NOV 26 — Sarawak’s recent move to enforce stricter work permit requirements for all non-Sarawakians has sparked a nationwide debate on balancing local job protection with economic growth. While the intent to prioritise employment for Sarawakians is valid, overly restrictive measures risk deterring investments, potentially undermining the state's competitiveness as a regional economic hub.

This policy is deeply rooted in Sarawak’s governance framework, established under the Malaysia Agreement 1963 (MA63) and the Immigration Act 1959/63. These legal provisions grant Sarawak — and Sabah — the authority to regulate labour and immigration matters independently, a privilege unique to the two East Malaysian states. While initially aimed at safeguarding local employment and demographics, these powers now face the challenge of aligning with the demands of a connected Malaysian economy and an increasingly competitive global market.

Risks of restrictive policies

Stricter work permit enforcement creates bureaucratic barriers, increasing costs for businesses and limiting access to skilled talent critical for high-demand sectors like renewable energy and technology. Such restrictions could hinder Sarawak’s efforts to position itself as a leader in hydrogen production and digital innovation.

Industries thrive on diverse expertise, and restricting access to non-Sarawakian talent risks stagnating growth in key sectors, making the state less attractive to foreign direct investment. These policies could jeopardise Kuching’s broader economic strategy, which hinges on strengthening its appeal as a hub for innovation and development.

Moreover, businesses often gravitate toward countries with efficient regulatory systems. Overly protectionist policies could deter investors, especially in sectors like oil and gas, where access to specialised talent directly impacts operational efficiency — a point tied closely to Sarawak’s evolving relationship with Petronas.

Kuching’s bid for resource control

Sarawak’s stricter work permit policies reflect a broader strategy to assert greater control over Sarawak’s resources, particularly in its governance and negotiations with Petronas. As Malaysia’s national oil company, Petronas operates under federal law through the Petroleum Development Act 1974, granting it exclusive authority over the nation’s petroleum resources. However, Kuching has increasingly pursued greater autonomy over its oil and gas sector, invoking the Oil Mining Ordinance 1958 and establishing its state oil company, Petros, in 2017 to manage hydrocarbon activities within its borders.

While progress has been made, negotiations between Sarawak and Petronas have occasionally stalled, with the company pursuing legal action in 2019 to reaffirm its role under federal legislation. This backdrop underscores Kuching’s determination to leverage all available tools, including stricter immigration enforcement, to assert its autonomy. While such moves resonate strongly with local sentiments, careful implementation is essential to avoid deterring investors or further straining federal-state relations.

What if Peninsular Malaysia did the same?

A hypothetical scenario where Peninsular Malaysia adopts a similar approach to protect its local workforce underscores the risks of restrictive policies. Malaysia’s economy depends heavily on integration across states, and fragmenting labour markets through restrictive, state-specific measures could disrupt industries and deter investment. This highlights the importance of harmonising state-level policies with national economic priorities to maintain cohesion.

Sarawak’s leaders must ensure their decisions support both local priorities and the overall development of the federation, avoiding friction that could undermine collaborative efforts between Kuching and Putrajaya.

The historical context of MA63 and federalism

The Malaysia Agreement 1963 granted Sarawak and Sabah special rights to manage immigration and related employment matters, ensuring local interests were protected within the country’s federal framework. These provisions were designed to address concerns over potential federal overreach, safeguarding the states’ unique cultural identities and economic priorities.

This autonomy introduces asymmetry into Malaysia’s federal system, meaning Sarawak and Sabah enjoy unique privileges that set them apart from the other 11 states. While the rest of Malaysia operates under a more uniform federal structure, the special rights granted to these East Malaysian states create distinct differences that must align with national economic priorities. The tension between autonomy and federalism underpins Sarawak’s current challenges, particularly as it seeks to balance its governance framework with the demands of a modern economy.

Preserving these rights entails a responsibility to ensure that policies support sustainable growth. Decisions rooted in historical grievances must evolve into forward-looking strategies that foster competitiveness and inclusivity in a globalised economy.

Charting a balanced path forward

Rather than implementing blanket restrictions, Sarawak can adopt policies that protect local jobs while maintaining economic dynamism. Incentives such as tax breaks or benefits for companies that prioritise hiring Sarawakians could encourage local employment without penalising businesses for recruiting non-Sarawakians. Investments in education and vocational training would empower locals to fill specialised roles, reducing reliance on external talent and strengthening the local workforce.

Streamlining the work permit application process for critical industries could alleviate bureaucratic hurdles, ensuring businesses have access to the skills they need without compromising local job opportunities. By focusing on capacity-building and infrastructure improvements, Sarawak can attract investment while safeguarding local interests.

Conclusion: A crossroads for Sarawak

By embracing inclusive, forward-looking strategies, Sarawak can achieve its employment goals while maintaining investor confidence and fostering stronger ties with the federal government. The choices made now will determine whether Sarawak thrives as a dynamic economic hub or struggles with stagnation amid rising global competition. Striking this balance is essential to ensuring Sarawak’s policies not only resonate with local aspirations but also support long-term growth and stability within Malaysia’s broader economic framework.

* Jamil A Ghani is a PhD candidate at the S Rajaratnam School of International Studies, Nanyang Technological University, Singapore.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.