SG4 Group: PAS Bid to Consolidate Bargaining Power?

 A new move by four PAS-controlled states to form a joint company is brilliant if seen from the lens of political consolidation.

Four Malaysian states – Kedah, Kelantan, Perlis and Terengganu — have formed a joint company to pool their resources and share wealth. Whether the new company would be viable in attracting investments to the four states controlled by Parti Islam SeMalaysia (PAS) remains to be seen. But if the development is about the consolidation of political power, it is a timely and wise one.

In early September, it was reported that the four state governments ruled by the federal opposition coalition Perikatan Nasional (PN) have banded together to set up a company called SG4 Group Sdn Bhd. The objective of this company is to pool the four relatively rural states’ resources in order to share wealth equitably, with each state holding 25 per cent stake in the company.

According to the company’s adviser, former Prime Minister Dr Mahathir Mohamed, while Terengganu, Kelantan and Kedah contain rare earth elements (REE), Perlis has dolomite, which is used in processing rare earth elements (REEs). Terengganu and Kelantan also possess valuable oil and gas resources, while Kedah and Perlis have agricultural land. Hence the five key clusters the group will focus on are infrastructure and logistics; trade, investment and industry; agriculture and food security; education and human capital; and new sources of revenue. Each state will appoint an executive council (exco) member to lead each cluster.

The idea of clustering states together is not new. When Pakatan Harapan (then Rakyat) governed the states of Penang, Perak and Selangor following the 12th General Election of 2008, there were attempts at common policy platforms. However, the most that was achieved in that first Pakatan term was hosting Chief Minister summits, bringing together the three (and then later only two, when Perak switched hands to Barisan Nasional) states alongside their aides and civil servants to discuss administrative matters such as water and land policy.

This latest innovation, based on the idea of pooling resources and sharing wealth, is therefore the first of its kind. State governments, constrained by an overly centralised federal structure, in which states have relatively few responsibilities and receive minimal revenues, have continually expanded initiatives to take control of their assets through state economic development corporations or state-level government-linked companies, including the successful examples of Johor Corporation and Selangor’s Menteri Besar (Chief Minister) Incorporated. While setting up a multi-state company is unusual, whether it will achieve its chief purpose of attracting investment remains to be seen.

The launch of SG4 raises several questions. First, although these four states are PN-administered, the reality is that the majority of seats in each of the four states is controlled by Parti Islam SeMalaysia (PAS); is this therefore a PAS or PN-led entity? At the press conference of the event announcing SG4’s formation, Dr Mahathir was flanked by the four states’ Chief Ministers, all of whom hail from PAS. The message this sends is that this is essentially a PAS initiative – and a demonstration of PAS’ strength and prominence within the coalition relative to its partner Parti Pribumi Bersatu Malaysia (Bersatu).

If this is the case, PAS is taking the lead and showcasing what it has to offer as a major, national-level political party. Indeed, PAS has experienced the taste of helming the federal government, as recently as up to two years ago under the Muhyiddin Yassin and Ismail Sabri BN-PN administrations. In a recent interview, Terengganu Chief Minister Dr Ahmad Samsuri Mokhtar confirmed this, saying that the objective of SG4 was less about chasing profits, and more about “consolidation of bargain(ing) power”. The two smallest and most rural states, Perlis and Kedah, would especially stand to gain from this arrangement.

To truly make an attractive case for SG4, it will have to co-operate with federal agencies such as the Malaysian Investment Development Authority (MIDA), since the latter is responsible for providing tax incentives and grants to companies.

Dr Samsuri also said that in the two to three years before the next election, the four states would prove their potential. The party has the long game in mind. Likewise, when the Pakatan coalition was in power at the subnational level of Selangor and Penang from 2008 to 2018, it, too, assumed an aggressive position of wanting to prove itself as an alternative ruling coalition, by governing well at the state level first.  

Second, what kind of economic development model would the SG4 arrangement showcase? Being an Islamic party, PAS would likely intend to demonstrate a particular type of economic development, differentiating itself sufficiently from the developmentalist model of pre-2018 BN. During BN’s more than 50 years in power, it adopted an approach that combined development with some form of welfare provision, although arguably not systematically administered. After espousing the “Islamic State” model for decades, PAS has since 2008 moved on to the “welfare state” philosophy. On this note, it is significant that a new think tank was recently launched in Putrajaya, the location of which sends a strong signal. With a mission to “unravel the complexities of contemporary challenges” and “offer a fresh narrative rooted in Islamic wisdom”, The Future Research is rumoured to be the brainchild of Dr Ahmad Samsuri, who also officiated its launch on 5 August this year.

While this is certainly an opportunity for the federal opposition to fluff its feathers, the question remains as to the feasibility of such a scheme. First, trade and investment fall under the jurisdiction of the federal government. To truly make an attractive case for SG4, it will have to co-operate with federal agencies such as the Malaysian Investment Development Authority (MIDA), since the latter is responsible for providing tax incentives and grants to companies. Second, talent as a crucial resource would still be lacking within these states, whose graduates would likely have migrated to urban centres in the Klang Valley, although this trend could be reversed were there incentives to stay. Third, the verdict is still out on whether investors would be interested in what the states have to offer, even with collective pooling of resources. Familiarity with the business environment and its stakeholders will be crucial for the state leadership.

However, if the group’s raison d’etre is more about a consolidation of power than it is about profit-making, then this is a brilliant move, especially as PAS intends to capture Pahang in the next election. It allows the states to negotiate with the federal government on a collective front, especially with regards to ongoing disputes such as on oil royalty and rights over the territorial sea of Malaysia. Except for issues pertaining to Sabah and Sarawak, there is no permanent platform at which state-federal conflict can be resolved.

And until the federal government takes this seriously enough to organise meaningful centres of dialogue, states will increasingly demand more, challenge the status quo and continue to bargain with the country’s political centre. Whether or not this has a political cost ultimately depends on how the Madani administration decides to respond. The SG4 Group formation and its future developments are a crucial milestone in the country’s continued journey towards a more balanced federalist model. -FULCRUM

Dr Tricia Yeoh is a Visiting Fellow at the ISEAS – Yusof Ishak Institute and Associate Professor of Practice at the University of Nottingham Malaysia's School of Politics and International Relations.