4 August 2005.

Tan Sri Dato Sri Mohd Hassan Marican,
Chairman, President & CEO,
Petroliam Nasional Berhad (PETRONAS)
Tower 1, PETRONAS Twin Towers
Kuala Lumpur City Centre
50088 Kuala Lumpur.                                                                                               BY HAND

Yang Berbahagia Tan Sri,

Petronas Mission Statement boldly states that,

"Our objective is to contribute to the well-being of the people and the nation.”

DAP is well aware that since Petronas was established on 17 August 1974, payments totaling RM 246 billion had been paid to the government, comprising 25% of the country’s national income. The time has come to contribute not just to the country but also contribute directly to the people of Malaysia.

DAP urges Petronas to fulfill its mission statement  by sharing out the  RM35.5 billion in profits for the 2005 fiscal year with 25 million needy Malaysians to fight inflation caused by higher fuel prices. However, rich Malaysians earning more than RM 80,000/- would not be able to benefit.

In the past year since 1 May 2004, petrol prices have risen five times by 25 cents or 18% from RM 1.37 to RM 1.62 per liter. Diesel have increased even higher by 64% or 50 cents from 78.1 cents to RM 1.281 per liter. Such huge increases only worsen inflation which rose by 3.2% in June 2005, the highest in 6 years. With the latest 10 cents rise in petrol, 5 cents per kg in gas and a 20 cents rise in diesel on 31 July 2005, inflation may breached the critical 4% this year which may lead to a rise in interest rates.

During this corresponding period of rising inflation, Petronas has earned record profits rising by 50% from RM 23.7 billion last year to RM 35.5 billion. Such profits exclude the RM 31.2 billion paid by Petronas to the Government in the form of dividends, royalties, taxes and export duties as compared to RM 21.3 billion last year.

DAP would not object to the government increasing fuel prices if they distribute all or part of Petronas profits to 25 million Malaysians. It is unethical and against the national spirit for Petronas to reap huge profits from high oil prices at the expense of the sufferings of ordinary Malaysians paying high fuel prices. If the government can receive RM 31.2 billion from Petronas for 2004, why is it that ordinary Malaysians do not get a single cent?

RM 35.5 billion is so huge that even if every 25 million Malaysians received RM 1,000 each from Petronas, Petronas would still have more than RM 10 billion left to conduct business. If the entire profits were distributed, each Malaysian can receive nearly RM 1,500/-.

The government states that the latest fuel price increase will save RM 956 million in subsidies. With profits of RM 35.5 billion, can Petronas not afford to paying RM 956 million? Malaysians can not understand why they have to pay higher fuel prices and watch Petronas make money.

Despite this hike, the Government claims that it will still have to bear RM6.63 billion in petrol subsidies and tax exemption forgone of another RM7.85 billion for the year 2005 bringing total subsidies of RM 14.5 billion. DAP proposes that if all the profits from Petronas are distributed to Malaysians then fuel subsidies can be removed and sales taxes on fuel can be imposed; thus allowing fuel prices to be determined solely by market forces. This may be a win-win situation:

1. For Malaysians who can enjoy the fruits of Malaysian natural resources and  afford to pay for higher fuel prices,

2. Economically efficient as there would be no distortion in the market price for fuel, no smuggling and black-market profiteering;

3. Avoid misuse and abuse of Petronas funds for dubious government projects; and

4. Petronas would still be able to fund its development activities from the RM 31.2 billion in royalties, dividends and taxes given to the government given in 2004. 

Distributing Petronas profits to the people, especially the poor, is fair. Removing fuel subsidies that benefits the rich driving big luxury calls is also equitable. Further, Petronas controls only 30% of the retail petrol sector with the remainder held by foreign oil companies. Continuing with fuel subsidies would also help to subsidise these foreign oil companies.

If the government wishes to stop fuel subsidies and increase fuel prices to international levels, it is only fair to distribute Petronas’ profits to the people. Better the money be spent on all Malaysians than be used to salvage questionable projects from public scandals and bankruptcy. The people have been deprived long enough!

Yours faithfully,

LIM GUAN ENG
SECRETARY-GENERAL