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Saturday, June 28, 2014

PETRONAS & NATIONAL WEALTH: But to Perkasa, it's corruption 'built by Malays, belongs to Malays!'

PETRONAS & NATIONAL WEALTH: But to Perkasa, it's corruption 'built by Malays, belongs to Malays!'
It is amusing to see how Perkasa and its gang could ‘racialise’ everything even in Petronas CEO’s interview, which listed down the real problems our national oil company is facing and therefore affecting the future welfare of the people.
Petronas has been undergoing constant attack by UMNO, Perkasa et al on its policy to shift towards open bidding, moving away from previous fixed allocation for local companies. Undoubtedly, this move has resulted in many incompetent local companies losing lucrative jobs, many of which owned by UMNO-linked bumiputras. But is it really a policy that threatens the welfare of the bumiputras as a whole? Not really.
Firstly, having an open bidding system will bring the cost down substantially, increasing Petronas profits, part of which will become dividend payout to the government, which can then be channeled to more strategic bumiputra development program.
Secondly, having to bring cost down through open bidding, Petronas will have higher margin to improve its employees compensation schemes to retain talents in a highly competitive oil and gas industries. This is not only beneficial to the company productivity but will also help to develop the bumiputras, since about three quarter of Petronas employees are bumiputras. An effective and performance-based compensation scheme will help the bumiptras who are talented and diligent in Petronas to be rewarded and motivated to continue to excel.
Why deliberately lose money?
Why should Petronas reward underserving political-linked bumiputra contractors while they could actually improve the compensation schemes of the truly deserving bumiputra employees who have helped to build the company to become a Fortune 500 company?
Therefore, we are supportive of Petronas’s move towards open bidding system to improve competitiveness, profitability and long-term growth of the company. As for bumiputras development aspect, such policy will benefit more ordinary but well-deserving bumiptras rather than only benefiting the elite few, who are politically connected but incompetent.
Already the huge dividend payout is questionable
Another important aspect of the interview that we would like to highlight here is the call to reduce Petronas dividend payout ratio.
According to Petroleum Development Act (PDA) 1974 Section 4, Petronas is to contribute certain percentage of its profit to the government. From 2008 to 2012, Petronas paid 55% to 68% of their profits to the government in the form of dividend[1], while the average percentage dividend payout of national oil companies around the world is only at 38%.[2]
To ensure long-term growth of Petronas, we strongly believe that there is a need for an amendment of Section 4 of PDA to impose a cap to Petronas dividend payout, i.e setting a maximum percentage of profits that Petronas is obliged to pay to the government.
Operational challenges in 2 areas
It is especially important now as Petronas is facing operational challenges in two areas that need high investment, namely the exploration and production and assets integrity.
For exploration and production, Petronas is facing depleting reserves at home and reduction of conventional fossil fuels around the world. For the sake of long-term survival, Petronas needs to invest heavily in cutting-edge technologies to discover reserves abroad and non-conventional fossil fuels such as shale gas and tar sands.
As for assets integrity, Petronas is facing asset integrity issue with pipelines at 35 years old and its plants and refineries at 20 to 25 years old. Capital investment in new assets is of paramount importance for continuous competitiveness of the company.
Must be exemplary custodian of national wealth
As Tan Sri Shamsul has rightfully put it in the interview, we must be good custodians to the nation’s natural bestowment. With that, we call upon Malaysians not to take the interview as an issue of race but an issue of national welfare and growth.
Malaysia must now have strategic plan to reduce our dependence on easy oil money lest we fall into the category ‘curse of oil’ or ‘Dutch Disease’.
Instead of requesting Petronas to cough up more money every year, the government must heighten its financial discipline and put serious efforts in reducing wastage. The government must also have a plan to invest the oil money into next generation who will live with little or no oil at all.
Yeo Bee Yin is the state assemblywoman for Damansara Utama

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