Malaysia is a country blessed with abundant natural resources. In particular, we are thankful that the country is rich in oil and gas, which created Malaysia’s sole representative in the Fortune 500, Petroliam Nasional Berhad (Petronas).
In the most recent financial year ending March 2007, Petronas achieved record profits before tax of RM76.3 billion thanks to record high crude oil prices which increased from under US$25 per barrel to above US$70 all within four years.
Of greatest importance, was the fact that Petronas contributed RM53.7 billion to our national coffers in taxes, royalties, dividends and export duties last year.
Contribution from Petronas and other oil and gas companies operating in Malaysia was budgeted to make up some 46.8% of the government revenue for 2007.
This represents a steep increase from approximately 30% in 2006 and 25% in 2004. These statistics marks Malaysia’s heavy reliance on oil and gas industry today.
Malaysia’s abundance of oil & gas resources is akin to striking lottery. It is a once-off affair, and at some point of time, our reserves will run dry.
According to Oil & Gas Journal, Malaysia held proven oil reserves of 3.0 billion barrels as of January 2007, down from a peak of 4.6 billion barrels in 1996. These reserves will last us for only another 20 years or so.
In addition, Malaysia is expected to become a net oil importer by 2010 assuming a conservative growth of 4% in petroleum products consumption. Our trade current account surplus has also been boosted significantly by oil and gas related products which constitutes more than 11% of our exports.
The frightful acceleration of dependence on our limited oil and gas resources places the country’s economy at great risks.
Malaysia must not fall into the trap of what economists call the “resource curse”, that is countries devoid of natural resources fare better than countries better endowed. Countries such as Hong Kong, Singapore and Switzerland contrasted against the oil-rich but poorly developed Middle East countries immediately come to mind. This appears to be closely related to the phenomenon known as the Dutch disease. The Netherlands in the 1960s, after its discovery and depletion of oil and gas in the North Sea, was plagued with unemployment and an unproductive manufacturing sector due to the negative side effects of such a discovery.
What is perhaps most worrying for Malaysia, with the reliance on natural resource overshadowing the other productive sectors of the economy, is the resulting “rent-seeking economy” where influential parties within the government together with external parties focus their efforts in securing a larger share of the economic pie, instead of creating a bigger pie.
Therefore the DAP proposes that the Government legislate that 50% of our windfall from oil and gas is kept under lock and key, with the sole purpose for investment in human capital as well as research & development, over and beyond our typical expenditure on education and training.
In addition, 25% shall be legislated for use in our social security system while the balance may be used for development expenditure of the national budget.
This way, the funds will be prevented from being expensed to an unproductive and wasteful rent-driven economy. All unutilised allocation from revenue derived from the oil and gas sector shall be maintained in a stabilisation fund for future investments in the legislated segments.
To quote Economics Nobel Prize winner, Joseph Stiglitz, “abundant natural resources can and should be a blessing, not a curse. We know what must be done. What is missing is the political will to make it so.”
(Speech 7 on 2008 Budget in Parliament on Monday, September 10, 2007)
Proceeds from the sale of oil and gas of this national oil corporation are kept offshore and invested in various securities. The people are entitled to know how these proceeds are being used – in what currencies have they been invested, where invested and which capital market, in what kind of securities, where invested and managed by whom? This aspect of the operations has never been made transparent.
There must be full transparency to ensure the wealth of the nation is fairly distributed to all her citizens and how the proceeds from oil and gas are being invested and spent.
How can there be transparent if most of the money has gone into the pockets of BN politicians?
This is the most lucrative source of funds for those corrupt poiticians.
Uncle Lim,
Thank you for the info I was searching and how frightening it will be if this God given resource is mismanaged. Do you also have the statistics of workers employed in our petroleum industry in terms of races?
Thanks again.
We are still able to survive despite all the raping of our country’s resources and money because we have Petronas.
One day, which is not very far from now, when the oil dry up Malaysia will suffer very badly. Cost of other commodites will shoot up at exponential rate because the goverment need to find alternative source of income. The rakyat will suffer. Very badly.
It is the curse of the black gold.
