Petronas has been bailing out GLCs financially since 1985, says Ku Li

By V. Anbalagan, Assistant News Editor. Published by The Malaysian Insider on 4 April 2014.

The founding chairman and chief executive of Petronas yesterday lamented that Putrajaya has been treating the leading oil and gas company as a cash cow, especially in bailing out government-linked outfits of financial trouble.

Tengku Razaleigh Hamzah, or Ku Li, said since its inception in 1974 and until 2011, Petronas paid the government RM529 billion in dividends, taxes, petroleum proceeds and export duties.

He said the reliance of Petronas to help government-linked outfits out of financial trouble had been going on since 1985.

Ku Li, a finance minister from 1976 to 1984, said that year Petronas rescued the then Bank Bumiputra with a RM2.5 billion bailout, and again in 1991 when it coughed up another RM1 billion.

In 1997, he said Petronas had to rescue the financially ailing Konsortium Perkapalan Berhad for RM2 billion.

He added that Petronas was made to underwrite the construction of the Twin Towers, located in the heart of Kuala Lumpur, for RM6 billion and the building of the extravagant Putrajaya, the administrative capital of the Federal Government, for RM22 billion.

"This amount could have been used more productively to fund a national pension programme for Malaysians, as has been done by a certain Scandinavian country," he said in his speech at the launch of the book "Rich Malaysia, Poor Malaysians" at the Sultan Sulaiman Club in Kuala Lumpur last night.

The book, authored by Anas Alam Faizli, is a collection of essays reflecting his thoughts on energy, economy and education in Malaysia.

The bailout and construction of mega projects was done during the premiership of Tun Dr Mahathir Mohamad, who initiated a series of major infrastructure ventures in the 1990s.

Ku Li said the exorbitant amount of the bailout and construction of these projects that was forced onto Petronas had also deprived the company from the much needed cash build-up for reinvestment, which would ensure its business sustainability.

He said it was important for Petronas to look further afield at business investments outside the oil and gas sector, and it was critical for the corporation to have a strong cash reserve for reinvestment purposes.

"It was this need for prudence that had led Tun (Abdul) Razak, the prime minister of the day (1970-1976) to impress upon me the need to ensure that Petronas would enjoy parity with such multinational companies," he said.

He said today Petronas was on par with oil majors and was ranked as one of Fortune 500's largest and profitable oil and gas companies.

"But sadly, it is being abused and treated as the piggy bank whenever the government needed cash in a hurry," he said.

Ku Li said while subsidising of consumer goods was not the most efficient of ways in managing the high cost of living, it was fairly understandable if the government extended a helping hand to the small man.

"What is sinful and cannot be forgiven is the ease with which the powers that be had been dishing out subsidies to such entities like the national power supplier, the independent power producers and some other non-power outfits," he said.

As pointed out by Anas in his book , Ku Li said since 1997 this subsidy had amounted to RM136.5 billion.

He said the sad part was that while these power producers continued to enjoy subsidised fuel price, petroleum subsidy to the consumers – which purportedly cost the government RM14 billion in 2011 – was partly discontinued.

Link: http://www.themalaysianinsider.com/malaysia/article/petronas-has-been-bailing-out-putrajaya-financially-since-1974-says-ku-li

Blessed with oil money, but why is Malaysia in huge debt?

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?

Link:

http://www.theantdaily.com/news/2014/01/14/blessed-oil-money-why-malaysia-huge-debt

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.

The Marginalised And The Elite

By Alyaa Azhar. Published by Free Malaysia Today on 2 January 2013.

Three members of a family in Pengerang, Johor, unable to cope with the loss of their home, committed suicide by inhaling charcoal smoke in an enclosed room yesterday. The family had received a notice informing them their home was being acquired for the controversial RM60 billion Petronas’s Refinery and Petrochemicals Development project.

They were told that they would receive only RM20,000 in compensation as the land on which their house was on was owned by another. Gabungan NGO Pengerang, a grassroots group opposing the oil plant, said the man sought help from the ruling political party, and had informed the party he wished to commit suicide.

The group’s treasurer, Chua Peng Sin, said the man, by name of Pang, suffered financial difficulties as he was earning a living helping out at a restaurant. He was forced to quit his job to care for his wife, who had suffered a stroke, and their child, who was diagnosed to be mentally disabled.

Read more here:
http://www.freemalaysiatoday.com/category/nation/2013/01/02/family-in-pengerang-commits-suicide/

By G Vinod. Published by Free Malaysia Today on 2 January 2013.

PKR director of strategy Rafizi Ramli claimed that Deepak bought 19 types of jewellery, worth about RM13 million for the prime minister's wife. Rafizi also produced several documents, including invoices and bank payment records made to two luxury jewellery companies based in Hong Kong – Dehres Limited and Firestone Corporation Limited.

