Please focus on our economic woes
Published on: Sunday, March 07, 2021
By: Datuk John Lo
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Oil countries, like Brunei, Saudi Arabia, which did not manage their windfall from oil prudently, have suffered huge deficits in the last several years. They are now in desperate mode to salvage their erstwhile financial pride. Malaysia is the same and with this Petronas loss, is now in this similar situation.
The consequence for Sabah will be
[a] smaller amount of royalty. This is serious as Sabah’s budget is about 30pc dependent on oil royalty.
[b] If the poor oil market price persists as is likely the case, Petronas will be under pressure from federal government for more and more funds. Already it was forced to pay RM30b so-called special dividend before last general election which was the height of irresponsibility.
[c] Payment of royalty to Sabah may become a back-burner issue. You just never know how bad the situation can become. Let me expand on this.
https://www.freemalaysiatoday.com/category/nation/2021/02/26/petronas-recordsrm21bil loss-in-2020/
Oil Companies in Trouble & oil grim future.
Simply google “oil companies in trouble”. [a] It will tell you that many oil companies worldwide have been suffering from depressed market, compounded by the Pandemic. Quite a few US oil companies have gone bust. [b] In the longer term, oil demand will reduce substantially because most countries will ban registration of fossil fuel vehicles starting from 2030 [note- only 9 years from now!]. Vehicles consume about 60pc of world oil production. [c] China, which is the largest consumer of oil, has become the largest EV [electric vehicles] manufacturer and market. [d] Renewable and alternative energy like hydrogen are increasing in popularity. [e] Most major countries have targeted zero emission by 2035 [only 14 years away], meaning fossil fuel will be out!
https://www.trtworld.com/magazine/big-oil-is-in-big-trouble-what-will-happen-next-43925
Sabah’s Huge Problems.
Along with other oil majors, Petronas is seeking ways to reinvent itself away from oil or it will perish. This will be not a walk in the park. Unlike most oil majors, Petronas has just too much political interference and considerations. Had Tan Sri Merican been around, its chances would be better.
The grim future of Petronas will impact Sabah in many ways, the most obvious of which is a much-reduced oil royalty.
Sabah, being excessively dependent on royalty must NOW start to seek for options to replace royalty with great urgency or else, we will be caught with pants down! What can Sabah do? Big mistake if our political leaders think that Petronas’ present problem will blow away. At best it may recover a bit but the long-term decline in oil is writing on the wall. Don’t need an oil expert’s confirmation.
Better believe it. This will be a huge problem for our State’s budget.
Sabah’s Option 1
Brunei, Saudi Arabia and many oil producing countries are reducing their dependence of oil export per se. They are going full speed into down-stream and value-added industrialisation.
Sabah’s choice is similar. Instead of fighting for increase in oil royalty, ask Petronas to invest down-stream in Sabah urgently and very substantially. Beside creating jobs for Sabahans, the Sabah government can impose sales tax on down-stream products. This will allow us to diversify from oil royalty.
Sabah’s Option 2—- ITP and Down-stream Industrialisation.
Within these few years, Sabah can encourage the establishment of an ITP [industrial tree plantation] and related down-stream industry. With proper policies in place, ITP can become Sabah’s perpetual green gold mine like NZ, Brazil and many northern European countries. With a vibrant down-stream investment, a steady stream of revenue income for government and many Sabahans can be employment.
The success of ITP and its down-stream play—-[a] is highly dependent on the interplay of tree growers and down-stream players. Their ability to give and take with each other will assure Sabah’s future. [b] A review of the performance of FMUs must be done as most of them have failed to deliver in the last 30 years. If these FMUs have kept to the terms and conditions of their licences, Sabah would have plenty of plantation logs to supply the downstream.
Don’t Wait, Start Now!
10 or 15 years may sound far away to politicians who can’t see no further than their nose. The fact is that it is just a bling of the eye. They must start seeking solutions here and now. Again, I appeal to our opposition politicians to avoid or at least minimize indulgence in petty opposition politics and start thinking about Sabah’s impending economic problems. Politics may give banquets to politicians but no food on the tables for Sabahans.
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