SABAH and Sarawak will receive RM18.7 billion and RM16.2 billion respectively in federal allocations next year, with the government continuing negotiations to resolve outstanding issues under the Malaysia Agreement 1963 (MA63).
Tabling Budget 2027 in the Dewan Rakyat today, Prime Minister Datuk Seri Anwar Ibrahim said the allocations for both states remained at their highest levels, with the government committed to fulfilling its obligations under the agreement.
He said the federal government had increased the special grant rates for Sabah and Sarawak three times, with the latest interim rate totalling RM1.5 billion.
The payment would be made before the end of this year, while discussions with both state governments would continue to establish a fair and sustainable annual formula, he said.
Anwar said MA63 should be treated as a national responsibility to ensure the rights of Sabah and Sarawak were upheld.
Under the MADANI administration, 12 matters relating to the agreement had been resolved, including the appointment of permanent representatives from both states to the Inland Revenue Board (LHDN), the transfer of Bintulu Port to the Sarawak government and the transfer of MASWings to the state for rebranding as AirBorneo.
The federal government would continue providing RM209 million in subsidies for rural air services, benefiting an estimated 820,000 passengers, Anwar said.
In Sabah, regulatory powers over electricity had been transferred to the state, while the federal government had allocated RM600 million to support the reliability of its power supply.
The government had also agreed to install STATCOM systems at the Dam Road and Segaliud main intake substations at a cost of RM204 million. Work on the Southern Link transmission project would continue to strengthen Sabah’s electricity supply in the longer term.
On education, Anwar said the government had agreed to double the number of Public Service Department (JPA) scholarship offers for students from Sabah and Sarawak, providing opportunities for 4,200 students from the two states to pursue higher education each year.
The federal government would also begin formal negotiations with Sarawak on incentives, a one-stop investment facilitation centre and strategic infrastructure for the proposed Sibu Special Economic Zone.
A total of RM3.3 billion would be allocated in 2027 for road projects in Sabah and Sarawak, including the Trans Borneo Highway, Sarawak-Sabah Link Road 1 and Pan Borneo Highway Sabah Phase 1B.
Anwar said the tender for the Miri section of the Trans Borneo Highway had been issued, while tenders for the Limbang and Lawas sections were expected to follow by the end of this year.
The Sarawak-Sabah Link Road 1 and Pan Borneo Highway Sabah Phase 1B are targeted for completion by the end of 2027.
Another RM350 million would be allocated for federal road maintenance in Sabah and Sarawak, with the funds reserved for G1 to G4-grade contractors. - October 9, 2026
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