By Ng Kee Seng. Published by The Ant Daily on 14 January 2014.
Can any oil producing country in the world make all her citizens millionaires via prudent management and savings?
Norway achieved that on Jan 8, 44 years after striking oil in the North Sea in 1969. But it only set up its oil sovereign wealth fund (SWF) in 1990, meaning it took the Norwegians only 23 years to be millionaires.
According to a Reuters report, everyone in Norway became a theoretical crown millionaire on Jan 8 in a milestone for the world’s biggest sovereign wealth fund that has ballooned thanks to high oil and gas prices.
The fund owns about one per cent of the world’s stocks, as well as bonds and real estate from London to Boston, making the Nordic nation an exception when others are struggling under a mountain of debts.
A preliminary counter on the website of the central bank, which manages the fund, rose to 5.11 trillion crowns (US$828.66 billion or RM2.7 trillion), fractionally more than a million times Norway’s most recent official population estimate of 5,096,300.
It was the first time it reached the equivalent of a million crowns each, central bank spokesman Thomas Sevang said.
Not that Norwegians will be able to access or spend the money, squirreled away for a rainy day for them and future generations. Norway has resisted the temptation to splurge all the windfall since its oil strike.
Finance Minister Siv Jensen told Reuters the fund, called the Government Pension Fund Global, had helped iron out big, unpredictable swings in oil and gas prices. Norway is the world's number seven oil exporter.
“Many countries have found that temporary large revenues from natural resource exploitation produce relatively short-lived booms that are followed by difficult adjustments,” she said in an email.
The fund, equivalent to 183 per cent of 2013 gross domestic product, is expected to peak at 220 per cent around 2030.
“The fund is a success in the sense that parliament has managed to put aside money for the future. There are many examples of countries that have not managed that,” said Oeystein Doerum, chief economist at DNB Markets.
Note the key word: Parliament. In Malaysia, only the prime minister has access to national oil producer Petronas’ funds and accounts.
Malaysia is the 27th largest oil producer in the world, rolling out 693,700 barrels/day. Only 114 countries were listed as at 2009 and 2010. Norway rolls out 2,350,000 bbl/day.
What’s the financial position of Malaysia? A federal debt of up to RM800 billion! (as revealed by then Deputy International Trade and Industry Minister Datuk Seri Mukhriz Mahathir at end of 2012).
And do we have such an oil SWF to save for rainy days for the rakyat and country? None.
According to a written reply in Parliament by Prime Minister Datuk Seri Najib Razak, Petronas had contributed RM3 billion to the National Trust Fund (or Kwan, the acronym for Kumpulan Wang Amanah Negara) as at June 2011.
He also said the money had been invested in various financial instruments and that Kwan’s fund currently stood at RM5.43 billion.
Just a measly RM5.43 billion compared with Norway’s RM2.7 trillion!
The administration and management of the trust is handled by Bank Negara with a panel under Kwan monitoring the collection of funds. And, digest this moronic joke: Najib said Kwan was set up to ensure that revenue from dwindling natural resources would benefit future generations.
After 39 years (Petronas was founded in 1974), all we have today is a federal debt of at least RM800 billion, and the international reserves of Bank Negara Malaysia stood at RM441.7 billion (equivalent to US$134.9 billion) as at Dec 31, 2013.
Now, it is clear why the Umno-led Barisan Nasional government is cutting down on subsidies. Its federal debt is so high that it cannot continue to borrow to serve the rakyat as before or Malaysia will go bust like Greece.
It’s time for Malaysians to take stock of the federal government’s lack of transparency and accountability in its financial management of the country’s wealth.
It’s utter nonsense and a disgrace for the 24-year-old Kwan to have a paltry savings of RM5.43 billion, unless Najib now wants to claim that the figure was erroneous and blame it on a scapegoat who prepared the written reply in Parliament.
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?
Why is there no oil-based SWF for Malaysia?
Petronas 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?
Where has Petronas’ hundreds of billions of ringgit in revenue over the past 38 years gone to?
Did Petronas’ oil and gas exploration presence in 32 countries outside Malaysia also contribute or help facilitate the bulk of the RM1.08 trillion in capital flight in the last decade?
Why avoid establishing an oil-based SWF for the people and country? Is it because financial transparency and accountability would be a pain?
Crude oil and natural gas are Malaysia’s two most abundant resources but their sustainability is being questioned with the country projected to become a net oil importer in a few years.
Now, let’s take a more detailed look on why other oil producing countries are doing better in terms of oil-based or non-commodity-based SWF 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).
Malaysia’s non-commodity Khazanah Nasional, founded in 1993, is ranked 23rd with US$34 billion (RM110 billion) in assets and a Linaburg-Maduell Transparency Index (LM-TI) of 5.
The world’s largest SWF, Norway’s Pension Fund Global, was in 2009 registered with assets worth US$664.3 billion (RM2 trillion) with a perfect 10 LM-TI.
UAE-Abu Dhabi’s oil-based Abu Dhabi Investment Authority, established in 1976, is ranked second with US$627 billion (RM2 trillion) and a 5 LM-TI.
At third spot, China’s non-commodity SAFE Investment Company, which was founded in 1997, now manages assets worth US$567.9 billion (RM1.8 trillion), with a 4 LM-TI.
That’s the top three SWFs in the world. Now, let’s focus on our neighbours.
Singapore’s non-commodity Government of Singapore Investment Corporation, which was set up in 1981, is ranked 8th with assets at US$247.5 billion (RM802 billion) and a 6 LM-TI.
Following at 9th rank is another Singapore non-commodity SWF, Temasek Holdings, which was established in 1974. It has US$157.5 billion (RM510 billion) in assets and a perfect 10 LM-TI.
Even countries like Kuwait, which was severely damaged by Iraq’s bombing and brief occupation, Libya, Kazakhstan, Algeria and South Korea, which were far poorer than Malaysia in the 60s, 70s and 80s, are all managing their country’s wealth better than Malaysia.
Malaysia’s economic and financial standing is baffling, don’t you think so?
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Ng Kee Seng believes that God helps those who help themselves. In a healthy democracy, every Malaysian has a role in politics and nation-building.
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