The only important resource for any country is human capital.
Only countries that emphasis human resource development can enjoy true lasting progress, provide a better standard of living and whether economic downturns.
However, developing human capital is slow and difficult process. It has to start with education, from primary school to tertiary education and beyond. It takes time for changes to create any effects as the younger generation gets educated and mature. It could take decades before the effect of such effort can be seen.
Next is medical and health-care. It does not matter how well-educated, hardworking and strong your population is, if the proper medical system is not in place. Sickness and poor health lowers productivity and lower productivity affects the economy and the society at large.
Finally, security is another major concern. Safety concerns of the society must be addressed. People must be allowed to stay in a safe environment and travel safely without fear of being robbed, snatch-theft, raped et cetera. If public safety is neglected, the first to leave the country is the educated professionals who is in high demand all over the world thanks to globalisation.
No use harping about loyalty and branding them as traitor to pressure or keeping them from migrating.
Education, health-care and public safety are all basic human needs which are far above any notions of patriotism.
Unfortunately, like any oil-rich or resource rich countries in the middle-east and African continent, large windfalls from oil have blinded our leaders and made them corrupt. It allows them to cloud the view of the society with unsustainable growth and ignoring the important fundamentals of modern progress.
What we doing right now is no different from ignorant people hitting the lottery jackpot and wasting away the money on luxuries just because they do not have the necessary knowledge on how to manage and invest properly.
If we have any larger oil reserves, our country would definitely be as backwards as perhaps Iran, Iraq or Saudi Arabia, at least in terms of human development.
Oil is not a blessing, it is a curse.
I hope my children will not be here in this land of hopelessness by then.
hi malaysia_mana_boleh,
If you yourself is in Malaysia and incapable of migrating to another country, most likely your children would be here in Msia as well in the future.
If you yourself can’t get out of the country, how much chance does your children have ? You have to pray very hard that they are hardworking and have good academic results in this case.
On the other hand, if you yourself is a highly-educated professional or reasonably rich, then I would say you have nothing to worry about.
Sorry to post so many times but I am sick and tired of hearing people comment the way malaysia_mana_boleh does.
Hoping that our next generation doesn’t need to endure what we going through or leaving the problem to the next generation to fix is totally irresponsible.
If we want the next generations to have a better life, then we ourselves have to do something about it NOW !!!
Dun regret or blame the next generations next time we get old and elderly and have to depend on them but they are too busy fighting for a living and can’t look after us.
You reap what you sow.
The fact that almost half of the country’s revenue is dependent on petroleum is frightening.
The fact that management figures of Petronas is not beholden to public scrutiny makes it even more so.
Yes i cant get out of this country but it doesnt mean my children cant. I am paving the road for them but it takes time. My father was not in MCA or UmNO else things would have been much much easier.
No, I am not static.
No, I am not merely saying and not doing.
I am trying very hard.
DAP proposal on how to appropriate Petronas funds is good but will the Government listen?
If much of Petronas funds are invested overseas (but off balance sheet without being disclosed to us) how do we know whether they are well managed or otherwise? (Maybe we should ask its advisor, TDM). If I were not mistaken even Temasik does not disclose completely how its vast financial resources are invested…
But surely if govt does not follow DAP’s proposals, it can still use a portion of Petronas bumper profits to benefit us.
The last time, it withdrew a part of fuel subsidies on the justification of high oil prices which was supposed to generate an estimated RM4.4 billion per year to be spent on improving the public transportation system. (I don’t see it improved?) The withdrawal in fact caused a cost-push inflation across the board making it difficult for the middle and lower income groups.
Now compare this to the Port Klang Free Zone (PKFZ)’s fiasco. Here the government is prepared to effect with alacrity a bailout (though one off) (to the benefit of selected few not made to account) of RM 4.6 billion without a blink of an eye and yet had a such a toothache earlier to buffer us RM4.4 billion (for benefit of all) against the rise in oil prices.
