If The 2004 Petronas Profits Of RM 35.6 Billion Were Distributed To the Poor, Malaysia Would Not Have Wealth Distribution Problems.

Speech at the Meeting between DAPSY National and Perak State Leaders In Teluk Intan
by Lim Guan Eng  

(Teluk Intan, Tuesday): DAP agrees with Deputy Prime Minister Datuk Seri Najib Tun Razak yesterday that in principle, there should be no increase oil subsidy given by the government from the financial management aspect. However DAP disagrees with him that oil subsidies could jeopardise the nation's wealth distribution because without oil subsidies, wealth distribution in Malaysia would be even more unequal.

In the report by the latest United Nations Human Development (UNHDP) Report 2004, Malaysia has the worst income disparity between the rich and poor in South East Asia, higher than Philippines, Thailand, Singapore, Vietnam and Indonesia. The UNHDP Report 2004 shows the richest 10% in Malaysia controls 38.4% of our economic income as compared to our poorest 10% controlling only 1.7%. 

The reason for such a great income gap between the rich and the poor is that leakages from corruption and inefficiencies in the economy deprives the poor of their economic rights. If the profits from Petronas were not used to bail out failed government projects such as the RM 10 billion Perwaja scandal but distributed to the poor, Malaysia would have the smallest income gap between the rich and poor in South-East Asia.

Petronas And Not The Government Should Bear Fuel Subsidies

Minister in the Prime Minister's Department Mustapa Mohamed said that if the current price of crude oil of US$60 (RM228) a barrel continues to rise, the government would have to review its domestic price. The government has no justification for any further fuel price increases with the highest profits recorded by Petronas in history of RM 35.6 billion for the financial year ending 31 March 2005. Petronas’ after-tax profits jumped by RM 11.9 billion or 50% from RM 23.7 billion last year. Petronas’ pre-tax profits was even higher at RM 58 billion from RM 37.4 billion last year. As a result the government obtained dividends and taxes of RM 31.2 billion for 2005.

With such huge profits of Petronas of RM 35.6 billion after payments to the government US$ 31.2 billion when the average price of oil was US$ 45, Petronas is expected to earn more with the current oil price of US$ 60/-. The 33% increase in oil price will increase Petronas profits by at least another RM 12 billion and the government receipts by another RM 10 billion.

The government claims that it cannot continue to subsidise the price of petrol, which is mostly imported. Such arguments is unacceptable when the government received RM 31.2 billion from Petronas and expected to receive more than RM 40 billion for this financial year. Further even if the government refuses to bear the burden then it should direct Petronas to do so because Petronas with its huge record profits of RM 35.6 billion can afford to do so.

I have received many calls from Malaysians who are angry why they have to pay higher fuel prices when Petronas makes so much money. It is unethical and against the national interest for Petronas to record huge profits whilst Malaysian consumers have to suffer high fuel prices. Such a policy violates the basic principle that oil reserves belongs not to Petronas but to the people of Malaysia. As owners of oil earnings and reserves, the people have the right to enjoy cheaper oil prices. Petronas’ refusal to share oil profits violates the sovereign right of 25 million Malaysians.

(12/07/2005)