Time for Sabah to step up?
Published on: Sunday, September 22, 2019
By: Johan Arrifin
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In his Malaysia Day speech, Prime Minister Mahathir Mohamad reiterated Sabah and Sarawak are equal partners. Equal partners means sharing your wealth and not exploit your partners goodwill. Thinking it would make us feel better after Finance Minister Lim Guan Eng’s bombshell, Tun Mahathir dropped by Sabah after the Merdeka celebrations and said Sabah is going to be the richest state in the country once the deep water oil wells yield their production.
The Sabah deep water wells are already on stream in the West Coast, like Gumsut-Kakap. Oil is being exported and gas piped through 520km from Kimanis to Bintulu. So far Project SAMUR in Sipitang is the only downstream plant in Sabah by Petronas and the promise to build the second one for Sabah to go further downstream has not materialised. All of SAMUR production is exported. Sabah is only a transit point and does not gain anything except for the 5pc oil royalty despite producing 60pc of the nation’s oil production.
After being ridiculed by netizens over his remarks, Tun Mahathir clarified what he meant by Sabah going to be rich, “They have a lot of land, so we want to renew our policy on modern agriculture, which can ensure people in rural areas can also become rich,” he said. So now we are talking about going back to the middle ages and not industrial revolution.
The recent letdown from Guan Eng – he said legacy issues from the “bossku” government are preventing the implementation of promises under the Pakatan Harapan manifesto, especially the oil royalty for Sabah and Sarawak.
We have to sympathise with Guan Eng. To be fair, his only fault is for promising. If our predicament is due to 1MDB, our Sabah BN leaders who were in the Federal Government at that time are equally to blame. They carried the deceit and vigorously defended 1MDB and Najib. As former Minister Youth and Sports Khairy Jamaluddin aptly put it, they were drunk on “Kool Aid”. Many Peninsular Malaysians blamed Sabah leaders for prolonging the issue for their own benefit, except for the current Chief Minister Datuk Seri Shafie Apdal who broke ranks with the establishment. To some, there is no shame and accountability when it comes to politics.
No nation has infinite resources. There are many competing needs and requests from different states and it becomes a zero sum game. Simply put, a zero-sum game is a situation in which there is no net gain among the participants. If one gains, it means others have to lose an equivalent amount.
In June, 2018 we had the first statements on oil royalty from our nonagenarian Prime Minister Mahathir Mohamad in the Dewan Rakyat. Mahathir said the government will honour its promise of giving 20 per cent royalty to petroleum-producing states but later “gostan” (reversed) and said it would be 20 per cent of the profit.
In July 2018, clarifying the muddled statement from the Prime Minister, Economic Affairs Minister Azmin Ali said in Dewan Rakyat Pakatan Harapan’s (PH) promise of offering a 20pc royalty to oil-producing states will take time to be realised. He confirmed that the royalty would be based on the net profit and not gross production as practised presently. Azmin explained the proposal could not be implemented immediately as it contradicts the Petroleum Development Act (PDA) 1974. If Petronas were to increase this royalty to the state governments based on the gross profit, it will have grave implications on Petronas and the federal government’s finances.
Azmin Ali statements is all about the zero sum game. Give more oil royalties to Sabah and Sarawak – Petronas will have less profit to give to the Federal government for their expenditures.
In September, 2018, Azmin Ali said that a special cabinet committee has been set up and given six months to study proposals for the payment method for oil royalties. A year later, the committee has not announced anything about the oil royalty payments. In August a statement from the Prime Minister’s Office said on MA63 – Seven issues have been solved related to MA63 and 14 to be resolved by Aug 31. There was no mention on oil royalties or 40pc return on taxes for Sabah.
In March 2019 Azmin told the Dewan Rakyat Malaysia’s oil and gas reserves are expected to last 10 years based on the annual average production rate. By the time GE 15 comes around, our reserves will last another five years and Sabahans and Sarawakians will still be biting their fingers waiting for the increase in oil royalty.
During the state Budget readings on November 2018 by Chief Minister Shafie, he said in the first seven months of this year, the export value of crude petroleum amounted to RM16.8 billion. Petroleum royalty is expected to remain the highest contributor to 2019 total revenue estimates which accounts for 37.5 per cent with a projected collection of RM1,600 million. It must be pointed out that State Government has no control of oil and gas production in Sabah and relies totally on numbers given by Petronas. The State Government cannot dictate any terms on oil exploration in Sabah waters. If the export is RM16.8 billions for that 7 months, our 20pc oil royalty should be approximately three times more what we are getting now. Recently, Tun Mahathir announced the “Shared Prosperity Vision” in an effort to close the gap between rich and poor states. The prime minister acknowledged that not enough attention has been paid to the two east Malaysian states in the past, compared to the Peninsular states. It’s is not clear whether Sabah and Sarawak is classified as rich or poor states as earlier he said the poor states were Kelantan, Perlis and Kedah.
With the impending issue of more than 600,000 illegals with pass sementara Sabah the poverty rate in Sabah will be greater. Prime Minister’s economic adviser, Dr Muhammed Abdul Khalid said there is a need for Malaysia to change the current method to measure poverty rates, as it is outdated. The poverty line income (PLI) rate used by the Economic Affairs Ministry – a monthly income of RM980 for Peninsular Malaysia, RM1,180 for Sabah and RM1,020 for Sarawak – was very low. United Nations human rights expert Philip Alston with a supporting view said non-citizens including migrants, refugees and stateless people who are barred from the public school system, face severe barriers to accessing healthcare and are often unable to work legally, are systematically excluded from official poverty statistics.
It is still unclear what is the final status of the 600,000 illegals in Sabah once they obtained the Pas Semantara Sabah.
Definitely they will be an added financial burden to the state and will deprive the rightful citizens of quality of life. If the illegals are to be included in the poverty count, Sabah will be the poorest state in Malaysia. Currently Sabah’s poverty rate is at 2.8pc.
More money is needed as the Sabah government struggles to deal with the mushrooming squatter colony. In July, 2018, Deputy Chief Minister Jaujan Sambakong said state government is coming up with strategies to deal with the squatter problem. Jaujan said there were a total of 35,093 squatter families comprising 146,225 individuals statewide. Most of these squatters are believed to be illegals.
In the zero sum game, they are no winners or losers. In the natural selection of things those who shout the loudest may get more. Niceties and timidity may have worked in the past but the state government has to show more muscle in their negotiations. An online news portal reported that Sarawak has gone further than Sabah by insisting that the MA63 issues be settled by end of October. Like Guan Eng’s Malaysia Day message, its time for East Malaysian leaders to step up to become key decision makers. Sarawak is the most vocal and taken the lead and it’s now up to Sabah to step up on the zero sum game.
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