Modern Malaysia, in the heart of Southeast Asia, is comprised of two main regions separated by the South China Sea. West Malaysia, also known as Peninsular Malaysia, is considered the political and economic centre of the country, having largely arbitrated Malaysian identity since the country’s formation in 1963. East Malaysia comprises the states of Sarawak and Sabah situated on the northern half of Borneo. Until recently, both Bornean states were largely marginalised vis-à-vis the more dominant peninsula. However, the recent fracturing of the political landscape in Peninsular Malaysia as part of the country’s larger democratisation has provided Borneo with the unique opportunity to demand fundamental changes to Malaysian federal-state dynamics, with major implications for the future trajectory of the country.

First, it is important to understand how Borneo differs from the peninsula. One way is through its demographic makeup. While the ethnic makeup of Peninsular Malaysia is often reduced to the essentialised MCIO (Malay, Chinese, Indian, Other), Borneo’s diversity is significantly more pluralistic and fluid. While Muslim Malays make up more than half the peninsula’s population, no single ethnic group in Borneo make up more than 40 per cent of either state. Both states also have large non-Muslim populations, with Christians forming the majority in Sarawak. The single largest communities in each state – the Kadazandusun Murut (KDM) in Sabah and the Dayaks in Sarawak – are largely non-Muslim. Ethnic relations are generally more relaxed in Borneo compared to the more segregated societies found on the peninsula.

Besides demographic differences, the alienation of Sarawak and Sabah from Peninsular Malaysia can also be attributed to the unique circumstances in which British rule came to northern Borneo. By the early 19th century, both the British and Dutch were in the process of formalising their respective areas of control in the Malay Archipelago – the Anglo-Dutch Treaty of 1824 had seen the Dutch have jurisdiction over Java and Sumatra, while the British controlled Singapore and the Malay Peninsula. The status of Borneo, however, remained ambiguous over the question of whose influence it fell under.

Circumstances would change dramatically in 1839 following the arrival of James Brooke (1803-68), a British middle-class adventurer and former soldier born in Calcutta. The exploits of Brooke and how he came to rule Sarawak stand as one of the most extraordinary chapters in British imperial history. Inspired by British colonial administrator Sir Stamford Raffles – today considered the ‘founder’ of modern Singapore – Brooke had travelled to Borneo to bring what he considered benevolent British rule.

On 11 August 1839, Brooke arrived off the coast of Sarawak on board his 142-tonne schooner Royalist. ‘Sarawak’ at the time referred to a small corner of northwestern Borneo then under the suzerainty of the Brunei sultanate. Brooke arrived to discover Sarawak in turmoil, with the Bruneians struggling to preserve their authority over rebellious local Malay chiefs. Brooke would help the Bruneians in putting down the rebellion, aided by the Royal Navy.

In return, the Bruneians granted Brooke the River Sarawak area as his personal fiefdom. In 1841, Brooke was accorded the title of ‘Rajah of Sarawak’ and established his capital in the coastal settlement of Kuching. Brooke would proceed to establish the dynasty of the ‘White Rajahs’ that ruled Sarawak until the end of the Second World War. During the rule of both James and his nephew and successor Charles, Sarawak’s territory would be expanded significantly at the expense of the beleaguered Bruneians to include all the territory of modern Sarawak state.

The formation of neighbouring Sabah, on the other hand, was slightly more convoluted. Prior to European colonial rule, the territory of North Borneo (as Sabah was then known) was split between the sultanate of Brunei and the sultanate of Sulu, located in the southern Philippines. In 1877, the Austro-Hungarian consul in Hong Kong, Baron von Overbeck, acquired territorial concessions from both the sultans of Brunei and Sulu in return for annual stipends. Overbeck would proceed to sell his rights to the territory to the British businessman Alfred Dent, who, in November 1881, received a Royal Charter to form the British North Borneo Chartered Company (BNBCC) to manage the region. The BNBCC proceeded to expand in parallel to the Raj of Sarawak – again at the expense of Brunei, who were squeezed in the middle.

For the British, concerned about the intrusion of other European powers into Borneo, both the exploits of the White Rajahs and the BNBCC provided a convenient way to stake their claims. Indeed, British support was vital for both colonial projects. Support from the Royal Navy allowed Brooke to put down the Sarawak rebellion. While James sought recognition for his kingdom as an independent entity, the British proceeded cautiously. Initially, they made him an agent to the Bruneian court, before effectively recognising his independence from Brunei by sending an official consul to Sarawak.

British support was also vital for the establishment of the BNBCC. British pressure ensured that Overbeck sold his stake to Dent, who had connections to the Foreign Office. The chartering of the BNBCC in London granted the company a degree of protection from the Crown, with the London headquarters given control over the company’s foreign policy as well as the company’s choice of governors for the territory.

