After 38 years, why no sovereign oil fund for Malaysia?
By
Chua Jui Meng
IT’S time for Malaysians to take stock of the
Umno-led Barisan Nasional (BN) federal government’s lack of transparency and
accountability in its financial management of the country’s wealth.
It is utter rubbish and a disgrace for our 24-year-old
National Trust Fund (or Kwan, the acronym for Kumpulan Wang Amanah Negara) to
have a paltry savings of RM5.43 billion as at June last year (2012).
This amount was disclosed by Prime Minister Najib
Abdul Razak in his written reply to a question by Nurul Izzah Anwar (PKR-Lembah
Pantai) in Parliament.
Unless Najib now wants to claim that the figure was
erroneous and blame it on a scapegoat, it is a national and international
shame.
What can RM5.43 billion (US$1.9 billion) do to help
Malaysians and Malaysia during rainy days, like when our oil wells run dry
My biggest beef with the BN federal
government is this: Why is there no oil-based Soverign Wealth Fund (SWF) for
Malaysia?
Malaysia is the 27th
largest oil producer in the world, rolling out 693,700 bbl/day.
Only 114 countries are listed as at 2009 and 2010 (see list of oil producing
countries below).
Petronas
, founded in 1974, is today a global player in oil and gas exploration.
Why
is the government just satisfied with an annual RM100 million CONTRIBUTION to Kwan since 1988? Are
you treating Malaysians as monkeys and giving out peanuts?
Where
has Petronas’ trillions of ringgit in revenue over the past 38 years gone to?
Did Petronas’ oil and gas exploration presence in 32 countries outside Malaysia
contribute or help facilitate the bulk of RM1.08 trillion in capital flight in
the last decade?
Why
avoid establishing an oil-based sovereign fund for the people and country? Is
it because financial transparency and accountability would be a pain?
Petronas’
Q3 2012 profits are down 22%. That is a significant drop in financial
performance.
But
all these beg the question: With such wealth over 38 years, why is Malaysia’s
national debt, as reflected by Budget 2013, at RM502.4 billion or 1.3% short of
the 55% legislated debt ceiling?
However, there are RM118 billion in
off Budget liabilities or sovereign guarantees for private corporations like
the Port Klang Free Zone (PKFZ) and government-linked company loans ending
2011. This must be included and the federal debt is rightly at RM620.4 billion.
Energy Statistics > Oil > production (most recent) by country
Rank
|
Date
|
||||||||
# 1
|
10,120,000 bbl/day
|
||||||||
# 2
|
9,764,000 bbl/day
|
||||||||
# 3
|
9,056,000 bbl/day
|
||||||||
# 4
|
4,172,000 bbl/day
|
||||||||
# 5
|
3,991,000 bbl/day
|
||||||||
# 6
|
3,289,000 bbl/day
|
||||||||
# 7
|
3,001,000 bbl/day
|
||||||||
# 8
|
2,798,000 bbl/day
|
||||||||
# 9
|
2,572,000 bbl/day
|
||||||||
# 10
|
2,494,000 bbl/day
|
||||||||
# 11
|
2,472,000 bbl/day
|
||||||||
# 12
|
2,399,000 bbl/day
|
||||||||
# 13
|
2,350,000 bbl/day
|
||||||||
# 14
|
2,211,000 bbl/day
|
||||||||
# 15
|
2,125,000 bbl/day
|
||||||||
# 16
|
1,948,000 bbl/day
|
||||||||
# 17
|
1,790,000 bbl/day
|
||||||||
# 18
|
1,540,000 bbl/day
|
||||||||
# 19
|
1,502,000 bbl/day
|
||||||||
# 20
|
1,213,000 bbl/day
|
||||||||
# 21
|
1,023,000 bbl/day
|
||||||||
# 22
|
1,011,000 bbl/day
|
||||||||
# 23
|
878,700 bbl/day
|
||||||||
# 24
|
816,000 bbl/day
|
||||||||
# 25
|
796,300 bbl/day
|
||||||||
# 26
|
785,000 bbl/day
|
||||||||
# 27
|