The payments for the jewellery were made by two companies linked to Deepak – Carpet Raya Sdn Bhd and Carpet Plus Sdn Bhd. Rafizi urged the authorities to investigate, alleging that the matter was nothing short of a corrupt act. He said that it would not be difficult for an agency like the Malaysian Anti-Corruption Commission (MACC) to investigate as each luxury jewellery is unique, with its own reference code. 

“For example, Deepak’s company made payment for the purchase of a diamond ring, code DR 2763, worth US$1.5 million. “So we have its code and the MACC could easily trace this matter if it hauls up Deepak for an investigation,” Rafizi said, adding that it would be difficult for anyone to forge a bank record.

Read more here: 

http://www.freemalaysiatoday.com/category/nation/2013/01/02/deepak-purchased-gems-worth-millions-for-rosmah/

Goverment’s valuation ‘too conservative’

By Leven Woon. Published by Free Malaysia Today on 7 September 2012.

Upset Pengerang landowners will engage a surveyor to revalue their properties following the state government's shocking compensation of RM2.50 per sq ft.

http://www.freemalaysiatoday.com/category/nation/2012/09/07/govt%E2%80%99s-valuation-too-conservative-says-surveyor/

An independent surveyor has backed Pengerang residents in their demand for higher compensation for their demolition-bound homes. According to a land surveying firm director Tan Beng Sooi, the valuations offered by the authorities – RM2.50 and RM4.50 per sq foot – were too conservative. He said the figures did not reflect the full potential of the land.

“It is very low, and to my understanding, the valuation was done before October 2011. They did not take into account the current market value,” said the Johor-Baru based surveyor. More than 50 residents from Kampung Sungai Kapal, Kampung Jawa and Kampung Teluk Empang were the first batch of some 30,000 affected people to receive the land valuation offer.

The offer was made to them at a public hearing in Desaru on Monday. It was the first time they were told about the price offered. Their properties are to be acquired for the contentious RM60 billion Refinery and Petrochemical Integrated Development (RAPID), a project spearheaded by Petronas.

Fuming at the shockingly cheap offer, the residents said they would engage a lawyer and surveyor to revalue their properties. Tan, in a valuation report done for Pengerang earlier this year, had pointed out that the properties should be priced between RM12 per sq ft and RM15 per sq ft.

Six weeks to decide

When contacted yesterday, he expressed surprise at the figures offered by the Johor government and district land office. “Earlier this year there was a bungalow sold at RM40 per sq ft in Taman Rengit, Kampung Sungai Kapal,” he said. Tan doubted if the authorities had taken into account the villagers who operate fish farms in the areas, who would suffer a loss of income once they are relocated.

“What about the temples and places of worship? Have they drawn a new site for relocation?” he asked. He added that the authorities should not have begun the public hearing only now, since they planned to complete the entire relocation process by April next year. The residents are given six weeks from the day they receive the offer to make a decision.

The Johor government is planning to acquire some 8,094ha of land in Pengerang for the development of the Pengerang Integrated Petroleum Complex (PIPC). About 2,550ha will be developed by Petronas RAPID, while 544ha will be for the Pengerang Independent Deepwater Petroleum Terminal.

(Photo courtesy of Kampungku, Suaraku facebook page.)

Related report:

http://www.themalaysianinsider.com/malaysia/article/pengerang-compensation-within-fortnight-johor-mb-pledges/

Villagers affected by the land acquisition process in Pengerang will receive their compensation in cash within 14 days, following their acceptance of the award. The assurance given by the state government is for the ongoing public hearing on land acquisition award that started September 3 this year, for villagers whose land were affected by the RAPID project located within the Pengerang Integrated Petroleum Complex (PIPC).

Johor Mentri Besar Datuk Abdul Ghani Othman, in a statement today, said the first phase of the public hearing from September 3-14 will enable three villagers affected to state their case on government compensation for their acquired land and properties.

The three villagers affected are part of Kampung Sungai Kapal, Kampung Teluk Empang and Kampung Langkah Baik, he said. The public hearing implementation according to him was based on Land Acquisition Act 1960 and the affected villagers need not worry about their rights because it would be done according to provisions of the act.

“The compensation offered will be based on valuations conducted by the Valuation and Property Service Department based on prevailing market prices at the time before section 4 was gazetted. It will not be arbitrarily decided by the state government,” said Abdul Ghani. — Bernama

Ku Li Responds To Full-page Ads On Royalty Issue

Written by Tengku Razaleigh Hamzah

Monday, 22 February 2010 16:13

The Edge

I see the Ministry of Information has taken out full page advertisements in the major Malay newspapers to argue that Kelantan has no right to oil payments under the Petroleum Development Act because the oil resources in question lie outside the 3 nautical mile limit that delimits state versus federal jurisdictions. The advertisement fails to point out that almost all the oil found in Malaysia is located more than 3 nautical miles offshore, and Petronas has nevertheless been making oil payments to the states.

By the argument deployed in the advertisement, Terengganu, Sabah and Sarawak too are not entitled to the “cash payments” of 5% of profit oil (commonly and a little inaccurately referred to as “oil royalties”). Everything is at the arbitrary behest of the Federal Government.

