Balancing the politics and economics of oil in Sarawak

It is disingenuous for Gabungan Parti Sarawak (GPS) to use ‘Sarawakian loyalty’ to maintain its relevance among the people and grip on power.

The rallying cry for these seasoned politicians from the now-defunct Sarawak BN is to demand increased oil royalty payments than the present five percent of gross revenue.

That cry has been getting louder with looming state elections which must be held by September 2021. When Sarawak BN won the last elections in May 2016 with 72 out of 82 seats, there was no talk of increased oil royalty payment.

Now, two years later and with BN no longer the federal government, Pakatan Harapan has given these Sarawak politicians some ammunition by promising 20 percent royalties for oil-producing states in its election manifesto.

While there has been plenty of debate on how the 20 percent is computed, the bottom line is to get more from the estimated RM1.5 billion in 2018 to RM6 billion in future.

On paper it looks simple, but in reality it is not an easy task.

The media headlines in Sarawak would have us believe the billions of profit PETRONAS earns annually has raised jealousy and anger among ordinary Sarawakians.

The perception created is that their lives have not improved despite the state’s considerable contributions to those profits through its oil and gas resources.

The main issue used by politicians is that significant oil wealth goes directly to federal government and then redistributed indirectly through the federal budget. This creates more damaging perceptions that the wealth created from Sarawak’s natural resources is shared disproportionately and unfairly with the rest of the country.

The easiest route to the hearts of Sarawakians is for parties like PBB, who were once the backbone of Sarawak BN, to now claim that the state had been cheated all along by the BN-led federal government by receiving only five percent of its oil revenue.

The former Sarawak BN parties have started to resort to these anti-Pakatan Harapan and Federal sentiments to avoid losing more seats to the 10 already held by DAP and PKR.

The reality is that while Sarawak may get “just” five percent in royalties from the mining of its oil and gas resources, so does the federal government. We must understand the money the federal treasury receives from PETRONAS is actually dividends since it is the sole shareholder in PETRONAS.

For absolute clarity, PETRONAS’ profits are generated from its worldwide operations as the national oil corporation has truly gone global. This includes revenue from its upstream, downstream and ancillary business throughout the world, not just from the upstream activities in the four oil-producing states of Sabah, Sarawak, Terengganu and Kelantan.

In addition, PETRONAS has made significant investments to develop downstream industries, in particular the transformation of Bintulu into a major production hub for liquefied natural gas and fertiliser that will move Sarawak up the value chain and create more high-income and skilled employment in Sarawak.

These growth-generating capital-intensive projects will undoubtedly require a balance between the oil revenues obtained, oil royalty and dividend payments and re-investment into its operations in Sarawak and throughout the world.

The economic benefits are clear and can be tangibly felt on the ground. As of end 2017, PETRONAS has invested RM140 billion in the development of oil and gas sector in Sarawak, and registered 420 Sarawak companies as its vendors.

Since 2013, PETRONAS has awarded more than RM16 billion worth of jobs to Sarawak companies. In 2017 alone, 13 Sarawak companies clinched jobs within and outside the state. Sarawak has 81 PETRONAS stations, operated exclusively by Sarawakians, fuelling the state’s thriving cities as well as its remote areas.

Sarawak loyalty must be rewarded by tangible economic opportunities and focused on the well-being of the people for the future. However, if it is a cry for help to stay in power and perpetuate the politics of old, then perhaps loyalty should not be blind.

Source: malaysiakini

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