The four states are mostly agriculture-based: Kedah and Perlis have vast tracts of paddy fields, while Kelantan grows rubber and tobacco, alongside paddy and palm oil. Both Kelantan and Terengganu have an active batik industry.
Supplementing state-government incomes are petroleum royalties paid to Terengganu and Kelantan for offshore drilling of oil and gas by the federal government. The royalties generally amount to more than RM1 billion (S$300 million) a year for the two states, though the actual sums are not often discussed publicly.
The Straits Times understands that the Terengganu state government has been paid RM802.1 million and RM749.3 million in petroleum royalties in 2023 and 2024, but is still owed payments amounting to RM721.9 million for 2023 and RM774.7 million for this year.
The Kelantan government received about RM218 million of oil royalties from the federal government in 2023, its Menteri Besar Nassuruddin Daud was quoted by the New Straits Times as saying in March 2024.
Two of the four states are also homes to Malaysia’s popular island-holiday destinations – Langkawi in Kedah, and Redang and Perhentian in Terengganu. And Kedah has established manufacturing industries based in its Sungai Petani and Kulim townships.
The SG4 are often referred to as the Malay-belt states, as their Malay Muslim majorities range from 80 per cent in Kedah to 95 per cent in Kelantan. Perlis has a Malay Muslim population of 88 per cent, and Terengganu 97 per cent.
The four states have a combined population of 5.3 million, or 15.6 per cent, of Malaysia’s total. They are among the poorest of Malaysia’s 13 states, with combined Gross Domestic Product (GDP) of RM124 billion (S$37.2 billion) in 2023, or just 7.9 per cent of Malaysia’s total GDP.
The SG4 group aims to raise the combined GDP amount to RM149 billion a year, said Datuk Seri Samsuri.
More than 50 per cent of the population in the SG4 states earn below Malaysia’s poverty line of RM2,208 a month, according to a presentation at the meeting by Professor Emeritus Barjoyai Bardai of Universiti Tun Abdul Razak’s Graduate School of Business.
Geography is partly to explain for the lagging economies of the SG4: They are generally located far from the large population centres on the west coast of Peninsular Malaysia such as the Klang Valley, Penang and southern Johor.
At the Sept 2 meeting, the SG4 leaders said they hope to develop five key sectors which are economy and industry, green technology, infrastructure and logistics, trade and investment, and agriculture and food security, as well as education and human capital.
The plan for these states to process rare earth elements is a key venture, said Datuk Seri Samsuri, as 70 per cent of the country’s REE are located in the member states.
“We believe rare earth is a source of wealth. Not all four states have rare earth, but regardless, all four states will get an equal share of revenues” when it is mined, said Dr Mahathir.
Malaysia is home to 30,000 tonnes of the world’s rare earth reserves, data from the United States Geological Survey in 2019 showed. This is a tiny drop compared to China’s estimated reserves of 44 million tonnes.
Critical rare earth minerals are used widely in semiconductor chips, electric vehicles and military equipment.
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