THE FEDERAL Goverment resorts to semantics to explain why the Petronas royalty to Trengganu is not royalty but special payment as the poorest state in the peninsula. For more than a quarter of a century, it kept quiet about this. Until PAS captured the state in last November's general election. Henceforth Kuala Lumpur insists it would fund only those projects it approves of. It does not matter, of course, that Petronas agrees it is royalty. But it is Kuala Lumpur that disburses the funds. And Kuala Lumpur decides to play politics with it. This politicisation of royalty payments to states applies only to Trengganu, not to Sabah and Sarawak, the other two states which get royalty for petroleum found off their coast. But it creates a dangerous precedent. Federal help to states would depend upon who is in power -- those under the control of the opposition would get short shrift. Despite protestations to the contrary, this should not be ruled out even for Sarawak and Sabah, should opposition parties come to power there.

Why did Kuala Lumpur take a course of action that questions its commitment to federal-state relations, view any with a government other than the National Front as one to be destroyed? The current account deficit is in shambles, with little leeway to cut costs. How could you cut costs if just under 25 per cent goes towards debt servicing, and another 60 per cent to fixed costs like salaries and the like? So, the nearly RM1 billion due to Trengganu becomes extra financing to help it out of its difficulty. But it did not, as usual, think this through, and initiated a needless quarrel with the state administration, and questioned its sincerity in its obligations to the state governments. It throws open a can of worms. If Trengganu sticks to its guns, Kuala Lumpur will find itself on a sticky wicket.

On the face of it, Kuala Lumpur cannot deny Trengganu the royalty payments, or vary how that is given the state. Meanwhile, Kuala Lumpur should publish the royalty agreement Petronas signed with Trengganu, and explain why, if its view of it is correct, it poured billions into Trengganu when the National Front in power. This, by any stretch of imagination, is fiscal profligacy of the worst kind. It should explain why the National Front administration wasted so much money wastefully in Trengganu, when it should have, if one follows its arguments, also benefitted from Trengganu's windfall. Indeed, the federal argument is directed at Trengganu, not that the funds would be even distributed to other deserving poverty-stricken states. It is an ill-though out policy to beggar Trengganu.

But what it spawns is much larger. The National Front warns the other states, now under its control, of niggardly dues if its citizens vote the opposition into power. Royalty payments, by whatever name, is just the tip of the iceberg. Federal-state relations is in strain, and would be as more states cut their links to the centre. It would not happen in the next general election or even the next, but the groundrules of co-operation, or the lack of it, is now reframed, in defiance of the Constitution and the solemn agreements that firms this symbiotic coalition. With the same governing coalition in all states but in Kelantan Trengganu, with the other state to go opposition, Penang, subborned into the national coalition, the cordial ties is within the coalition, and not constitutionally.

The federal fear of a state becoming financially viable lies at the root of this narrow prescription of federalism, in which that state must be beggared. All the more so when it is in the opposition. This is how Kuala Lumpur's narrow view of royalty payments should be viewed. Trengganu is targetted because Kuala Lumpur is frightened about how the nearly billion ringgit in royalty payments could strengthen PAS. But it immediately frays the bonds that exist between not just Trengganu but the other states with the centre in this federation of Malaysia. That surely is not Kuala Lumpur's intention. If this is pursued to its logical conclusion, China's "one country two systems", could well find receptive ground in Malaysia.

M.G.G. Pillai
pillai@mgg.pc.my