From Periphery to Powerhouse: How Sarawak is Remaking Malaysia's Political and Economic Landscape

Sarawak, long considered a political periphery in Malaysia, is rapidly transforming into a 'Green State,' spearheading ambitious projects that are reshaping the federation. This shift isn't just a response to global trends toward sustainability and digital industries; it's rooted in a fundamental restructuring of federal-state relations. A unique convergence of fragmented politics on the Malaysian peninsula and consolidated local leadership in Sarawak has created a strategic moment, allowing the state to pivot from a passive resource supplier to a proactive economic force.

A History of Resource Wealth and Political Subordination

Rich in natural resources, Sarawak is estimated to hold about 29% of Malaysia’s crude oil and 54% of its natural gas reserves. For decades, this wealth primarily benefited the national oil company, Petronas, based in Kuala Lumpur. Politically, Sarawak, along with neighboring Sabah, served as a “fixed deposit” for the long-ruling Barisan Nasional (BN) coalition, its interests often subordinated to those of the peninsula, which gradually eroded its autonomy. Key benefits from its vast resources were channeled to serve federal interests.

The Turning Point: A Fractured Peninsula

The political calculus began to change in 2018 with the collapse of BN's decades-long rule, ushering in an era of instability in peninsular politics. The critical moment arrived after the 15th General Election in 2022, when no single coalition secured a majority. The Gabungan Parti Sarawak (GPS) coalition emerged as the decisive “Kingmaker,” enabling the formation of the current Unity Government. This newfound leverage secured key federal positions for Sarawak, including the appointment of Dato Sri Fadillah Yusof as the first-ever Deputy Prime Minister from East Malaysia.

Where a consolidated federal government once offered little room for negotiation, the fracture and turmoil in the peninsula opened a strategic window for Sarawak to assert its demands effectively.

Simultaneously, Sarawak consolidated its own leadership. A smooth, multi-stage transition of power—from Taib Mahmud to Adenan Satem in 2014, and then to current Premier Abang Johari Openg in 2017—occurred without internal division. Under Abang Jo, GPS has built an unchallenged power base by integrating parties representing diverse demographics, a dominance demonstrated by its capture of 76 out of 82 seats in the 2021 State Election. This internal stability stands in stark contrast to the fragmented political scene in neighboring Sabah.

Fueling a Green and Digital Future

Leveraging its political clout, Sarawak has moved aggressively to reclaim its economic rights. The state successfully enforced a State Sales Tax (SST) on petroleum products, generating approximately 19.55 billion Malaysian ringgit in revenue between 2019 and 2024. It's also pursuing acquisitions of key logistical and financial infrastructure, including taking a 31.25% controlling stake in Affin Bank and moving to establish a state-owned airline by acquiring MASwings.

This economic assertiveness is fueling a pivot toward a green economy, guided by the Post-COVID-19 Development Strategy 2030 (PCDS 2030). Harnessing massive hydropower dams like Bakun (2,400 MW), Sarawak is attracting energy-intensive investments. It's building a hydrogen economy through flagship projects like H2biscus (with Korean partners Samsung Engineering and Lotte Chemical) and H2ornbill (with Japanese giants ENEOS and Sumitomo). Furthermore, the state is pioneering Carbon Capture, Utilization, and Storage (CCUS) and has passed carbon trading legislation ahead of the federal government.

Sarawak is also extending its influence regionally, securing conditional approval to export 1 GW of renewable energy to Singapore by 2032 and integrating its power grid with Indonesia. Tapping its abundant green energy, the state is also diversifying into the high-tech sector, aiming to build a semiconductor value chain. It's partnering with the state of Penang to complement their respective strengths, with a goal of contributing RM30 billion to the state's GDP from this sector by 2030.

Sarawak's trajectory offers a powerful case study in how a sub-national entity can leverage shifting political dynamics and global trends to redefine its future. As political instability on the peninsula seems likely to persist, Sarawak’s Kingmaker status is set to endure. This positions the state not just as a resource vassal, but as a genuine 'Green Powerhouse' poised to become an economic driving force for both Malaysia and the wider maritime Southeast Asian region.