Malaysia stands on the verge of a major shift in the balance of power between its federal centre and constituent states. The momentum behind that shift is powered not just by history or constitutional argument, but by the concrete economic weight carried by a few key states in Peninsular Malaysia.
As Sabah and Sarawak renew their push for autonomy — reclaiming territory-based rights promised under the 1963 Malaysia Agreement — it becomes ever more striking that states like Johor, Selangor and Penang, which are the economic backbone of the federation could demand for more preposition from their contribution to the nation.
Their economic performance today offers both a compelling context and a preview of what could happen if Malayan states begin pressing claims for stronger statehood or devolved power.
Economies of Selangor, Johor and Penang
To begin with, Selangor remains the single most important contributor to Malaysia’s national output. In 2024, Selangor accounted for 26.2 percent of all national GDP, with a state GDP valued at RM 432.1 billion.
That scale of economic activity exceeds that of many small nations. Its dominance is not confined to services: Selangor leads nationally in manufacturing, services, and construction, making it a diversified powerhouse that underpins economic stability for the country.
Meanwhile, Johor — often overlooked compared with Selangor — is proving itself the fastest-growing state in 2024, expanding at 6.4 percent, well above the national average of 5.1 percent.
Its gross domestic product last year reached RM 158.0 billion, securing Johor’s position among the top contributors to the federation’s economy.
Johor’s economic resilience owes much to its strategic location — a gateway to Singapore and other regional markets — robust infrastructure, thriving industrial zones, strong port and logistics networks, and an expanding portfolio of services, manufacturing, construction and trade.
Even Penang plays a significant role. While smaller than Selangor or Johor, it remains among the handful of states contributing the largest shares to national GDP. In 2024’s state-level growth, Penang was still listed among the states powering Malaysia’s economy, especially through manufacturing and export-oriented industries.
Together, Selangor, Johor and Penang — often alongside Kuala Lumpur, Sarawak and a few others — account for a majority of Malaysia’s GDP output. For instance, in 2024, six states including Selangor, W.P. Kuala Lumpur, Johor, Sarawak, Penang and one other state contributed around 73.4 percent of national GDP.
This concentration of economic power means that the prosperity of the federation is heavily dependent on these states. Before oil was found and production stepped up, states such as Sabah, Sarawak, Kelantan, Terengganu and Perlis are dependent on revenue generated by these three states.
Their capacity to attract foreign direct investment (FDI), drive manufacturing and industrial growth, and generate revenue has widespread ripple effects — lifting not only their own local population, but also enabling federal redistribution (transfers, grants, infrastructure funding) to other states including Sabah and Sarawak.
Indeed, authorities acknowledge that Johor, Sarawak and Penang have been described as “Malaysia’s engine of growth.”
Their ability to draw investment, maintain industrial competitiveness, and support export-oriented manufacturing makes them zones of national strategic importance.
Johor, Selangor assert autonomy?
Given this economic reality, the reemerging autonomy movement in Sabah and Sarawak — which frames itself on constitutional justice, resource control, and self-governance — acquires a new dimension: it is no longer just about rights, but also about economic leverage.
If East Malaysian territories can point to their contribution to national revenue, control over resources, and ability to manage budgets and development, then Malayan states like Johor, Selangor, and Penang already possess far greater baseline economic justification to demand stronger devolution or even quasi-statehood within a restructured federation.
Imagining a political landscape where Johor or Selangor (or both) begin to assert autonomy is no longer a theoretical exercise. Their scale justifies it.
Johor’s rapid GDP growth, strategic southern location, and industrial capacity give it leverage; Selangor’s sheer size, diversified economy and dominance in services and manufacturing give it bargaining power; Penang’s export-oriented industrial base adds to the overall competitiveness of Peninsular Malaysia.
In such a scenario, these states could convincingly argue that their tax contributions, revenue generation, investment traction, and development output should be matched with commensurate administrative autonomy — greater control over economic policy, infrastructure-managed zones, regional planning, and even fiscal levers.
The implications of such a shift would be profound. Politically, national coalitions built around centralised authority might give way to state-centric alliances. Johor-centric or Selangor-centred parties might emerge, seeking to protect local interests rather than federal convenience.
States might begin to bargain for control over education, infrastructure, trade zones, foreign investment incentives — areas currently dominated by federal oversight. Their success could in turn fuel similar demands from other states, potentially fracturing the uniformity of the federation but also giving voice and power to regions that currently feel politically sidelined.
Socially, identity politics might shift — citizens may identify first with their state rather than the federation.
This could foster local pride, more accountable governance, and tailored regional policies that better reflect local needs. It could also revive state-level competition, with each economically strong state jockeying to outperform the others in attracting investment, talent, and infrastructure development.
SG4 states could go bankrupt
Economically, devolved governance might lead to more efficient resource allocation.
States like Johor or Selangor might leverage their industrial base and foreign investor appeal to accelerate growth, innovate, and negotiate trade or investment deals with greater agility than a centralised bureaucracy can.
On the other hand, poorer, less developed states might struggle to compete — potentially widening regional inequality. Unless redistribution mechanisms are retained or restructured, it is envisage that three out of the four proud SG4 states will go bankrupt together with a west coast state..
Federal revenue bases may shrink as states demand to retain more of what they generate, forcing the federal government to find new means of revenue or a different fiscal model — perhaps shifting to a more decentralised federation resembling federal systems elsewhere.
Putting these trajectories in the context of upcoming state elections — say in Johor, Sarawak, and even smaller states such as Melaka — autonomy and state identity could become powerful electoral narratives.
In Johor, a candidate or party that champions “Johor First” — arguing for greater autonomy, local control over economic development, foreign investment, trade zones, infrastructure planning — could attract voters frustrated with being treated as just another federal constituency. The influence of local royalty, historical identity, and strategic southern location adds weight to such a narrative.
For Sarawak, the autonomy claim remains central, but now it stands not just on constitutional morality, but also on economic rationality — Sarawak can demand real resource control, fair revenue return, and recognition as an economic partner equal to Peninsular Malaysia.
For Melaka and smaller states, even if full autonomy seems unrealistic, there may be pressure to push for more devolved administrative powers, better local governance, and greater say in how federal funds are spent.
The politics of state pride, administrative effectiveness, and regional identity may override previous loyalties to national-level coalitions.
In short, the economic weight of Johor, Selangor and Penang transforms the discussion about autonomy from one of abstract constitutional justice to a tangible debate about power, resources, and fair representation.
As Sabah and Sarawak push for their rightful place, the same logic may soon resonate in Malaya — not as a call for secession, but for genuine decentralisation, devolution of powers, and a reimagined Malaysia where states govern themselves while remaining part of a federal whole.
The coming wave of state elections could very well mark the beginning of that transformation.
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