‘We’ll take over if you can’t manage’
Sarawak govt confident it can sustain investor confidence it regulates its own O&G industry
KUCHING: The Sarawak government is ready to take over the helm of its oil and gas industry in the state if Putrajaya thinks the imposition of the state sales tax (SST) on the industry will hurt investor interest and confidence, an assistant state minister said yesterday.
Assistant Minister in the Chief Minister’s Department Sharifah Hasidah Sayeed Aman Ghazali said Sarawak has in place the necessary laws to regulate the industry if the federal government does not think it could continue to do so.
“If the Federal Government feels it is unable to sustain investor interest and confidence in the oil and gas industry in Sarawak, because industry players, including Petronas, has to pay annually RM3 billion of SST, the Federal Government should consider seriously allowing the State to regulate fully the industry under its Oil Mining Ordinance and Distribution of Gas Ordinance.
“The State Government is very confident that it is able to sustain investor confidence, whether short or long term, in the oil and gas industry in Sarawak. This is amply demonstrated by the fact that foreign oil companies operating in Sarawak such as Shell, Murphy Oil, Pertamina etc have paid the SST assessed up to date.
“Only Petronas has yet to pay,” said Sharifah Hasidah, who is in charge of Law, State-Federal Relations and Project Monitoring in a statement.
She made these remarks in refuting an article with headline ‘Why the introduction of the Petroleum Sales Tax in Sarawak may not appeal to Everyone’ published in the Malaysian Reserve on Sept 30.
Sharifah Hasidah said the article contained a number of inaccurate statements relating to Sarawak’s constitutional rights to levy SST on petroleum products principally liquefied natural gas (LNG), crude oil and condensates.
“To begin with, the SST Ordinance 1998 was passed pursuant to Article 95B(3) of the Federal Constitution.
“The Article reads ‘The Legislature of the State of Sabah and Sarawak may also make laws for imposing sales tax, and any sales tax imposed by State law in the State of Sabah and Sarawak shall be deemed to be amongst the mater enumerated in the State List and not in the Federal List’.
“Therefore, the State Legislature’s constitutional authority to pass laws on SST is not dependent on Article 96 as contended in the Malaysian Reserve,” she pointed out.
She said the right of Sarawak to pass laws on SST was incorporated into the Federal Constitution pursuant to the recommendation in para 24(1) of Chapter III of the InterGovernmental Committee (IGC) Report which is an Annexure to the Malaysia Agreement.
To question the state’s right to levy SST (which is a revenue assigned to the state under Item 7 Part V of the Tenth Schedule of the Federal Constitution), according to her, is therefore a disguise to dishonour the Malaysia Agreement and what is expressly provided in the supreme law of the nation as a source of revenue of Sarawak.
“The exercise of a right so clearly enshrined in the Constitution should not be dependent upon the outcome of the current discussions on MA63 (Malaysia Agreement 1963) which should be focused on matters pertaining to the erosion or reclamation of those rights which Sarawak is legitimately entitled to, under MA63.
“Why SST by State Government? The Chief Minister has repeatedly explained why SST needed to be imposed. The State needed this additional source to drive its development agenda.
“It must be pointed out that according to publicly available data, from 1976 to 2017, the total revenues derived from the production and sale of oil and gas within Sarawak territory amounted to RM660 billion, of which only five per cent or RM33 billion was paid to Sarawak,” she said.
As such, Sharifah Hasidah said Sarawak had contributed very significantly to federal coffers from its rich oil and gas resources since 1976.
All the natural gas derived from Sarawak were converted to LNG for export to Japan, Korea and Taiwan, earning very significant foreign exchange for the Malaysian government, she stressed.
Hence, she said the imposition of SST on petroleum products ‘is a discharge of the State Government’s fiduciary duty to Sarawakians to seek a fairer share of the revenues from oil and gas produced in Sarawak’.
“Based on the present production rate of oil and gas in Sarawak and at current global oil prices, the amount is RM40 billion annually. The SST will yield approximately RM3 billion additional revenues for the State.
“A er all these years of contributing billions of ringgit to federal Treasury from the State’s petroleum resources, what is the basis for the Minister of Finance Mr Lim Guan Eng to say ( as reported in Malaysian Reserve) that the State’s imposition of SST to yield additional reserve to the State of RM3 billion is unreasonable,” she said.
With regard to alleged loss of investor confidence in the oil and gas industry in Sarawak due to imposition of SST, Sharifah Hasidah said it must be pointed out that ‘ trade, commerce and industry’ are matters under the federal portfolio (Federal List).
To question the state’s right to levy SST is a disguise to dishonour the Malaysia Agreement. Sharifah Hasidah Sayeed Aman Ghazali