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Terengganu’s slippery oil royalty

PUBLICISED figures on the amount of oil royalty remitted to Terengganu don’t match. And because no clear explanation is forthcoming, expect the issue to be exploited by PAS, and glossed over by the Barisan Nasional (BN) in the Kuala Terengganu parliamentary by-election.

PAS promises to flog the issue in its campaign. The BN, however, already considers the subject closed, as the federal government has promised to repay the balance of oil royalty due, which is now being calculated. It will also let Petronas pay the full amount of 5% directly to the state every six months, beginning March 2009.

Consider the figures on the amount remitted as reported in the media:

  • Minister in the Prime Minister’s Department Senator Datuk Amirsham Aziz said in Parliament on 13 May 2008 that Terengganu had been paid RM7.364 billion from March 2004 to March 2007;
  • Terengganu Menteri Besar Datuk Ahmad Said said in the state legislative assembly that Terengganu has received RM6.218 billion from 2000 to 2008.

Why Amirsham has a larger figure over a three-year period, and Ahmad has a smaller amount over an eight-year period, nobody can explain — so far.

Ahmad’s standing answer, which he repeated when asked by The Nut Graph, is that the state government has asked the federal Treasury to list all the federal projects funded by Terengganu’s oil royalty in the past.

“When we get the list, we’ll be able to check whether the money was spent for projects in Terengganu or elsewhere. Then we’ll be able to know how much to claim back.” That’s about all Ahmad can say publicly.

Discrepancies and campaign fodder

However, according to a local Umno businessperson who deals with state officials, nobody in the state administration really knows exactly how much oil royalty the federal government owes Terengganu.

“Yes, some of the money was used on federal projects, but because those decisions did not go through the state government, nobody at this level knows exactly how much went where,” he tells The Nut Graph.

“And because it involves the federal government, nobody here is going to say much,” says the Umno businessperson, who does not want to be named.

PAS knows this and plans to make campaign fodder out of it. It is a pet subject because oil royalty was denied to the state government after the Islamist party won control of Terengganu in the 1999 general election.

Terengganu MB Ahmad Said
From 2000, oil royalty was channelled to the state through federal agencies. It gave the federal government control over projects funded by oil royalty. This was called “wang ehsan” (compassionate fund). All the PAS-led state government ever received in oil royalty was RM432 million in 2000.

How the wang ehsan was spent in the past eight years is the accounting Ahmad is now seeking.

The PAS-led Terengganu government filed a civil suit in 2000 against Petronas and the federal government for withholding the royalty based on political bias. The case is still pending, even after the BN won the state back in the 2004 general election and retained it in 2008. In June 2008, Ahmad said the state government would withdraw the suit.

During this campaign, PAS will also raise the issue of another apparent (because the exact amount owed is still unknown) deficit of RM3 billion. This is the shortfall from Amirsham’s figure of RM7.364 billion, of which Ahmad has said only RM4.3 billion has been received.

“The numbers don’t jive. PAS is asking for an inquiry to come up with a white paper report on all projects under the special fund on wang ehsan, and to explain how the money was used from 2000 to 2008,” said PAS research head Dr Dzulkefly Ahmad, who has been preparing arguments on this subject for the party’s campaign.

Ahmad scoffs at PAS’s ploy and says the matter has been resolved with the federal government’s promise to keep its hands off the oil royalty and let Petronas remit it directly to the state from March 2009.

“I’ve solved this problem through negotiations. They’re just saying this because of the by-election. I’ve been negotiating with the federal government on this since May [2008]. Who knew then that (former Member of Parliament Datuk) Razali Ismail would die and there would be a by-election?”

Negative perceptions

The BN’s arguments are up against a tide of negative perceptions. The opposition merely needs to ride on existing sentiment against projects like the Islamic Civilisation Park (Taman Tamadun Islam) and the annual international sailing tournament, the Monsoon Cup, which are said to be funded by the state’s oil royalty.

Even local Umno members are said to be against the Pulau Duyong makeover, the island which hosts the sailing tournament, and to be even more appalled at the high cost of building the Islamic theme park. Both projects cost around RM250 million each.

Part of Pulau Duyong, which underwent an RM250 million makeover

Part of the unhappiness stems from the fact that the contracts were given to outsiders, instead of local contractors.

“The issue gets conflated with sentiments against Datuk Seri Abdullah Ahmad Badawi,” says the local Umno businessperson, of the outgoing prime minister whose popularity within the party has dipped over alleged cronyism in these two projects and over the BN’s poor performance in the 2008 general election.

PAS will juxtapose these feelings with the fact that Terengganu, despite being one of the richest states in natural resources, still has one of the highest poverty rates in the country.

“The oil royalty doesn’t trickle down to the people and is instead used for wasteful projects,” says Dzulkefly.

Riding on typical opposition rhetoric that the BN is corrupt, he also questions the reliability of the state government in handling the oil royalty in a way that would benefit the state’s people.

Cabinet approval questioned

PAS is also against the need for cabinet approval for the setting up of the sovereign wealth fund, the Terengganu Investment Authority, which will manage the oil royalty by apportioning some funds to the state government for development and investing the rest.

Dzulkefly Ahmad
This is because the fund’s chairperson is to be the Yang Di-Pertuan Agong (who is currently also the Sultan of Terengganu), and the fund is to be operated by professionals to avoid political interference.

“Why is cabinet approval needed for the fund? It’s an indirect way of federal interference in the state’s oil royalty,” Dzulkefly says.

With the true state of affairs unclear, oil royalty doesn’t look like a by-election issue based on facts. Instead, it might hang on which side can put forth the most persuasive arguments. The BN’s credibility has suffered such a blow that its promises hold little meaning for its detractors. If it wants to fend off the opposition’s challenge on this matter, it might want to get Treasury officials cracking on that list fast.

The by-election,  involving a three-corner fight between the BN’s Datuk Wan Ahmad Farid Wan Salleh, the Pakatan Rakyat’s Mohd Abdul Wahid Endut, and independent Azharudin Mamat @ Adam, is on 17 Jan. And that’s just nine days away.

See also: Politicising Islam in KT

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4 Responses to “Terengganu’s slippery oil royalty”

  1. Singam says:

    Deborah, well done. This report is nicely balanced.

    If the BN is doing wrong, tell it like it is. If the PR are being idiots, give them what they deserve.

    The people are depending on the alternate media for some semblance of the truth (always a slippery subject) about what is going on. At the very least, they are entitled to not being dismissed as fools ready to swallow any spin that is being spewed out.

    One question – is The Nut Graph subject to licensing and thereby, control by any government agency?

  2. Eric says:

    Thanks for the incisive and fact-based article. It is big money at stake here. Especially in one of the poorest states of the peninsula.

    No wonder the Sultan-cum-Agong got the former MB fired. Wonder whether he is happy with his replacement, who got his time of fame courtesy of his Mercedes purchase order.

  3. Hi Singam,

    The Nut Graph, like other online news sites, is not subject to government licensing.

    But we are bound by the laws of the land just like every other Malaysian or Malaysian company.

    Jacqueline Ann Surin
    Editor, The Nut Graph

  4. sans says:

    Good, interesting, informative article.

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