KUALA LUMPUR – Four Malaysian states controlled by federal opposition alliance Perikatan Nasional (PN) have closed ranks to jointly beef up their economies, as their leaders move to strengthen their grip on the Malay-belt states.
With Tun Dr Mahathir Mohamad as their adviser, the states of Terengganu, Kelantan, Kedah and Perlis – which call themselves the State Government 4 (SG4) – have formed investment firm SG4 Group to seek investments, including in the mining of rare earth elements (REE).
“We are not undermining or opposing the federal government. We are creating this to develop these four states because they are not getting their fair share of the wealth,” Dr Mahathir, 99, told a news conference at the first SG4 Summit on Sept 2. He was referring to the revenues collected by the federal government from various taxes, and generated by minerals and commodities resources, of which a portion is then allotted to the different states.
Each PN-led state will hold a 25 per cent stake in the investment company, ensuring that any generated wealth will be distributed equally, he noted.
Terengganu Menteri Besar Samsuri Mokhtar said at the meeting held in Bangi, Selangor, that the SG4 Group has already attracted interest from foreign investors from South Korea, Japan and China.
Also present at the meeting were the menteris besar, or chief ministers, from the other states, along with Parti Islam SeMalaysia (PAS) president Abdul Hadi Awang and PAS secretary-general Takiyuddin Hassan. PAS and Parti Pribumi Bersatu Malaysia – PN’s two biggest parties – jointly govern the four states.
Federal and state lawmakers from the four states were also at the summit, including those from Bersatu.
The rise of SG4 reflects the politically deflated Umno, and the failure of Prime Minister Anwar Ibrahim’s governing coalition to win more Malay voters, Malaysia’s majority ethnic group.
Together, the SG4 could become a formidable bulwark as PN tries to spread its “green wave” to other states.
Professor James Chin, who teaches Asian studies at Tasmania University in Australia, told The Straits Times that the creation of the SG4 grouping is to show voters that PAS is capable of ruling the country.
He added that the so-called “green wave”, or the surge in the popularity of PAS, which won 43 parliamentary seats in the 2022 General Election, is still strong.
“Prime Minister Anwar Ibrahim has not delivered on the economy, the cost of living in Malaysia is still too high, and wages are still too low. Unless he gets the economy right, he will not be able to beat PAS.”
Umno-led Barisan Nasional governed all 11 Peninsular Malaysia states for decades until Kelantan fell to PAS 34 years ago in 1990. Perlis was captured by PN in the November 2022 elections.
As for Dr Mahathir, he has a complicated history with Bersatu. He co-founded Bersatu with Tan Sri Muhyiddin Yassin in 2016 but was sacked from the party in 2020. He was antagonistic towards PAS for decades but sought its support in 2018 when he led the federal government again.
Today, after being shut out of the Anwar-led government that was formed after the 2022 General Election, Dr Mahathir has gravitated towards PN.
The four states are mostly agriculture-based: Kedah and Perlis have vast tracts of paddy fields, while Kelantan grows rubber and tobacco, alongside paddy and palm oil. Both Kelantan and Terengganu have an active batik industry.
Supplementing state government incomes are petroleum royalties paid to Terengganu and Kelantan for offshore drilling of oil and gas by the federal government.
ST has learnt from a state official that Terengganu was paid RM802.1 million (S$240 million) and RM749.3 million in petroleum royalties in 2023 and 2024, respectively, but is still owed payments amounting to RM721.9 million for 2023, and RM774.7 million for 2024.
The Kelantan government received about RM218 million of oil royalties from the federal government in 2023, its Menteri Besar Nassuruddin Daud was quoted by the New Straits Times as saying in March 2024.
Two of the four states are also home to Malaysia’s popular island holiday destinations – Langkawi in Kedah, and Redang and Perhentian in Terengganu. And Kedah has established manufacturing industries based in its Sungai Petani and Kulim townships.
The SG4 are often referred to as the Malay-belt states, as their Malay Muslim majorities range from 80 per cent in Kedah to 95 per cent in Kelantan. Perlis has a Malay Muslim population of 88 per cent, and Terengganu 97 per cent.
The four states have a combined population of 5.3 million, or 15.6 per cent, of Malaysia’s total population. They are among the poorest of Malaysia’s 13 states, with a combined gross domestic product (GDP) of RM124 billion in 2023, or just 7.9 per cent of Malaysia’s total GDP.
The SG4 group aims to raise the combined GDP amount to RM149 billion a year, said Datuk Seri Samsuri.
More than 50 per cent of the population in the SG4 states earn below Malaysia’s poverty line of RM2,208 a month, according to a presentation at the meeting by Professor Emeritus Barjoyai Bardai from Universiti Tun Abdul Razak’s Graduate School of Business.
Geography is partly to blame for the SG4’s lagging economies: The states are generally located far from the large population centres on the west coast of Peninsular Malaysia such as Klang Valley, Penang and southern Johor.
At the Sept 2 meeting, the SG4 leaders said they hope to develop these key sectors: economy and industry, green technology, infrastructure and logistics, trade and investment, and agriculture and food security, as well as education and human capital.
The plan for these states to process REE is a key venture, said Mr Samsuri, as 70 per cent of the country’s REE are located in the member states.
“We believe rare earth is a source of wealth. Not all four states have rare earth, but regardless, all four states will get an equal share of revenues” when it is mined, said Dr Mahathir.
Malaysia is home to 30,000 tonnes of the world’s rare earth reserves, data from a United States Geological Survey in 2019 showed. This is a tiny drop compared with China’s estimated reserves of 44 million tonnes.
Critical rare earth minerals are used widely in semiconductor chips, electric vehicles and military equipment.