NEP, high oil prices and declining oil reserves will damage future economic growth and prosperity

http://dapmalaysia.org Forward Feedback

The New Economic Policy (NEP), high oil prices and Malaysia’s declining oil reserves that will make Malaysia a net oil importer 2011 will damage future economic growth and prosperity

______________

Press Statement

by Lim Guan Eng

__________________

(Petaling Jaya, Friday): DAP expresses concern that Prime Minister Datuk Seri Abdullah Ahmad Badawi has still not woken up to the challenges of negative impact of high oil prices that has reached US$80 per barrel, the NEP and Malaysia’s declining oil reserves that will turn Malaysia from an oil exporter to a net oil importer in 2011, will damage future economic growth and prosperity. The triple shock of high oil prices, the anti-competition, anti-growth and anti-trade NEP as well as Malaysia’s declining oil reserves are huge challenges that the BN government has not even begun to address.

Oil revenues make up 37.6% of our 2007 government’s revenue. According to the latest Budgetary estimates by the Ministry of Finance, Malaysia revenue’s is estimated to be RM 141,790 million in 2007. Of this, oil and gas amounts to RM 53,311 million comprising: -

· Petroleum income tax of RM 22,600 million

· Crude oil export duties of RM 2,481 million

· Petroleum and Gas Royalty of RM 4,230 million

· Petronas Dividend of RM 24,000 million.

This RM 53,311 million does not include the taxes paid by oil related companies or companies in the oil industry, which can be quite substantial. This oil revenue has allowed Malaysia to cushion the negative impact from mismanagement, wastage of public funds and corruption scandals that have plagued Malaysian society and would otherwise have crippled Malaysia’s economy. When Malaysia becomes a net importer of oil by 2011, one wonders where Malaysia is going to find the tens of billions of ringgit needed to fill in the gap in the nation’s finances.

For this reason, Abdullah is too complacent to say that the rise in world oil prices is a “serious matter” and has not decided whether to raise the price or whatever other action. DAP wishes to remind the Government of its promises not to raise petrol prices in 2007. Therefore any moves to remove petrol prices or subsidies must be followed with the government allowing the people to share in Petronas’ profits.

Despite Petronas earning RM 500 billion since it was established in 1974, Malaysians have not benefited from a single cent in sharing in the oil revenues. This contrasts with an oil importer like Singapore that can afford to distribute S$ 2,000-2,500 a year to poor and unfortunate families.

Petrol vouchers of RM1,000 yearly to those earning less than RM3,000 per month

To promote efficiency and cut down on leakages from waste or smuggling, the government should abolish fuel subsidies provided that financial aid is given to shelter Malaysians from the price hike. DAP would oppose any fuel hike or abolition of fuel subsidies if profits from Petronas are not distributed to poor families to reduce the financial burden of price increases in form of the following financial aid such as:-

· Petrol vouchers of RM 1,000 per year for every Malaysian worker earning less than RM 3,000 per month. Such petrol vouchers will only cost RM 8.5 billion a year, far less than the government yearly subsidies of RM 12.2 billion, mostly fuel subsidies ; and

· a “Malaysia First Bonus” of RM 1,200 a year to Malaysians (a family would receive RM 2,400 regardless whether the spouse is working) with income not more than RM3,000 per month. For the elderly above 60, they will receive a “Senior Malaysian First Bonus” of RM 1,000/-. These bonuses will only cost around RM 20 billion, far less than the RM 76.3 billion in gross profits earned by Petronas last year.

DAP also proposes that the government legislates the use of oil and gas revenue to ensure that 50% of oil and gas revenues be invested in human capital and research and development, while another 25% be used to strengthen the social security for Malaysians who are in need. This will help to build the necessary economic capacity for Malaysia, to ensure that the increases in productivity and innovation will more than compensate for the expected decline in oil revenues.

Without oil resources, a country’s economic growth would depend on comparative and competitive advantages. As comparative advantage has been fully utilized in all countries, economic growth is now fuelled by competitive advantages especially in producing goods and services which are of good quality and service at reasonable prices. As indicated by the EU Ambassador to Malaysia, the NEP has harmed instead of helped Malaysia to improve our competitive advantages.

With the advent of Malaysia being an oil importer, it is more crucial and critical that anti-competitive economic practices and policies such as the NEP must be dumped. The BN government has to put aside the political, racial and historical burdens and stop being stubborn in continuing with outdated policies if Malaysia is to progress in the market economy and globalised world of the 21^st century.

(14/9/2007)

* Lim Guan Eng, Secretary-General of DAP