The advent of the White Rajahs and the BNBCC helped reinforce the historical connections between the British-dominated Malay peninsula and northern Borneo. These links would be formalised in 1888, when Sarawak, North Borneo and Brunei all became British protectorates. The governor of Singapore, besides being High Commissioner to the Malay states, could now add the title of consul-general to the Borneo states. The contours of a future Malaysia were beginning to emerge.

Like elsewhere in Southeast Asia, the Japanese occupation during the Second World War changed everything. In the aftermath of the war, the third White Rajah, Vyner Brooke, and the BNBCC returned to their respective territories to find them shattered. Both Vyner and the BNBCC lacked the necessary funds for reconstruction, looking instead to offload the burden to the British. Both Sarawak and North Borneo would become British crown colonies in July 1946, the last territories in the world to do so.

This was only ever going to be a temporary measure. Shortly following the independence of Malaya in 1957, both the premier of Malaya, Tunku Abdul Rahman, and the British were in discussions about the possibility of expanding Malaya to include the British crown colonies of Singapore, Sarawak, Brunei and North Borneo. Such an idea was not without precedent, with the British having mulled over bringing their territories in the Malay archipelago into closer alignment since the late 19th century.

Brunei would eventually opt out of joining the new nation of Malaysia, wary of diluting its oil wealth and curbing the sultan’s absolute powers. Many in Sarawak and North Borneo were also initially hesitant in joining, wary about being dominated by the Malays of the more populous and developed peninsula. In order to gain their approval, certain safeguards were agreed upon. Among other things, both states were given authority over immigration (to this day Malaysian citizens from the peninsula require a special pass to enter either state), freedom of religion and complete control over the states’ natural resources such as land, forests, minerals, both onshore and offshore.

Finally, on 16 September 1963, Malaya, Singapore, North Borneo (to be renamed Sabah) and Sarawak united to form the Federation of Malaysia through the Malaysia Agreement 1963 (MA63). Subsequent economic and political differences would see Singapore exit Malaysia in August 1965.

However, in the decades following the formation of Malaysia, these safeguards would be increasingly ignored, as the federal government proceeded to construct a highly centralised state centred on the peninsula. For much of its history, Malaysia had been ruled by a political coalition called the National Front (BN), led by the United Malays National Organization (UMNO). BN would rule Malaysia uninterrupted from 1957 until 2018.

BN’s long rule was upheld by Malaysia’s unique system of ethnic politics: in particular, the elevation of the peninsula Malay identity as the central pillar of Malaysian identity. Ensuring the political and cultural dominance of the Malays within Malaysia’s multicultural setting has long been a central preoccupation. As the leading party of BN and self-proclaimed representative of the Malays, UMNO was able to consolidate its rule over Malaysia by reinforcing Malay-Muslim dominance through two means.

The first was through a series of far-reaching affirmative action policies designed to empower the Bumiputera, an administrative term for the Malays and indigenous peoples meaning ‘sons of the soil’. These included privileged access to government housing, higher education and government contracts. The second was through an overt policy of Islamisation, resulting in a proliferation of mosques and Islamic schools alongside the establishment of religious departments to enforce Islamic morals.

This unique brand of ethno-religious nationalism would serve as a central pillar of BN’s long rule in Malaysia. It should be noted, however, that the ethno-religious nationalism espoused by UMNO largely reflected the Malay-Muslims of Peninsular Malaysia. Although most of Borneo’s indigenous population also legally count as Bumiputera, in fact, Malay-Muslim Bumiputeras tend to benefit rather than non-Muslim Bumiputeras. In addition, many Muslim Malays living in Sarawak and Sabah also felt little affinity with their peninsular compatriots, since they generally practised a more liberal form of Islam.

To consolidate their power, the BN-ruled federal government sought to extend the Peninsula’s brand of Malay-Muslim political dominance onto East Malaysia. The federal government backed local leaders who maintained Malay-Muslim political dominance and promoted Islam. Critics claimed that Muslims were afforded preferential treatment in terms of employment in the civil service, while gerrymandering ensured that Muslim-majority seats were generally favoured. In Sabah, there are credible allegations that the federal government engaged in demographic engineering by dramatically increasing the number of Muslim citizens. This was allegedly done by illegally giving Malaysian citizenship to thousands of Moros, referring to the Muslims of the southern Philippines.

East Malaysians were also aggrieved by the federal government’s centralisation of control over both states’ natural resources, particularly their rich oil and gas deposits. While both states had previously controlled the oil and gas found within their territories, this control was eventually ceded to the central government in exchange for five per cent royalties. Many in East Malaysia feel this is insufficient, given the sheer wealth of resources extracted from both states: Sarawak alone holds over 60 per cent of Malaysia’s oil while Sabah holds 19 per cent. Yet these two states are among Malaysia’s least developed.

