This article first appeared in The Edge Financial Daily on July 31, 2018

KUALA LUMPUR: Sarawak will still receive the existing oil royalties of 5% gross value while being entitled to additional royalties of 20% of net profit from state oil producing activities.

In a joint press conference by Pakatan Harapan members of parliament (MPs) from Sarawak, Stampin representative Chong Chieng Jen said this message was conveyed to them when they sought clarification from Economic Affairs Minister Datuk Seri Mohamed Azmin Ali.

“On the 20% oil profit, Sarawakians can rest assured that it will not compromise the present 5% royalties. The 5% is an agreement between Petronas (Petroliam Nasional Bhd) and the state government, and cannot be varied unless the state government voluntarily gives it up,” Chong said.

The Sarawak Pakatan chairman also said the federal government is concerned about direct cash payment to the Sarawak government, given that the state government “does not practise transparent and good governance”.

“The state government’s policies on land and timber have proven that the state government’s policies on management of natural wealth only favour the cronies, while the general populace does not get a fair share of wealth,” he said.

Therefore, Chong said, the cabinet committee to be set up to look into petroleum royalty matters will discuss further the quantum and the mechanism to channel the fund to Sarawakians, while minimising the risk of mismanagement by the state government.

“[The] bottom line [is that] the 20% oil profit now [being] offered will be further and in addition to the present 5% oil and gas royalties. This is a positive development and far better than the arrangement by the Barisan Nasional coalition previously, whereby the 5% royalties [had] stayed stagnant for the past 45 years,” he said.

On the package promised to Sarawak in the Pakatan manifesto, Chong said since the state government had rejected the offer, the federal government is compelled to renegotiate the matter. In the meantime, Sarawak is entitled to the new package mentioned by Mohamed Azmin.

“It is the Sarawak government which has brought upon themselves and Sarawakians in general the present predicament,” he said.

Under the manifesto, the coalition promised oil royalties of 20% of gross oil value plus 50% of tax revenue collected in Sarawak to be given to the state government.

In return, the state government will attain full autonomy in all education and healthcare matters in Sarawak, and undertake the financial obligations of these two ministries in the state.

The manifesto also stated that if oil and gas companies cannot afford to pay the full 20% royalties, the federal government will top up the shortfall.