693,700 bbl/day
|
||||||||
# 28
|
680,500 bbl/day
|
||||||||
# 29
|
589,200 bbl/day
|
||||||||
# 30
|
486,700 bbl/day
|
||||||||
# 31
|
485,700 bbl/day
|
||||||||
# 32
|
400,400 bbl/day
|
||||||||
# 33
|
380,000 bbl/day
|
||||||||
# 34
|
346,000 bbl/day
|
||||||||
# 35
|
300,600 bbl/day
|
||||||||
# 36
|
288,400 bbl/day
|
||||||||
# 37
|
276,800 bbl/day
|
||||||||
# 38
|
274,400 bbl/day
|
||||||||
# 39
|
262,100 bbl/day
|
||||||||
# 40
|
241,700 bbl/day
|
||||||||
# 41
|
197,700 bbl/day
|
||||||||
# 42
|
191,000 bbl/day
|
||||||||
# 43
|
156,800 bbl/day
|
||||||||
# 44
|
151,600 bbl/day
|
||||||||
# 45
|
148,000 bbl/day
|
||||||||
# 46
|
146,500 bbl/day
|
||||||||
# 47
|
146,000 bbl/day
|
||||||||
# 48
|
132,700 bbl/day
|
||||||||
# 49
|
117,000 bbl/day
|
||||||||
# 50
|
115,000 bbl/day
|
||||||||
# 51
|
99,930 bbl/day
|
||||||||
# 52
|
96,270 bbl/day
|
||||||||
# 53
|
91,380 bbl/day
|
||||||||
# 54
|
77,310 bbl/day
|
||||||||
# 55
|
70,910 bbl/day
|
||||||||
# 56
|
70,820 bbl/day
|
||||||||
# 57
|
61,150 bbl/day
|
||||||||
# 58
|
59,140 bbl/day
|
||||||||
# 59
|
58,950 bbl/day
|
||||||||
# 60
|
57,190 bbl/day
|
||||||||
# 61
|
52,980 bbl/day
|
||||||||
# 62
|
48,560 bbl/day
|
||||||||
# 63
|
48,340 bbl/day
|
||||||||
# 64
|
48,180 bbl/day
|
||||||||
# 65
|
47,050 bbl/day
|
||||||||
# 66
|
35,090 bbl/day
|
||||||||
# 67
|
34,140 bbl/day
|
||||||||
# 68
|
31,400 bbl/day
|
||||||||
# 69
|
27,230 bbl/day
|
||||||||
# 70
|
23,960 bbl/day
|
||||||||
# 71
|
21,880 bbl/day
|
||||||||
# 72
|
21,430 bbl/day
|
||||||||
# 73
|
18,880 bbl/day
|
||||||||
# 74
|
16,870 bbl/day
|
||||||||
# 75
|
16,510 bbl/day
|
||||||||
# 76
|
16,360 bbl/day
|
||||||||
# 77
|
15,190 bbl/day
|
||||||||
# 78
|
13,530 bbl/day
|
||||||||
# 79
|
11,400 bbl/day
|
||||||||
# 80
|
11,220 bbl/day
|
||||||||
# 81
|
10,970 bbl/day
|
||||||||
# 82
|
10,910 bbl/day
|
||||||||
# 83
|
10,850 bbl/day
|
||||||||
# 84
|
9,671 bbl/day
|
||||||||
# 85
|
8,718 bbl/day
|
||||||||
# 86
|
7,600 bbl/day
|
||||||||
# 87
|
7,081 bbl/day
|
||||||||
# 88
|
6,779 bbl/day
|
||||||||
# 89
|
6,333 bbl/day
|
||||||||
# 90
|
5,733 bbl/day
|
||||||||
# 91
|
5,400 bbl/day
|
||||||||
# 92
|
5,100 bbl/day
|
||||||||
# 93
|
4,833 bbl/day
|
||||||||
# 94
|
4,721 bbl/day
|
||||||||
# 95
|
4,114 bbl/day
|
||||||||
# 96
|
4,053 bbl/day
|
||||||||
# 97
|
3,990 bbl/day
|
||||||||
# 98
|
3,806 bbl/day
|
||||||||
# 99
|
3,488 bbl/day
|
||||||||
# 100
|
3,227 bbl/day
|
||||||||
# 101
|
2,235 bbl/day
|
||||||||
# 102
|
1,783 bbl/day
|
||||||||
# 103
|
997 bbl/day
|
||||||||
# 104
|
995 bbl/day
|
||||||||
# 105
|
979 bbl/day
|
||||||||
# 106
|
765 bbl/day
|
||||||||
# 107
|
221 bbl/day
|
||||||||
# 108
|
160 bbl/day
|
||||||||
# 109
|
118 bbl/day
|
||||||||
# 110
|
108 bbl/day
|
||||||||
# 111
|
31 bbl/day
|
||||||||
# 112
|
29 bbl/day
|
||||||||
# 113
|
5 bbl/day
|
||||||||
# 114
|
2 bbl/day
|
||||||||
Total:
|
84,764,555
bbl/day
|
||||||||
Weighted average:
|
417,559.4
bbl/day
|
||||||||
Historical countries, unions or other regions: |
|||||||||
European Union
|
2,365,000
bbl/day
|
||||||||
Why are the following countries
doing better in terms of oil-based or non-commodity based sovereign wealth
fund management: Kuwait (10th at 2,494,000
bbl/day), Libya (17th at 1,790,000 bbl/day), Kazakhstan (18th
at 1,540,000 bbl/day), Algeria (15th at 2,125,000 bbl/day), South
Korea (64th at 48,180 bbl/day) and Singapore (82nd at
10,910 bbl/day).
