Pakatan govt paying oil royalties to states held by opposition

A RM250 million (S$83 million) drawbridge in Kuala Terengganu built using oil royalties given to the former Umno state government. Terengganu Menteri Besar Ahmad Samsuri Mokhtar (above) says the state government can look forward to some RM1 billion a
A RM250 million (S$83 million) drawbridge in Kuala Terengganu built using oil royalties given to the former Umno state government. Terengganu Menteri Besar Ahmad Samsuri Mokhtar says the state government can look forward to some RM1 billion annually in oil royalties from the federal government. PHOTO: BERNAMA
A RM250 million (S$83 million) drawbridge in Kuala Terengganu built using oil royalties given to the former Umno state government. Terengganu Menteri Besar Ahmad Samsuri Mokhtar (above) says the state government can look forward to some RM1 billion a
A RM250 million (S$83 million) drawbridge in Kuala Terengganu built using oil royalties given to the former Umno state government. Terengganu Menteri Besar Ahmad Samsuri Mokhtar (above) says the state government can look forward to some RM1 billion annually in oil royalties from the federal government. PHOTO: BERNAMA

PAS-controlled Terengganu has received millions of ringgit, Kelantan set to be paid

Malaysia's Pakatan Harapan (PH) administration has paid out millions of ringgit in petroleum royalties to Terengganu, in a radical departure from the previous federal government's practice of blocking such payments to opposition-controlled states to derail development plans by its political rival.

Economically impoverished but hydrocarbon-rich Terengganu received nearly RM200 million (S$66 million) in March, and expects another payment of around RM700 million in September.

The state government, controlled by Parti Islam SeMalaysia (PAS), can look forward to banking in some RM1 billion a year from the PH administration, Terengganu Menteri Besar Ahmad Samsuri Mokhtar told The Straits Times. This is 5 per cent of the annual value of petroleum deposits extracted off Terengganu.

"The next royalty payment will be in September, I would say roughly around RM650 million to RM700 million," he said.

Kelantan, also held by PAS, is expecting royalties too. The state government has been battling the federal authorities in court since 2010, saying the federal government has denied the state its royalties.

But Kelantan last week dropped the court action and is confident of receiving the payments soon.

"We are waiting for the federal government or the Economic Affairs Ministry to make an announcement on the payment," Kelantan Menteri Besar Ahmad Yakob said on Sunday.

He said the cash injection - the amount is not known - would be used for state projects such as resolving Kelantan's water supply issues and upgrading health facilities, the New Straits Times quoted him as saying.

These payments, widely called oil royalties, are paid to states from which the federal government, through national oil firm Petronas, extracts oil, gas and other petroleum products offshore.

"Basically, I think both state governments should get what was promised. The federal government really has no right to hold on to the money or use the money via federal agencies in both states," said Professor James Chin, director of the Asia Institute at University of Tasmania. "The money rightfully belongs to the state governments."

Two other Malaysian states that have been receiving these payments are Sabah and Sarawak, with the funds paid since 1976 pegged at 5 per cent of the value of petroleum deposits brought out.

Prime Minister Mahathir Mohamad's move to start paying the royalties forms part of an electoral promise by his PH government to pay states for providing hydrocarbon products that help fill the coffers of the federal government.

But the move is a double-edged sword for PH. While it is fulfilling its election pledge, giving millions of dollars to opposition parties helps them develop their states, create jobs for locals and strengthen their political grip.

Sarawak - which produces plenty of gas offshore - is controlled by opposition alliance Gabungan Parti Sarawak. The state government is pushing to get more than just 5 per cent in revenue, and has formed Petroleum Sarawak, or Petros, to start digging on its own.

Sabah is controlled by a PH ally, Parti Warisan Sabah, that keeps the funds in PH-friendly hands.

Terengganu's Dr Samsuri told ST that the cash would be used for projects such as a North Kuala Terengganu water supply venture costing RM1.3 billion, and raising a new RM400 million district in Kuala Nerus near the state capital.

The federal government's move on payment is a departure from the aftermath of the 1999 general election, when the Terengganu state assembly fell to PAS for the first time.

Tun Dr Mahathir, then Prime Minister of the Barisan Nasional (BN) government, refused to pay PAS Terengganu the annual 5 per cent royalty, which it had been regularly paying BN Terengganu.

The federal government then set up Wang Ehsan (Goodwill Fund) for the eastern state, and handed out some RM1 billion in cash a year to Umno Terengganu for development projects, despite criticisms of little accountability.

When Umno-led BN won back Terengganu in the next general election, in 2004, the fund was called oil royalties again and passed to the state government.

This time, Dr Mahathir has handed over the cash to PAS in Terengganu without fanfare. And PAS just last month decided to formally join hands with PH's other political nemesis, Umno.

A version of this article appeared in the print edition of The Straits Times on July 06, 2019, with the headline 'Pakatan govt paying oil royalties to states held by opposition'. Print Edition | Subscribe