Having said that, “don’t play play” with Petronas. It is one of the top oil and gas giants in the Fortune Global 500. Talking of depleting of our oil resources, I hear that today 80% of Petronas’ revenues are generated outside of Malaysia and 30% of its petroleum reserves are located overseas…. According to CEO Hassan Marican, “Foreign production should exceed the national one within two or three years.†This guy, according to market talk, is quite prudent : it seems that when then ex premier came a calling asking what’s what’s new and exciting in Petronas, he’d always have the stock response of nothing much happening, apparently worried about a possible request for bailout! :)
In view of a number of huge financial scandals in the past and recently, let alone the numerous smaller financial issues, could you trust the government to take proper care of public funds and taxpayers money to invest and spend it wisely and productively with responsibility and accoutability?
The problem is that the present selfish and greedy generation is consuming and taking all the resources, including all natural resources, meant for future generations.
Like a badly run and loss making Company, the only way to find out what’s wrong and stop the losses is to change management.
Petronas money is the biggest candu of all for NEP. Modal insan is a nice word but fed with candu Petronas, its still addicts we get.
“You reap what you sow”.
Megaman how correctly you have put it.
As a direct result of what my own Chinese leaders (MCA ) did not bargain for their own skins right from the beginning, I was made one among many poor chinese victims of the NEP (not all Chinese are rich please!). And that was 1975.
Over these 32 years since I just don’t know how many more of poor Chinese & others have sufferred and how many more will suffer in the future.
We are still reaping the bad fruits of what MCA had earlier sow!
Don’t blame the Malays, we only have ourselves to blame.If MCA still don’t put their foot down now, what is your take of the future?
In the 70’s – They didn’t love us
In the 90’s – They didn’t care about us
201?’s – They don’t need us???
Oops! I mean
In the 70’s – They didn’t love us, so keep quiet!
In the 90’s – They didn’t care about us, so stop complaining!
201?’s – They don’t need us, so get lost ???
Observing the long queues and detestable delays in purchasing ASW units (offering half the dividends of ASN), I believe that should this nascent discontent be translated into GE votes, it is capable of trashing Koh TK, Ong KT and the other despiscable MCA, Gerakan, MIC lapdogs into the garbage dump of history. These dogs need us, BUT WE DON’T NEED THEM! So, borrowing a quote from Admiral Nelson, “Malaysia expects that every man will do his duty” on polling day, the day when MCA, Gerakan etc no longer blight the land of our birth is near
Malaysia planted rubber, but rubber prices held by London. Malaysia dug for tin, but tin prices held by London. Malaysia dug for oil but oil prices held by OPEC. What else can’t Malaysia do?
would be interesting to find out where the oil goes to – breakdown by country and e.g a pie chart and then another chart to see if the revenue for the respective countries tally with the export.
this will provide some transparency ….and perhaps confirm/reject the role Petronas played during the asian currency crisis….
If contributions from Petronas and other oil and gas companies make up 46.8% of the government revenue, it is not difficult to picture a scenario in 2010 when Malaysia becomes a net importer of oil.Oil subsidies will immediately be removed,transportation costs will zoom up along with food prices with demonstrations throughout the country and police adopting dragonian methods to quell them causing unrest throughout the nation.
Malaysia is so lucky to have petroleum but look at what they did? They prefer to export the Malaysian petroleum and buy some cheap and lousy petroleum back, claiming that Malaysian petroleum is of superior quality and it would be more beneficial to export our own petroleum and purchase cheap petroleum from overseas.
This is analogous to planting nice vegetables in front of the house and just because they are to nice to be eaten, we sell them to others and then purchase some cheap and rotten vegetables for self consumption.
The logic is what if we have already promised to sell our nice vegetables to others and others refuse to sell us their “rotten vegetables”? What is there left to eat? I still remember Mahathir saying that we close our doors when our currency was speculated by Soros. How can we close our doors when we are not the least bit self sufficient?
another grand-old story about the GLC in KL………..but agreed.
Luckily Malaysia have oil, otherwise we are nothing better than Indonesia. What else can the government owned company can do for Malaysia? MAS is like shit. Telekom & TNB can’t make good profit, Proton nearly “bungkus”, profit from Petronas “don’t know go where”, etc. This is how BN manages Malaysia. Vision 2020 go to hell lar !!!