As long as the position of BN was strong in Peninsula Malaysia, the federal government could ignore East Malaysia’s push for autonomy. However, an historic general election in 2018 saw BN ousted from power after 61 years of uninterrupted rule, with its loss attributed to a multi-billion dollar corruption scandal involving a debt-laden state-development fund called 1MDB. The subsequent years would see significant instability and fluidity in Malaysia’s political centre, resulting in five governments in nine years. In every government formed, East Malaysia provided the crucial number of seats. This fragmentation of politics in Peninsular Malaysia has fundamentally reshaped Malaysia’s federal dynamics, providing East Malaysia with significant leverage in pursuing greater autonomy and state rights as per MA63.

Sarawak, in particular, has managed to secure some major concessions from the federal government, including in energy, tourism, and education, all of which were long considered under federal jurisdiction. The state government has extended the usage of English in its education system and recently set up its own airline.

The state government also sought to assert greater control over its oil and gas deposits. In 2024, Sarawak announced that its own energy firm Petros would be taking over the purchase and sale of gas produced in the state from Malaysia’s state-owned oil and gas firm Petronas. Since then, Sarawak and Petronas have been locked in a dispute over the governance of gas distribution within Sarawak.

Compared to Sarawak, Sabah has been less successful in asserting its autonomy. In part, this is attributed to historical precedent – while the centralised rule of the Brookes had bequeathed Sarawak with strong institutional foundations and a distinct political identity, the fragmented nature of the BNBCC’s administration ensured Sabahans entered Malaysia less politically developed. Until recently, national parties also enjoyed more influence in Sabah compared to Sarawak, where locally based parties dominate. This hampers Sabah’s ability to pursue a localist agenda.

However, the results of a state election held on 29 November 2025 may have signalled the beginning of a new era for Sabah. The election saw the near-decimation of national parties in favour of local parties, with some 91 per cent of the vote share going to local parties or independents. The strong performance of local parties was attributed to the growing appeal of ‘Sabah First’ state nationalism. A particularly pertinent issue for voters was a previous high court ruling that the federal government had not honoured Sabah’s constitutional entitlement to 40 per cent of federal revenue derived from the state under MA63. The federal government responded by partially appealing the ruling, aggravating many Sabahan voters and likely contributing to the swing away from peninsula-based parties.

The consolidation of local power in Sabah opens the possibility of a ‘Borneo Bloc’ being formed in Malaysian politics, providing both states with greater leverage when negotiating with Peninsular Malaysia. One key demand being made is the increase in Borneo’s representation within parliament from its current share of 25 per cent of total seats to 35 per cent, thereby providing both states with veto power over any constitutional amendment pushed by Malaya.

The rising profile of East Malaysia is expected to have long-term implications for Malaysia as a whole. For one thing, Sabah and Sarawak may provide barriers to the ongoing Islamisation of the country, given the large numbers of non-Muslims who reside in both states. Indeed, both the non-Muslims of Borneo and many Bornean Muslims themselves are generally adverse to the chauvinistic Malay ethno-religious nationalism that characterises Peninsular Malaysian politics today.

Borneo’s rising profile may also encourage Malaysia to more forcefully assert its territorial claims in the South China Sea, given that East Malaysia directly faces the disputed waters claimed by Malaysia, China, and several other Southeast Asian countries. Malaysia’s exclusive economic zone (EEZ) in the South China Sea is also claimed by China as part of its so-called Nine Dash Line, with the waters rich in oil and gas. Beijing has regularly protested against Malaysian hydrocarbon exploration activities in the South China Sea, with Chinese coastguard vessels regularly shadowing and harassing Malaysian drilling rigs and survey ships.

Partly due to pressure from East Malaysian leaders, in recent years the federal government has prioritised bolstering its military assets and facilities in East Malaysia. This has included investments in maritime surveillance, drones and air and naval bases. Indeed, in the Malaysian government’s latest five-year development roadmap released in July 2025, the government made specific mention of confronting security threats in the South China Sea. Given that previous five-year plans mentioned improving defence capabilities only in general terms, the specific mention of the South China Sea is noteworthy, highlighting the heightened strategic importance of the disputed waters for Malaysia.

The near-permanent fracturing of the political landscape on Peninsular Malaysia has provided East Malaysia with a once-in-a-lifetime opportunity to demand a return to the original spirit of MA63, whereupon Sarawak and Sabah entered as equal partners to Malaya. A more self-confident Borneo with a louder national voice is expected to have significant implications for the future trajectory of Malaysia, whether in terms of local political dynamics or foreign policy priorities.