KUALA LUMPUR, March 14 — Each Federal Territory in Malaysia has its own role to play in shaping the nation, and therefore, any suggestion that Labuan should be placed under another authority is moot, Minister in the Prime Minister’s Department (Federal Territories) Dr Zaliha Mustafa said.

Dr Zaliha was responding to Tuaran MP Madius Tangau, who asked if the federal government intends to return Labuan to the Sabah government, since Labuan’s basic needs such as water supply, electricity supply and the main generator of Labuan’s economy, namely the Asian Supply Base Sdn Bhd (ASB), are under the governance of the state.

In her written reply, Dr Zaliha explained that although Labuan’s main water source is supplied from Sabah through the Lawa Gadong Water Treatment Plant in Beaufort, the management of water supply is still under the regulation of the Labuan Water Supply Division, which is a federal department.

"Meanwhile, in order to improve the quality of water supply services, the federal government is dealing with four main supply issues, namely in terms of reducing supply disruptions, overhauling obsolete assets, storage systems and sources of raw water supply. To deal with these issues, there are currently 13 water supply projects with a total cost of RM366 million and these will be implemented with a total allocation of RM55 million this year.

"This effort is also supported by the announcement in the 2024 Budget by the prime minister, to provide an additional allocation of RM300 million to solve short-term and long-term water supply issues in the Federal Territory of Labuan,” she said.

In terms of electricity supply, she said that currently, the regulatory takeover of electricity supply is being implemented within a seven-year period by the Sabah government, whereby the operation of electricity supply in Labuan remains provided by Sabah Electricity Sdn Bhd (SESB).

However, in order to strengthen the electricity supply system in Labuan, Dr Zaliha said that the federal government is fully committed to the proposed construction of a new power station by Petronas Gas Berhad, which has an estimated electricity generation capacity of up to 135 megawatts, to provide a more stable supply and is able to cover long-term needs for the ongoing development of Labuan.

Dr Zaliha said that ASB is an investment arm of the Sabah government that plays an important role in the development of the industrial area in Labuan, and the company’s desire to expand its operating area, compared to the existing area of 345 acres, is also seen to have a positive impact on the investment space and infrastructure needs in Labuan in future.

"At this point, Labuan’s main economic resource is driven by the service sector which contributes 78.5 percent to the Gross Domestic Product (GDP). In the service sector in Labuan, there are several industry players who are contributors; for example, financial services through the Financial Services Authority, or industry services related to oil and gas such as Petronas Methanol Sdn Bhd, as well as other multinational and international companies located in Labuan, including the Asian Supply Base company,” she said.

She added that following Prime Minister Datuk Seri Anwar Ibrahim’s visit to Labuan on December 7 last year, a total of 113 activities and programmes have been organised by various ministries and departments throughout 2024, to boost the economy on the duty-free island.

As a result of the efforts, Dr Zaliha said that Labuan is no longer "lethargic”, with the number of passengers landing at the airport and also the hotel occupancy rate seeing an increase. She said that commercial activities had also benefitted from the increase in visitor numbers.

"The Federal Territories will not be complete without Labuan. Each Federal Territory has its own role in shaping our country Malaysia.

"The use of fence signs or the hashtag #WilayahPersekutuanKita on social media also fosters the unification of the citizens of the three Federal Territories.

"Any proposal to hand over Labuan to any party should be irrelevant.

"Despite this, with Labuan’s position close to the state of Sabah, it is hoped that the development of Labuan will go hand in hand and be interdependent, including social aspects, economic cooperation and communication networks,” Dr Zaliha added.