The
BN federal government is answerable to the people who have the right to
demand accountability and transparency. They have every right to question and
seek honest explanations and answers.
Unfortunately,
Najib, as prime minister and finance minister, and his administration have
been taking a non responsive and silent position whenever confronted by
economic and financial issues related to accountability and transparency.
The
people today are aware of BN-Umno making fools of Malays and Malaysians in
the management of the country’s rich natural resources.
Their
restlessness, intolerance for corruption and mismanagement of the country’s
finances are reflected by the growing mammoth crowds at Pakatan Rakyat’s ceramahs.
Here,
I also wish to draw Malaysians’ attention to a renewed attempt, parallel to
the Petronas issue albeit on a smaller scale, to fool the people and win
their confidence and votes with ridiculous claims of Kulim Hi-Tech Park
(KHTP)’s success.
The
details of the KHTP issue is clearly explained in a Malaysia Chronicle report produced below titled “MAKING A
FOOL OF THE MALAYS: Kulim & NUR not success stories but UMNO FAILURES”.
Also
reproduced below are The Star
report on Petronas’ contribution to Kwan and an extract of a Centre for
Public Policy Studies (CPPS) factsheet on oil and gas:
|
Thursday
June 30, 2011
PM: Petronas contributed RM3bil to national trust fund
A total of RM3bil
was contributed by Petronas to the National Trust Fund (Kwan) as at June this
year, said Prime Minister Datuk Seri Najib Tun Razak.
The money has been
invested in various financial instruments and the fund currently stands at
RM5.43bil, he told Nurul Izzah Anwar (PKR-Lembah Pantai) in a written reply
yesterday.
The fund was set
up to ensure that revenue from dwindling natural resources would benefit future
generations, said Najib.
He added that the
administration and management of the fund would be handled by Bank Negara while
a panel under Kwan would monitor the collection of funds.
Najib, who is also
Finance Minister, said Petronas had also paid the federal government and state
governments RM594.6bil in dividends, taxes, export duties and petroleum revenue
up to March this year. – The Star
CPPS
Policy Factsheet:
Oil
and Gas
CPPS
is
pleased to bring to you its “CPPS Policy Fact Sheet” on the oil and gas
industry. In this factsheet, we will look at perhaps the most important sector
of the Malaysian economy and its relationship with both public and private
sectors.
BACKGROUND
Crude
oil and natural gas are two of Malaysia’s most abundant resources. In a country
rapidly industrialising and moving into the service sector, oil and gas, among
a handful of primary resources, remain significant contributors to the
national economy. The national oil corporation, Petronas, is one of the
largest companies in the world, and a towering figure at home; a significant
portion of its revenues flow into the treasury.
The
sustainability of the petroleum industry in Malaysia is increasingly becoming
an issue, with projections predicting the country will become a net oil
importer in a few years. With petroleum contributing a large chunk of
federal revenue, there are fears that the government is too dependent on
oil and gas royalties. Rising global fuel prices have buoyed Petronas and
government revenues, but also put pressure on the government to cut fuel
subsidies, which are among the largest in the region.
