This article first appeared in The Edge Financial Daily on June 21, 2018

KUALA LUMPUR: A 20% oil royalty claim, if it materialises, could boost Sabah’s annual revenue stream by RM3 billion to RM4 billion, RAM Rating Services Bhd said, adding that it could significantly fund development projects in the state.

The local rating agency noted that Sabah’s revenue collection is superior to that of all other states in Peninsular Malaysia, amounting to RM4.2 billion in 2017.

Both Sarawak and Sabah have demanded that royalty to their oil be increased by 15% from the current 5%.

In a statement yesterday, RAM said Sabah’s RM1 billion bonds (2014/2019) are currently rated AAA/stable, premised on expectation that the relationship between the state and federal governments will stay solid.

“Any material erosion of federal government support for Sabah will precipitate negative rating action,” it added.

“While it is too early to determine the political dynamics of the ruling coalition in Sabah, the transition to the new state government has taken place with institutional settings intact,” said RAM head of sovereign ratings Esther Lai.