OIL ROYALTY - UPPING THE ANTE?

A mere sideshow over oil royalty

The 'oil royalty story' has been resurrected just when the general election is around the corner.

August 24, 2012: The ruling Barisan Nasional (BN) is predictably moving towards a political review of the current 5% oil royalty from the inner waters to the states concerned, with an eye on the coming 13th general election.

This follows increasing demands in Sabah and Sarawak in particular for more benefits from their oil and gas resources and promises of a higher royalty – 20% if not more – by the Pakatan Rakyat when it seizes the reins of powers in Putrajaya.

Sarawak Chief Minister Abdul Taib Mahmud’s recent statement calling for a review – he didn’t say upward or mention the percentage – provides the perfect pretext for the BN to save face on the issue and engage in a “sandiwara” of sorts to steal the so-called thunder from the Pakatan offer to the oil states. Throw in tai chi and wayang kulit, too.

Any such review, as proposed by Taib, would be a case of too little, too late.

To add insult to injury, Taib wants to engage in secret talks with Petronas and the federal government on a new oil royalty.

Secret talks can only result in Taib getting something for himself at the expense of the people.

It has been revealed in Parliament from time to time that 80% of Petronas oil and gas are not sold directly by the national oil corporation but through seven recognised brokers and/or concessions holders. It’s believed that Abdul Rahman Yakub, Taib’s maternal uncle and predecessor, is among these lucky seven holders. Rahman has never denied these reports.

Sabah strongman Jeffrey Kitingan has written about the concession holders in his book, “Justice for Sabah”, and has demanded that the names be disclosed but to no avail.

Abdul Rahman, then chief minister of Sarawak, was seated and belted up in the ill-fated Nomad aircraft which took the life of then Sabah chief minister Donald Muhd Fuad Stephens in June 1976.

Abdul Rahman was pulled out from the aircraft in Labuan at the last minute by then Petronas chairman and finance minister Tengku Razaleigh Hamzah who was responding to an invitation from Sabah deputy chief minister Harris Salleh to visit a cattle ranch in Kudat.

Local hero

Razaleigh was seated next to Donald Stephens and engaged in conversation on the oil agreement which the latter refused to sign in Labuan. A second attempt was to be made later the same day in Kota Kinabalu.

Stephens was the same person who, as chief minister, demanded a review of Sabah’s participation in Malaysia upon the exit of Singapore in 1965.

Instead, he was bundled off shortly thereafter into virtual political exile as the high commissioner to Australia. He returned from Australia in 1976 to lead the federal government-backed Parti Berjaya which trounced the United Sabah National Organisation (Usno) led by Mustapha Harun who refused to sign the oil agreement for 5% and held out for 30% to 20%.

Therein the story lay until resurrected by demands for more oil and gas royalty in Sabah, if not Sarawak, and Pakatan’s standing offer to the two Malaysian states in Borneo with an eye on Putrajaya.

Now, Taib has jumped on the bandwagon just in time for the 13th general election to project himself as a local hero of sorts to go one up on Joseph Pairin Kitingan who, after two years, managed to get the federal government to initiate a Royal Commission of Inquiry (RCI) on the illegal immigrant phenomenon in Sabah.

The Sabah Law Association (SLA) announced in recent weeks through Seremban-born lawyer Sukumar Vanugopal that the Petroleum Development Act (PDA), on which the oil royalty is based, is unconstitutional. Therefore, it follows that the so-called oil agreements between Petronas and the federal government, on the one hand, and the oil states, on the other, are null and void.

The oil agreement only gives 5% royalty from inner waters, as stated, and none from the outer waters where most of the oil and gas wells are situated. Putrajaya claims the outer waters belong exclusively to it without taking into consideration the fact that if Sabah and Sarawak, for example, were not in Malaysia, the outer waters would belong to the two countries concerned.

Any review of the oil royalty to the oil states must be based on the principle adopted in neighbouring Indonesia and elsewhere in the world vis-à-vis oil-producing regions, that is, the oil and gas resources belong exclusively to the states and the question of these states collecting royalty does not arise. Instead, it’s the federal government which should be collecting royalty and/or taxes, if any, on these resources with the states managing them.

Again, in Indonesia, for example, the oil-producing provinces get to keep 70% of their oil and gas revenues with Jakarta getting a still healthy 30%.

Anathema to Sabahans, Sarawakians

It’s unlikely that the people in Sabah and Sarawak would be satisfied with the 20% oil royalty for the inner waters, as offered by Pakatan and likely to be matched by the BN government. In turn, Pakatan is likely to up its offer up to anything reaching 50% as proposed by the Sabah chapter of PKR.

Any exclusion of the outer waters from payment of royalty, no matter what the final percentage, would be anathema to Sabahans and Sarawakians.

The people in the two states are more inclined to think along the lines of the 70:30 (provinces/central government) oil and revenue sharing formula as practised in Indonesia.

Some nationalists, not entirely tongue in cheek, have even floated the idea publicly that Sabah and Sarawak would be better off joining Kalimantan as provinces of Indonesia given Jakarta’s policy on oil and gas revenue sharing. This idea has merits since Kalimantan is Dayak like Sarawak and the Dusun in Sabah, the Orang Asal along with the Murut, are considered a sub-branch of the Dayak communities.

Unity of Sabah and Sarawak with Kalimantan is seen as a necessary prelude to the independence of the entire Borneo Island, the world’s third largest, from Indonesia. Borneo is the proverbial Dayakstan.

Patently, Putrajaya needs to stop being greedy not only on the oil and gas revenue from Sabah and Sarawak but also other revenues from these states. Most of them flow into the federal coffers with just a measly sum making its back to the two states which are generating them in the first place.

Hence, the oft-repeated accusations that Malaya has colonised Sabah and Sarawak in the wake of the British departure in 1963 and/or Putrajaya has embarked on a policy of internal colonisation in the two states.

One glaring example of a coloniser-colonised relationship between the federal government and the two states in Malaysian Borneo is the fact that Sabah is today the poorest state in Malaysia and Sarawak the second poorest.

This was confirmed in Kota Kinabalu in late 2010 by the World Bank when releasing a report on the two states. The report uses figures provided by the Economic Planning Unit (EPU) and the respective State Planning Units in Sabah and Sarawak. Nabawan in the interior of Sabah takes the cake this year, according to figures released in Parliament recently, for having a 70% poverty rate, the highest in Malaysia.

Joe Fernandez