Complicating
matters is the government’s opacity in the oil and gas industry; despite
being completely state-owned, Petronas does not report to Parliament,
and makes very limited information available about its operations and revenue.
Several states with oil and gas reserves have also publicly raised the issue
of royalties, saying they should be paid a larger share directly, rather
than relying primarily on the federal government to funnel revenue back into
the state.
FLASH
POINTS
Oil and gas is a
significant contributor to government revenue, comprising more than 40% of
federal revenue annually.
The main vehicle
for developing the oil and gas industry is the state-owned Petronas corporation,
which partners with international oil companies to explore and mine oil and gas
fields.
Petronas is also
expanding its operations overseas; foreign fields contribute an
increasing amount of Petronas revenue.
Under the
Petroleum Development Act 1974, Petronas reports only to the Prime Minister;
much information about its business operations thus remains hidden from the
public.
Transparency
International has ranked Petronas as a low-performing international oil
company and middle-performing national oil company when it comes to revenue
transparency.
A substantial
amount of revenue from oil and gas goes into subsidising various petroleum
products, primarily petrol, diesel and natural gas.
Some revenue —
about RM100 million a year — goes into the National Trust Fund, or
Kumpulan Wang Amanah Negara, for future savings and investment; the fund
currently has RM 3.8 billion in the bank.
The rest of the
revenue is primarily spent on development, and allocated through the
annual budget.
Due to
Malaysia’s heavy dependence on oil and gas, some fear we may be subject
to the “resource curse”. From 1960 to 1990, per capita incomes in
resource-deficient countries grew two to three times faster than in
resource-dependent countries.
Pure
subsidies for fuel will not be sustainable for much longer, especially
in light of depleting oil and gas reserves. Worryingly, the National Trust
Fund’s RM3.8 billion is unlikely to be enough to sustain current rates
of government expenditure once current reserves are exhausted.
WHO
ARE the PLAYERS
Petronas, the
national oil and gas company; responsible for development of the
industry locally, and stewardship of the country’s oil and gas resources. Visit
the official Petronas website.
The Prime
Minister’s Office receives reports from Petronas and is
responsible for allocating oil and gas revenue through the annual budget.
Kumpulan Wang
Amanah Negara stores oil and gas funds allocated for future saving
and investment by the Prime Minister.
International
oil companies which partner with Petronas: ExxonMobile, Shell,
BHP, Caltex, Murpy Oil, Nippon Oil, Lundin Malaysia, Mitsubishi and Japex.
BASIC
STATISTICS and FACTS
The main oil
and gas firm is Petroleum Nasional Berhad (Petronas), a 100% state-owned
corporation. Several other international oil companies such as ExxonMobil,
Shell, BHP, etc. also have operations in Malaysia, in partnership with
Petronas.
Petronas also
operates internationally in 32 other countries.
Malaysia’s total
reserves of oil and gas as of 1 January 2008 stand at 20.13 billion
barrels of oil equivalent (boe). In the last year production averaged
out at 1,673,500 boe per day.
Petronas also
has an additional 6.24 billion boe of international reserves, with
production of 615,100 boe per day.
At current
rates, Petronas has estimated Malaysia will become a net importer of oil by
2012.
At the end of
the 2007 fiscal year, Petronas had earned RM223.1 billion in revenue. Of
this money, Petronas paid RM62.8 billion to the federal government, and
RM4.8 billion in royalties to the states of Terengganu, Sabah and Sarawak.
These payments constituted 63.1% of Petronas revenue.
Petronas money
comprised 44% of federal government revenue in the previous year. Since
inception Petronas has paid RM403 billion to the government, comprising
more than half of all government revenue since the 3rd Malaysia Plan.
In the 2007
fiscal year Petronas subsidised the gas sector to the tune of RM19.7 billion;
the government’s expenditure on petrol, diesel and gas subsidies that year
stood at RM16.2 billion.
The
Kumpulan Wang Amanah Negara (National Trust Fund, or KWAN), primarily comprises
Petronas funds earmarked for future investment; as of 2008, the fund has about RM3.8
billion, a paltry amount compared to other resource-rich countries such as
Kazakhstan, whose trust fund has USD14.1 billion in the bank.
MAPPING
it OUT
Oil and gas
mining operations are based in the territories of three states: Terengganu,
Sabah and Sarawak.
