GEORGE TOWN – The federal government must ensure Penang is fairly compensated for its outsized contributions to the national economy in the upcoming 13th Malaysia Plan (13MP), especially through a transparent revenue-sharing model that reflects the state’s economic output, the state assembly was told today.
With the 13MP set to be tabled in July, Gooi Hsiao Leung (Bukit Tengah-PH) called on Putrajaya to guarantee a minimal sharing of revenue from the sales and services tax (SST) based on each state’s contribution to the national gross domestic product (GDP), in order to balance the limited tax revenue states are able to collect under the current system.
The PKR assemblyman said Penang, despite being one of the smallest states, had consistently ranked among Malaysia’s top economic contributors – yet remained underfunded.
“In 2023 alone, our economic output was RM116 billion, which made up more than 7% of the national GDP,” he said during the debate on the motion of thanks to the governor.
Penang was also among the country’s top exporters, with RM435 billion in export value, 31% of Malaysia’s total exports. Its manufacturing sector, particularly in the electric and electronic industry through the Bayan Lepas Free Industrial Zone (FIZ), continues to attract global investors and drive the country’s growth.
“But when it comes to state revenues, what is Penang getting in return? In 2023, its revenue was only RM593 million – just 0.5% of the state’s GDP,” he said.
“…and we have to cope with fiscal deficits for more than 13 years continuously. In 2023, we recorded the largest fiscal deficit of all 13 states, which is RM421.7 million.
“In terms of revenue collection, Penang was at the fourth last spot, only ahead of Perlis, Melaka and Negri Sembilan.”
Gooi noted that Penang had to borrow RM100 million from the federal government last year due to concerns over cash flow. He argued that the current tax distribution framework under the Federal Constitution left states, including Penang, without sufficient resources to sustain development.
“Penang has sacrificed for this country, and yet it could not stand up for itself (financially).
“Is it fair for a massive contributor like Penang to be systematically underfunded?” he asked.
Gooi also urged the federal government to introduce a new formula for the equalisation grant that factors in not just population size, but also each state’s economic contribution and fiscal needs, to ensure fairer distribution.
He proposed that Putrajaya implement a transparent fiscal channelling mechanism with regular reporting, so states know what they are entitled to and can plan responsibly. He also recommended incentive grants for states that perform well in governance, transparency, innovation and environmental management.
In February, Scoop reported that Chief Minister Chow Kon Yeow reiterated Penang deserves more in federal grants, citing its contributions as a tech manufacturing hub and key revenue contributor.
Chow, now in his second and final term as Penang’s top executive, said he has struggled with Putrajaya’s perception that the state, being developed, does not need additional assistance. – May 20, 2025