Ku Li responds to full-page ads on royalty issue

On the instruction of the late Tun Razak, I drafted the Petroleum Development Act precisely because we wanted to ensure that Kelantan, Terengganu, and potentially Pahang and Johor would benefit from the 5% cash payments.

Tengku Razaleigh Hamzah, The Edge

I see the Ministry of Information has taken out full page advertisements in the major Malay newspapers to argue that Kelantan has no right to oil payments under the Petroleum Development Act because the oil resources in question lie outside the 3 nautical mile limit that delimits state versus federal jurisdictions. The advertisement fails to point out that almost all the oil found in Malaysia is located more than 3 nautical miles offshore, and Petronas has nevertheless been making oil payments to the states.

By the argument deployed in the advertisement, Terengganu, Sabah and Sarawak too are not entitled to the “cash payments” of 5% of profit oil (commonly and a little inaccurately referred to as “oil royalties”). Everything is at the arbitrary behest of the Federal Government.

Yet last year, according to its annual report, Petronas paid out RM6.2 billion in petroleum cash payments, with RM3 billion to Terengganu, RM2.3 billion to Sarawak and RM0.9 billion to Sabah. One wonders what basis this payment was made on since none of this was for petroleum found within 3 nautical miles offshore of these states.  The argument for depriving Kelantan of 5% cash payments on the basis of its petroleum resources being found beyond 3 nautical miles is an insult to the intelligence.

I have spoken and written at length on this issue and had been reluctant to say more on it. Moreover, as a member of the ruling party I am embarrassed to have to belabour elementary points against the government. This information campaign, whether through a leaflet campaign in the schools or through newspaper advertisements paid for with taxpayer money, implies either culpable stupidity or gross deceitfulness on the part of agents of the Federal Government. I had hoped to avoid that implication.

The government’s advertisement also exhumes a ten year old mis-quotation in a government newspaper to allege that I once denied that Terengganu had any right to the 5% cash payment. I said no such thing. If the government media is to be believed I also once converted to Christianity by wearing Kadazan headgear just in time to be exposed amidst a General Election campaign. Why does the government rely on a ten year old misquotation? Well, these days we have our own blogs.

In fact, as a BN backbencher at the time I opposed the Federal Government’s intervention to prevent Petronas from making oil payments to Terengganu and the move to channel those funds instead into “wang ihsan”. Tun Salleh Abbas and I offered ourselves as witnesses to the Terengganu state government in the suit it filed against the Federal government to recover those oil payments. Between the 2000 and 2009, RM15.8 billion was paid out through the legal black hole of wang ihsan, not to the rightful party as specified under the Petroleum Development Act, which is the state government’s consolidated fund, but to agencies more amenable to vested interests linked to the central government. The outcome of that spending is the Monsoon Cup, a Crystal Mosque in which it is impossible to pray, a leaking swimming pool, a collapsed bridge and a collapsed stadium. The people of Terengganu remain poor while Billions have been paid out in their name.

I am said to have changed my mind or somehow ignorant of the fact that Kelantan’s petroleum resources all lie offshore when the fact is that, on the instruction of the late Tun Razak, I drafted the Petroleum Development Act precisely because we wanted to ensure that Kelantan, Terengganu, and potentially Pahang and Johor would benefit from the 5% cash payments.

We did precisely because we knew that these states did not have oil onshore or within their territorial waters. The device we used was a Vesting Deed by which the states vested, in perpetuity, all their petroleum resources to Petronas, onshore or offshore. In return for this Petronas guaranteed the cash payment of 5% from oil found anywhere, offshore or onshore, of the state. This rendered any consideration of federal/state boundaries whether at 3 or 12 nautical miles or whatever irrelevant for the purpose of reckoning the payment. I traversed the country to sign this agreement with each Chief Minister of each state government. Tun Razak was driven by the nation-building concern that these poorer east coast areas, which are also predominantly Malay areas should benefit directly from offshore oil, and I drafted the Petroleum Development Act to reflect that concern.

It is this benefit to the people which Umno Kelantan opposes 34 years after the death of Tun Razak. It is also Razak’s legacy that they make a mockery of. It is a mark of how far Umno has strayed off course that the leadership of Umno, and in particular Umno Kelantan is doing its utmost to deprive the people of Kelantan of sovereign rights secured by an UMNO-led government of another day. No one in their right mind could mistake this as behaviour that is beneficial to Umno’s long term standing in Kelantan, let alone elsewhere as people observe this behaviour.

I am accused of putting state interest before party interest. However the issue goes far beyond Kelantan. The arguments used in yesterday’s newspaper advertisement undercut the rights of all the states in respect of a natural resource which is theirs as a sovereign right. It violates a contract between Petronas and the states, denies the Petroleum Development Act, denies the raison d’etre of Petronas (which was in the first place formed to ensure the integrtiy of the federation by way of an equitable sharing of this valuable resource) and sets the Federal Government in contravention of an Act of Parliament.

One immediate implication of the argument laid out in yesterday’s official clarification from the Ministry of Information is that Terengganu is also ineligible for the oil payments. This means that after cutting off oil payments when Terengganu fell into Opposition hands and replacing it with “compassionate payment” there is absolutely no basis for the government’s promise to return Terengganu to cash payments again. All of Terengganu’s oil is found very far offshore. In this matter whatever holds for Kelantan holds for Terengganu and vice versa.

In the end this is not a question of politics or personality. It is not about what I or anyone else says, nor of  where Umno or PAS stand. It is about the government complying with written agreements governed by an Act of Parliament and respecting parliamentary democracy. The rights of the people are not to be fulfilled or withheld depending on who they have voted for. In treating Terengganu and Kelantan in this manner we are depriving them of money that is rightfully theirs, undermining sovereign state rights, and eroding parliamentary democracy. We should do the right thing by the people at whose pleasure we serve.