Petronas
partners with foreign companies in 32 countries, whose contribution to
Petronas revenue is steadily growing.
Credit:
US Energy Information Administration
Petronas
Foreign Operations:
Algeria
Argentina
Australia
Benin
Cambodia
Cameroon
Chad
China
Cuba
Egypt
Equatorial Guinea
Ethiopia
India
Indonesia
Iran
Japan
Mauritania
Morocco
Mozambique
Myanmar
Nigeria
Pakistan
Philippines
Russia
South Africa
Sudan
Thailand
Timor Leste
Turkmenistan
United Kingdom
Uzbekistan
Vietnam
PARTY POSITIONS
Barisan
Nasional
Supports weaning Malaysians from
resource dependence by cutting subsidies
Supports slow phasing out of
current subsidies for Independent Power Producers (IPPs)
Supports letting Petronas
reinvest more of its profits, through subsidy reductions
Prefers
maintenance of status quo with respect to state royalties
Pakatan
Rakyat
Supports
reduction in fuel prices by as much as 50 sen
Demands
immediate end to government protection of IPPs, which receive substantial
subsidies at the expense of Petronas and Tenaga Nasional
Supports greater
transparency in Petronas accounting
Supports
giving more oil and gas royalties to the states
REVENUE
TRANSPARENCY
As Petronas
is accountable only to the Prime Minister, its accounts are not public nor
available to Parliament, rendering the state oil company’s operations extremely
opaque.
As an
international oil company, Petronas has been rated as a low performer on
revenue transparency by Transparency International. According to the criteria,
this means Petronas discloses its revenue only by geographical segmentation,
with almost no additional relevant information, and that increased reporting in
all areas of revenue transparency is necessary.
As a national
oil company, Petronas was rated as a middle performer, meaning it discloses
relatively little about payments and anti-corruption programmes, and needs
increased reporting on policy and management systems, as well as improved
reporting on all areas of revenue transparency. For more, see the full report.
Malaysia does
not subscribe to the Extractive Industries Transparency Initiative (EITI),
an initiative to get governments to release information on revenues received,
and also to get oil and gas companies to publish information revenues paid to
governments. Timor Leste is the only country in Asia Pacific subscribing to
this initiative.
POLICY
RECOMMENDATIONS
Make disclosures
within the extractive industry fully transparent: All oil and gas companies
operating in Malaysia especially Petronas (being the national oil company)
should disclose all payments to the government. this should be disaggregated to
show all types of payments (royalties, taxes, etc.) following international
disclosure standards for transparency in company reporting.
Make fully
transparent the revenue flows coming from foreign countries in
which Petronas operates, and the revenues being paid to foreign governments, as
these may raise serious human rights concerns.
Amend the
Petroleum Development Act 1974 to make Petronas reportable to Parliament instead
of to the Prime Minister. This would increase accountability of oil and gas
revenues that form a tremendous amount of national budget. Large activities and
investments should be tabled to Parliament.
Increase
Parliamentary oversight of the Kumpulan Wang Amanah Negara that
absorbs RM100 million from Petronas accounts annually. Reports that are tabled
to Parliament should be followed up on (the 2005 report is the latest available
in the Parliament library).
Ensure that all
information provided by the Government is watertight.
Profit, revenue, subsidy, and expenditure figures must be consistent across all
Ministries and Government Departments.
The National
Depletion Policy must be updated in light of recent changes in the global
oil market, highlighting steps taken to seek alternative sources of revenues
for the sake of future generations.
Have
a consistent subsidy scheme, with detailed measures on addressing
targeted low-income groups. This should be accompanied by thorough methodology,
figures and calculations on how the scheme is configured.
Monday, 10 December 2012 13:24
MAKING
A FOOL OF THE MALAYS: Kulim & NUR not success stories but UMNO FAILURES
Written by Nawawi Mohamad, Malaysia Chronicle
The Kulim Hi-Tech Park (KHTP), was officially opened
in 1996, the first commercial estate to house specialist high technology
industries in Malaysia. The nature of this park is to catch a niche market that
needs a 'fool-proof' uninterrupted power supply. There are many sophisticated
operations that cannot tolerate even for a second a power brown-out as that may
be enough to create havoc in the costly manufacturing processes. So when there
is a hiccup in power supply, the firms who have committed to set up stall there
stand to lose millions as it is very time consuming to restore the complex
systems and re-start production.Kulim, which was another of former premier Mahathir Mohamad's 'brainchild', was beset by problems right from the start. There were few and insufficient takers for the 31 industrial lots needed to provide economics of scale for the developer's construction of 5 mini-power plants. The 5 power plants were needed to provide sufficient standby power that TNB could not provide through the main power grid lines. And these 5 plants, although not supplying power simultaneously, had to be on standby 24/7. Thus, it is very costly to have all 5 systems working when there is no or insufficient income because the power has to be burnt or wasted in any case.
