Why did Selangor and Penang receive less federal funds than they contributed?

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Selangor and Penang Received Less Federal Allocations Than They Contributed Due to Disparities in Funding Distribution

Selangor and Penang received less in federal allocations between 2023 and 2025 compared to their respective contributions to the federal government. DAP national adviser Lim Guan Eng highlighted that Penang, in particular, experienced a shortfall of RM2.8 billion over this three-year period. This situation has led to calls for a review of the federal funding formula to ensure more equitable distribution.
Discrepancies in State Contributions and Allocations

Figures cited by Lim Guan Eng indicate significant differences between what some states contribute and what they receive. For instance, Selangor contributed an average of RM43.6 billion and was allocated RM15 billion, while Penang contributed RM10.7 billion and received RM7.9 billion. In contrast, Kedah contributed RM3.7 billion and received RM9.5 billion, illustrating a pattern where some states received more in allocations than their stated contributions.
Identification of States Receiving Less Than Contributed

During the period of 2023 to 2025, Selangor and Penang were identified as the only two states that received less in federal allocations than their financial contributions to the federal government. This observation has fuelled arguments that the current distribution mechanism does not adequately reflect the economic input of these states. Lim Guan Eng specifically pointed out that Penang's contribution to the federal government is substantially higher than Kedah's, yet Penang received a lesser amount in funding.
Calls for Equitable Revenue Distribution and a New Formula

In response to these disparities, there have been calls for a more equitable system of revenue distribution. Penang Chief Minister Chow Kon Yeow emphasised the need for distribution to be based on a state's actual contribution to national development, rather than seeking special treatment. Lim Guan Eng has urged Prime Minister Datuk Seri Anwar Ibrahim to introduce a "justice for all formula" to address these shortfalls and prevent states like Penang from being "shortchanged" in future allocations.

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Why did Selangor and Penang receive less federal funds than they contributed?

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