August 17, 2016
Good News: A More Assertive Sarawak after 50+ Years in Malaysia
by Dr. Lim Teck Ghee
Sarawak’s Popular Chief Minister–Standing Up for State Rights
The latest East Malaysia/Putrajaya controversy stemming from the Sarawak government’s announcement of a moratorium on all new applications for work permits from Petronas personnel from outside Sarawak intending to work in the state has several important dimensions.
On the surface it appears a straightforward dispute. The imposition of the work permit freeze has been justified by the finding of the state’s think-tank group Suarah Petroleum Group (SPG) that the national oil company has hired hundreds of new staff from the peninsular at the expense of Sarawakians. In response Petronas has taken a conciliatory stance and maintained that it expects the majority of the workforce required to meet the new manpower demand from its Sarawak operations to constitute Sarawakians “as per existing recruitment practices”. But is this all there is to the spat or is much more at stake?
What’s At Stake–State Economy
First and foremost are the political ramifications arising from this exercise of state rights under the Malaysia Agreement negotiated to bring Sabah and Sarawak into Malaysia in 1963. During the last state election Chief Minister Adenan Satem rode on the bandwagon of greater state autonomy to secure a massive victory. He is now making good his electoral promises to the state’s voters.
Sarawak for Sarawakians
Although the decision to freeze the issuance of work permits was announced by the state’s Deputy Chief Minister Douglas Unggah Embas, it bears all the finger prints of Adenan. On July 28, speaking to party members, Adenan warned that his (and by extension, the state’s) patience was running out at the slow progress of the talks over the devolution of federal power to the state. According to reports covering the dinner event, he told party members “We are not happy. I can tell you we are not happy, with the present arrangement… I told the Prime Minister himself, I do not want, in the coming General Election, to be seen defending the Federal Government if they do not concede, if they do not give us concessions on our requests.”
He also warned that should the devolution talks not succeed, he could not guarantee a BN victory as the Opposition would take it up. “So there must be results before the coming General Election to show the people that we mean business, et cetera, et cetra,”
It is evident that a bigger battle is being waged behind the scenes over the longstanding oil revenue issue with Sarawak pushing for a 20% royalty, a four fold increase from the present 5% it has been receiving. If Putrajaya concedes to this, it will severely impact Petronas revenue and contribution to the federal budget.
No attempt has yet been made by Bank Negara, the Ministry of Finance or any other economic agency to calculate the impact of any change in the royalty rate on federal revenues so sensitive and contentious is the topic. What is clear is that even a smaller royalty increase for Sarawak – say 15% instead of 20% – will invariably result in demands for increases in royalty payments by the other three oil and gas producing states, Sabah, Kelantan and Trengganu.
Currently, the federal government receives revenues from Petronas through royalties and taxes as the government, and dividends as Petronas shareholder. Between 2008 and 2011, Petronas contributed an average of 35%-40% of federal government revenue annually. By comparison, in 2011, individual income tax only amounted to 10% or RM20bil while corporate income tax amounted to RM47bil or 24% of government revenue (which would be smaller if the Petronas share is not included).
Despite the sharp decline in petroleum prices during the last two years, Petronas remains the number one cash cow for Putrajaya for now and in the foreseeable future. Should Petronas oil and gas royalty payment to state governments be recaliberated, it will adversely – and perhaps drastically – affect the financial underpinnings of the federal government.
And if that happens, it could be a catalyst to change in economics and politics in ways which cannot be easily deciphered at present. One sure thing though – Putrajaya and our political masters will have to find new forms of fiscal skullduggery if they are to maintain their inefficient, profligate and corrupt lifestyle.
The jettisoning of a federally determined – some say, imposed – royalty rate in favour of a more fairly negotiated one between center and state appears to be the first target that advocates of state rights and autonomy from East Malaysia are focusing on. However, a much larger agenda of change is being pursued, and this is not simply by the hawks of state rights.
Here again Putrajaya needs to pay special heed to what Sarawak’s Chief Minister is saying. During the same dinner event, he pointed to a joint resolution, passed unanimously in the state assembly in 2014, seeking for the state’s powers to revert back to the 1963 agreement. Adenan maintained that the resolution was supported by a “groundswell of feeling among all Sarawakians of all colours” for the devolution of Federal power. “And that we are not a state within Malaysia, and that we are party to the formation of Malaysia. There is a strong feeling, and one of the reasons we won is that we are seen by the people of Sarawak as championing this cause. And now they want to see the results.”
In the 18 Points and 20 Points Agreements, the list of subject areas to safeguard the autonomy and the special interest of the people of Sabah and Sarawak seeks to protect, among others, the region’s rights on religion, language, education, administration, economy, culture and the special position of indigenous races.
Notable in the two agreements is also the statement that “There should be no right to secede from the Federation.”
On this point, Adenan was careful to point out that he did not support any move to secede. According to him, “We will not secede from Malaysia. No. We will not. We will pursue only the matters which are within the Constitution which have been neglected either by negligence or ignorance, with all due respect to some of our predecessors”.
Putrajaya should be relieved and thankful that the spectre of a Brexit breakup for Malaysia does not appear to be a possibility as the two states fight to regain the rights which they have been unfairly deprived of during the past 50 odd years of being in the Federation.