Funds allocated, but Sabah, S’wak projects held up by local issues

Economists say a low spending rate does not necessarily mean the federal government lacks commitment, as project progress depends on implementation on the ground.

They said a low rate of development spending does not necessarily suggest that the federal government is unwilling to allocate funds or lacks commitment to Sabah and Sarawak’s progress.

Bank Muamalat Malaysia Bhd chief economist Afzanizam Abdul Rashid explained that allocations do not instantly lead to physical development, as projects must first undergo multiple stages of approval and implementation.

“Funds may have been allocated, but before they can be translated into roads, bridges, schools or water supply, several layers of processes must be completed.

“The obstacles to implementation may involve practical matters, and not merely the size of the allocation,” he told FMT.

In November 2024, then federal territories minister Dr Zaliha Mustafa said Sabah and Sarawak recorded 1,244 and 1,124 federal development projects respectively, the highest in the country.

However, their spending rates at the time stood only at 46.7% and 54.43%, respectively.

Sabah’s performance improved in 2025, with the finance ministry announcing that RM5.9 billion — or 89% of the state’s RM6.7 billion allocation for development projects — had been spent.

The ministry previously explained that all development spending is managed by implementing agencies and released in line with project progress and status.

Afzanizam said implementation is further complicated by Sabah and Sarawak’s vast geography, scattered settlements, difficult terrain and project sites located far from economic centres.

Logistics and land acquisition issues could also delay projects, he added.

“For example, in the Sarawak-Sabah Link Road Phase 2 project, earthworks and site clearing began in January 2025, but land acquisition for parts of the alignment is still ongoing.

“If one link in the chain, such as land, approvals, contractors or logistics, gets stuck, the entire project schedule can be affected,” he said.

Tan Peck Leong of Universiti Teknologi Mara explained that budget allocations are not disbursed in full at the start of the year. Instead, he said they are released in stages, against work that has been completed and formally certified.

“For example, if a contractor has only completed half the work, the government does not pay the full project value simply to show a high spending rate.

“What matters more is ensuring that projects are completed on schedule, are of good quality and truly benefit the people of Sabah and Sarawak,” he said.