A Kuala Lumpur-based city planner recently came to Kedah to attend a meeting with his clients in Alor Star to discuss a major development project (an industrial-cum-science park) located not far away from Padang Besar.
We met over coffee and we talked about development projects in the state, local politics, local food and, finally, land law.
We also spoke on the recent amendments affecting the National Land Code (NLC), the Land Acquisition Act (LAA) and the Strata Titles Act (STA). He told me that a portion of the land involved in the project was under the Malay Reservation Enactment and asked why the relevant authorities did not find it necessary to revamp the law related to Malay reservation land, since it is over 100 years old. I told him I was disappointed over the matter, as well.
It is actually not appropriate to compare NLC with the Malay Reservation Enactment (MRE), because it is like comparing an apple to an orange. The NLC is a uniform law by Parliament for all the 11 states in Peninsular Malaysia, while in the case of Malay reservation land, there are six enactments — one uniform law for the four former Federated Malay States of Selangor, Pahang, Perak and Negri Sembilan, and five enactments for the five former non-Federated Malay States of Johor, Kedah, Perlis, Kelantan and Terengganu.
The law for the four former Federated Malay States was the Malay Reservation Enactment of 1913, later replaced in 1933 and reviewed again in 1935. It is now known as FMS Cap 142. As for the other five Malay States, the law came at different times — Kelantan in 1930, Kedah (1931), Perlis (1935), Johor (1936) and Terengganu (1941). There is no similar law for the two former Straits Settlements, Penang and Malacca.
It should be remembered that the NLC is a law of general application, while the MRE is a specific law applicable only to a specific category of land. Thus, while an owner of a piece of land can enter into three “dealings” (transfer, lease and charge) with another person under NLC, an owner of a Malay reserve land cannot enter into such dealings with a non-Malay.
The NLC recognises another dealing (easement), but it is not mentioned at all in the MRE.
If there is a conflict between the NLC and the MRE, the courts will resolve it in favour of the latter. This is in accordance with the legal maxim “Generalia specialibus non derogant” — the provisions of a general statute must yield to those of a special one, or “the general does not detract from the specific”.
My friend asked what choice did a state government (such as Kedah) have when its development projects involved Malay reserve land and its potential investors (who wish to acquire such properties either via purchase or lease) are foreigners or non-Malays?
I told him one solution was to amend the law — by removing restrictive provisions in the law.
The other alternative is to revoke the status of the land as Malay reserve, but this entails a duty for the state to replace the land with another land of “similar character and area” (Article 89(3)(b) of the Federal Constitution).
The power to revoke a Malay reserve land is vested in the menteri besar with the approval of the Ruler in Council, and in recent years in Kedah, this has been done several times.
It should be remembered that under the law, there is a difference between a tenancy (involving a period of not more than three years) and a lease (involving a period of more than three years).
Under the Kedah MRE, a tenancy of a Malay reserve land to a non-Malay is allowed, but a lease of more than three years to a non-Malay is prohibited (see Abdul Kadir bin Mahmud v Goay Weng Kim  6 AMR 413). However, a charge of such land to a non-Malay has been held by the courts as valid because there is no provision in the state law prohibiting it (see Sime Securities Sdn Bhd v Tetuan Projek Kota Langkawi Sdn Bhd  4 MLJ 585).
The correctness of the decision in Sime Securities has, however, been questioned lately by the Court of Appeal in Jamaluddin bin Jaafar v Affin Bank Bhd (Civil Appeal No. K-02-2728-12, 2013), when Abdul Rahman Sebli, JCA, said that the case was “decided per incuriam and can no longer be regarded as good law in so far as it ruled that a Malay reservation land could be charged to a non-Malay”.
Some quarters may find the idea difficult to accept, but if we wish to bring the Malay reservation law into the 21st century, all restrictions regarding the leasing and charging of Malay reserve land to non-Malays should be removed.
Owners of Malay reserve land should be allowed freely to lease their land to anyone (including a non-Malay person or a foreign corporation) provided it does not exceed a certain number of years, after which there can be one further extension or renewal, but no more.
The period of the lease (original period, or original period with extension) should be more than sufficient for the lessee to recover his investments and profit (ROI). Upon expiry of the lease, the land reverts to the owner. A monitoring body or agency should be put in place to ensure that the terms of these leases are fair to both parties — the lessors and lessees.
Owners of Malay reserve land should also be allowed to freely charge (or create a lien as security) their land to any bank or financial institution, thus giving the owners wider access to credit. The old way of doing things by forcing banks to apply to state authorities to be listed on the Second Schedule (see section 17 of Cap 142) should be scrapped. Should the owners (borrowers) later default and the banks decide to foreclose, only Malays are permitted to bid for their auctioned properties. Thus, even if there is a foreclosure action by any of these banks, these properties still remain in Malay hands.
However, the restrictions against alienation and transfer of Malay reserve lands (as provided in the current law) should remain. If the owners decide to develop their own lands (rather than let others develop them under the lease arrangements), then state authorities should work out incentives to encourage them, such as by reducing premiums, imposing reduced costs and charges, expediting and simplifying procedures, offering better densities and plot ratios, and making available affordable development financing packages, etc.
Kedah could set the example for others in coming out with these suggested reforms.
Salleh Buang formerly served the Attorney-General’s Chambers before he left for practice, the corporate sector and, then, the academia