TERENGGANU will go bankrupt if it keeps up its 90% reliance on oil and gas royalties to fill its coffers, said state Pakatan Harapan deputy chief Azan Ismail.
The PAS-controlled state has failed to diversify its economy, resulting in its over-reliance on one source of income, he said.
“Terengganu relies too much on the royalties from the federal government,” he told The Malaysian Insight.
“The state doesn’t look for other sources of funds to boost its finances, like other states.”
Azan, who is also state PKR chief, said Terengganu’s approach to its finances is “very risky” given the volatility of global oil prices.
Last year’s state budget recorded an oil revenue of RM1.7 billion, while income from the assessment tax, and mining and forestry activities stood at between RM300 million and RM400 million.
“It paints a scary picture. Without oil and gas royalties, Terengganu would become the first state to go bankrupt. It wouldn’t be able to cover its annual expenditure.”
PAS wrested Terengganu in last year’s general election, as well as retained its stronghold, Kelantan.
The Islamist party won 22 of Terengganu’s 32 state seats. The rest are held by Barisan Nasional, which previously controlled the state, and now a PAS ally.
PH won no seats in Terengganu.
Azan said despite receiving royalties for the past 20 years, the state and its people’s economic status has remained largely the same.
“We are still the third-poorest state. Growth has continued to flatline. We see growth only in population and the number of houses.”
The state government should view oil and gas royalties as just a bonus and use them to boost Terengganu’s economy and eradicate poverty, he said.
“Imagine if Terengganu had revenue like the other states. Add the royalties to the revenue, and Terengganu’s financial position would be strong.
“The state would then be able to manage its development, education and healthcare, and improve infrastructure at a faster rate.”
Terengganu, led by Menteri Besar Ahmad Samsuri Mokhtar, received between RM1.5 billion and RM1.6 billion in oil and gas royalties for 2018 and this year.
Three tranches of RM450 million have been paid. The next payment is expected in September.
The payments are in line with PH’s 14th general election manifesto. Previously, BN did not pay the state oil and gas royalties, instead giving “wang ihsan” (compassionate funds).
Last month, Samsuri told The Malaysian Insight that the money will be used to pay state civil servants’ salaries and fund development projects started by the previous administration.
However, Azan said the money should not be used to pay wages, as doing so would go against the state government’s accountability principle.
It would be irresponsible for the state to make such a “risky move”, he said.
“It is shocking that the menteri besar wants to use the money to pay state civil servants. The royalties should go towards development projects that benefit the people.”
Terengganu must account for how it spends oil royalty
PUTRAJAYA must implement a mechanism to monitor the use of oil royalty given to PAS-ruled Terengganu to avoid abuse of the funds, said the state Pakatan Harapan chairman.
Such monitoring is necessary to ensure the money is used for people-oriented projects, said Raja Kamarul Bahrin Shah.
“There must be a mechanism so that the federal government can monitor closely how the money is used. The federal government must monitor so that the funds are not used for lavish projects but for development of the state as a whole.
“It is also necessary so that the state government can be held accountable,” the state Amanah chief told The Malaysian Insight.
The senator said the present check-and-balance system does not audit the expenditure of oil royalty in detail.
Terengganu PKR chief Azan Ismail urged Putrajaya to amend the Petroleum Development Act 1974 to include provisions to make it compulsory for oil royalty recipient states to submit audits twice a year.
This will ensure that such funds are not abused by the state governments.
“I think we must amend the act to make states submit audit reports twice a year. It will ensure that the people can see where the oil royalty has gone, to see if they are used to build schools or homes.
“We are worried that if there is no audit, the funds can just vanish,” he said.
The PH federal government agreed to give oil royalty to Terengganu to the tune of RM1.6 billion per year.
During PAS’ rule of Terengganu between 1999 and 2004, the then Barisan Nasional replaced oil royalty with compassionate payment (wang ehsan) distributed through federal government agencies in the state.
Last month, Menteri Besar Dr Ahmad Samsuri Mokhtar said the state received RM1.053 billion in oil royalty from Putrajaya last year.
The payment was made in stages, with RM603 million before the 14th general election, RM100 million on August 21, RM200 million on October 8 and RM150 million on December 12.
THE MALAYSIAN INSIGHT
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