So for years, the situation at Kulim was like the proverbial chicken-and-egg, i.e. which came first? Without the power plants, there would be no hi-tech manufacturing plants. Yet without the hi-tech manufacturing plants, the 5 power plants cannot be constructed as the costs would be too prohibitive.
Then, as usual in Malaysia, whenever there is huge money to be made, UMNO is bound to be involved. And more often than not, the money somehow vanishes into thin air, leaving behind a big huge white elephant which will have to be paid for over and over again by the people..
Greed that knows no bounds
Indeed, Kulim is symptomatic of UMNO's greed during the Mahathir era. Some greedy 'warlords' were not content to monopolize the power industry through Tenaga Nasioal Bhd. They wanted a set-up like Kulim, where the 5 plants would be totally independent and untouchable by even TNB. Kulim would not only be a separate power producing entity but also the gateway to the Forbes' List of the World's Wealthiest for many quarters with close ties to Mahathir and UMNO.
To cut the story short, in the end instead of 5, only one power plant was constructed producing some 228 mega-Watt of electrical power (compared to normal plant supply 1,500 MW). The deal was given to Northern Utility Resources Sdn Bhd ( NUR). This obscure firm was given a 30 year concession period beginning 1997. But as a result of building only one power plant instead of 5, not many hi-tech companies were keen to invest there. The investors were not at all keen to take the risk that there would not be any brown or black outs.
After a while, amid much haggling and the notorious UMNO arm-twisting, the Mahathir administration managed to lure 25 companies - of course, mostly local 'crony firms' and GLCs - to open shop there. Like sitting ducks, these firms agreed to go there to save the entire Kulim 'Hi-Tech' project from becoming an embarrassing white elephant. But they were forced to sacrifice their need for uninterrupted power supply and the best joke of all, NUR still made huge losses and was indebted to the tune of RM1.5 billion.
Ex-minister
What happened next is actually incredible but sad to say, it has become part of the UMNO-BN SOP or standard operating procedure for failed mega projects. After 'saving' Kulim, the BN administration stepped in to save NUR!
The UMNO-led BN government did this by changing NUR's license allowing it to sell power to the national grid. However, the firm failed to sign a power purchase agreement with TNB despite being in discussion for more than 2 years.
Some people say that this is due to one 'adamant' UMNO leader who wanted to take control of NUR and was trying to use the government to bail out the NUR just like the Ministry of Finance was persuaded to bail out the perennially loss-making national carrier MAS. To this particular UMNO leader, who is surely very influential, it was a case of 'if you can do it, why can’t I do the same?'
The latest postings in the back-biting UMNO blogs have already hinted that NUR is now under the control of a powerful ex-minister. Of course, he's from UMNO! Just like the DRB-Hicom's daring purchase of Proton without using 'real' money or having any know-how in car manufacturing, this ex-minister is said to be confident of being bailed out by the UMNO-BN government.
But of course - why else would he have got involved in the first place if not for the fact that he knows he would be bailed out and generously too!
Malay success story or RAPE & PLUNDER OF OWN RACE?
However, the UMNO media and bloggers are spinning the story as being one of the major successes of Prime Minister Najib Razak's ETP and NKEA economic programs. They are selling the Kulim failure and NUR bailout as a Malay economic success story. And thanks should be given to Najib's 'foresight' and 'great love' for his race, they insist.
But in actual fact, this is nothing but another RM1.5 billion down the drain - at the very least. It may be nothing compared to the RM12.5 billion PKFZ scandal but it is stunning enough to knock another hole in the country's coffers and ratchet up a national debt that has already surpassed its 55% legal ceiling.
If this is a Malay success story, then Malays would do well to worry about their future with UMNO leading their own rape and plunder.
Malaysia Chronicle
