The North Borneo dispute is the result of a claim by the Philippines over much of the eastern part of Sabah in Malaysia. Sabah was known as North Borneo prior to the formation of the Malaysian federation in 1963. The Philippines, via the heritage of the Sultanate of Sulu, claim Sabah on the basis that Sabah was only leased to the British North Borneo Company with Sulu's sovereignty never being relinquished.
This dispute stems from the difference in the intepretation used on an agreement signed between Sultanate of Sulu and British commercial syndicate (Alfred Dent and Baron von Overback) in 1878, which stipulated that North Borneo was either ceded or leased (depending on translation used) to the British syndicate in return for payment of 5000 Malayan Dollar per year.
Nevertheless, Malaysia considered this dispute as a "non-issue", as there is no desire from the actual people of Sabah to be part of the Philippines or of the Sultanate of Sulu. As reported by the Secretary-General of the United Nations, the independence of North Borneo was brought about as the result of the expressed wish of the majority of the people of the territory in a 1963 election.
As of press time, the Malaysian Embassy in Manila continues to pay "cession money" to the heirs of the Sultanate of Sulu, amounting to P73,940 (Filipino Peso) or RM5300. This cession money is confirmed by the Malaysian Embassy in Manila, and the heirs of the Sultanate of Sulu.
Read more about this topic: Sultanate Of Sulu
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