Yet last year, according to its annual report, Petronas paid out RM6.2 billion in petroleum cash payments, with RM3 billion to Terengganu, RM2.3 billion to Sarawak and RM0.9 billion to Sabah. One wonders what basis this payment was made on since none of this was for petroleum found within 3 nautical miles offshore of these states. The argument for depriving Kelantan of 5% cash payments on the basis of its petroleum resources being found beyond 3 nautical miles is an insult to the intelligence.

I have spoken and written at length on this issue and had been reluctant to say more on it. Moreover, as a member of the ruling party I am embarrassed to have to belabour elementary points against the government. This information campaign, whether through a leaflet campaign in the schools or through newspaper advertisements paid for with taxpayer money, implies either culpable stupidity or gross deceitfulness on the part of agents of the Federal Government. I had hoped to avoid that implication.

The government’s advertisement also exhumes a ten year old mis-quotation in a government newspaper to allege that I once denied that Terengganu had any right to the 5% cash payment. I said no such thing. If the government media is to be believed I also once converted to Christianity by wearing Kadazan headgear just in time to be exposed amidst a General Election campaign. Why does the government rely on a ten year old misquotation? Well, these days we have our own blogs.

In fact, as a BN backbencher at the time I opposed the Federal Government’s intervention to prevent Petronas from making oil payments to Terengganu and the move to channel those funds instead into “wang ihsan”. Tun Salleh Abbas and I offered ourselves as witnesses to the Terengganu state government in the suit it filed against the Federal government to recover those oil payments. Between the 2000 and 2009, RM15.8 billion was paid out through the legal black hole of wang ihsan, not to the rightful party as specified under the Petroleum Development Act, which is the state government’s consolidated fund, but to agencies more amenable to vested interests linked to the central government. The outcome of that spending is the Monsoon Cup, a Crystal Mosque in which it is impossible to pray, a leaking swimming pool, a collapsed bridge and a collapsed stadium. The people of Terengganu remain poor while Billions have been paid out in their name.

I am said to have changed my mind or somehow ignorant of the fact that Kelantan’s petroleum resources all lie offshore when the fact is that, on the instruction of the late Tun Razak, I drafted the Petroleum Development Act precisely because we wanted to ensure that Kelantan, Terengganu, and potentially Pahang and Johor would benefit from the 5% cash payments.

We did precisely because we knew that these states did not have oil onshore or within their territorial waters. The device we used was a Vesting Deed by which the states vested, in perpetuity, all their petroleum resources to Petronas, onshore or offshore. In return for this Petronas guaranteed the cash payment of 5% from oil found anywhere, offshore or onshore, of the state. This rendered any consideration of federal/state boundaries whether at 3 or 12 nautical miles or whatever irrelevant for the purpose of reckoning the payment. I traversed the country to sign this agreement with each Chief Minister of each state government. Tun Razak was driven by the nation-building concern that these poorer east coast areas, which are also predominantly Malay areas should benefit directly from offshore oil, and I drafted the Petroleum Development Act to reflect that concern.

It is this benefit to the people which Umno Kelantan opposes 34 years after the death of Tun Razak. It is also Razak’s legacy that they make a mockery of. It is a mark of how far Umno has strayed off course that the leadership of Umno, and in particular Umno Kelantan is doing its utmost to deprive the people of Kelantan of sovereign rights secured by an UMNO-led government of another day. No one in their right mind could mistake this as behaviour that is beneficial to Umno’s long term standing in Kelantan, let alone elsewhere as people observe this behaviour.

I am accused of putting state interest before party interest. However the issue goes far beyond Kelantan. The arguments used in yesterday’s newspaper advertisement undercut the rights of all the states in respect of a natural resource which is theirs as a sovereign right. It violates a contract between Petronas and the states, denies the Petroleum Development Act, denies the raison d’etre of Petronas (which was in the first place formed to ensure the integrity of the federation by way of an equitable sharing of this valuable resource) and sets the Federal Government in contravention of an Act of Parliament.

One immediate implication of the argument laid out in yesterday’s official clarification from the Ministry of Information is that Terengganu is also ineligible for the oil payments. This means that after cutting off oil payments when Terengganu fell into Opposition hands and replacing it with “compassionate payment” there is absolutely no basis for the government’s promise to return Terengganu to cash payments again. All of Terengganu’s oil is found very far offshore. In this matter whatever holds for Kelantan holds for Terengganu and vice versa.

In the end this is not a question of politics or personality. It is not about what I or anyone else says, nor of where Umno or PAS stand. It is about the government complying with written agreements governed by an Act of Parliament and respecting parliamentary democracy. The rights of the people are not to be fulfilled or withheld depending on who they have voted for. In treating Terengganu and Kelantan in this manner we are depriving them of money that is rightfully theirs, undermining sovereign state rights, and eroding parliamentary democracy. We should do the right thing by the people at whose pleasure we serve.