Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

The Largest Malaysian Taxpayer

Written by johnleemk on 2:55:42 pm Jun 30, 2007.
Categories: ,

Petronas recently released its figures for the past year — figures indicating it has had the best year ever in its history.

Looking past the mind-boggling numbers such as revenues totalling RM184.1 billion and profits of RM46.4 billion, there is one number which the press both here and abroad has obviously downplayed, either avoiding mentioning it or burying it deep in the articles.

That number is simple: over a third of government revenue comes from one source alone — that government-owned corporation known as Petroliam Nasional Berhad. Yes, that really is how it is spelled, and according to Forbes, it is also the largest taxpayer in Malaysia.

It is clearer than ever that Malaysia has to reduce its reliance on oil — I have estimated that about half of government revenue is derived from petroleum in some way.

Even if we take the lower number of about 33%, that is still a lot. Look at anything funded by the government, and take away one third of it — that is our future without oil. Imagine a school with only two-thirds of its current staff, or a four-lane road where there is a six-lane road.

Worse still, our economy is very state-centred, so a loss of petroleum revenue translates directly to a loss in the economy. By perverting and manipulating the market through the artificial power it has gained through petroleum, the government has allowed inefficient firms to flourish through state-granted monopolies and protection, without necessarily spending anything directly.

There is some hope in that a not-insignificant portion of Petronas revenue is derived from manufacturing. But I suspect that a lot of goods manufactured, such as plastics, are based on the same raw material Petronas sells — petroleum.

Take away that free petroleum, and the profit margins for the manufacturing sector of Petronas would probably fall considerably. This in itself would constitute a huge blow to the economy, since the Petronas figures indicate it makes up nearly a third of the manufacturing sector's contribution to Malaysian gross domestic product.

Basically, we need to lessen our reliance on petroleum and on Petronas soon, or we will be in deep shit. Petronas acknowledged as much, sounding the warning that fuel subsidies are probably not maintainable at current rates, and that Malaysia may become a net petroleum importer by 2010.

(Note that this would not immediately directly harm the economy because the government earns from petroleum exports, but the burden of paying for imports is borne by individual Malaysians.)

We need to manage our resources right. Oil can be a huge boon to us, but only if we treat it as seed money to be invested, rather than a windfall to be squandered.

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