It’s 40 years since Labuan became a Federal Territory. Unfortunately, it is not a day of celebration.
There are no easy answers but discussion is a necessary step forward. Clearly, Labuan needs a close relationship with Sabah but it also needs to be able to build on its existing strengths and own identity.
In her four-month tenure as minister, she had made three short trips to Labuan, largely aimed at pacifying growing grievances about harmful policies and her government’s unwillingness to engage in meaningful structural and economic reforms. In 1956, the British made Labuan Island duty-free, aiming to increase its strategic economic role. After Labuan was made a federal territory, it became an international offshore financial centre in 1990 and the area became a free-trade zone, with the plan of attracting foreign capital and spillover to promote prosperity.Labuan has also served as the core for Petronas to access Sabah’s oil and gas resources.
Locals reflect the multiethnic composition of southwestern Sabah, Brunei Malays, Kedayan, Chinese, Kadazans, Dusuns, Muruts, Bajaus, Lundayeh, and other communities there for multiple generations. An example is higher education. There is a satellite campus from Universiti Malaysia Sabah but it lacks the vibrancy of that in Sabah itself.There is also a shortage of jobs for local youth, with youth unemployment one of the highest in the country at 24 percent. Overall unemployment in Labuan is higher than the national figure at 7.2 per cent.Labuan has also been severely hit by the erosion of its duty-free status in 2022, imposing taxes and limiting the purchase of items such as beer.
What has not helped is that Labuan has been increasingly pitted against Sabah and Sarawak in key sectors of oil and gas and its port in an unfair competition without her own resources that has left the territory less economically viable.Labuan’s infrastructure has not been properly maintained, is inadequately sustainable, and is grossly underutilised.
Labuan’s electricity supply has not been stable and there are concerns about adequate and regular electricity when the Patau-Patau power station is retired in 2027. In fairness, some political appointees have tried to move out of this pattern, but it is hard when there is limited space to operate, with the federal government’s slow and siloed decision-making hampering progress and, importantly, limited resources.
Moreover, Labuan has also been caught up in federal battles. Because it lacks advocates of its own in Peninsular Malaysia , it has suffered.
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