Friday, December 11, 2009

Petronas Profit Dips, Rakyat To Bear The Burden

As Petronas profits dip 50.7%, will the Rakyat will have to pay for the Government's past excesses?

Petronas’ net profit before tax for April-September 2009 stood at RM31.2 billion versus RM63.3 billion in the same period a year ago, or a sharp decline of 50.7%. At the same time, revenues dropped 37.5 per cent to RM98.2 billion from RM157.2 billion ringgit.

The drop in profits is largely due to the decline in crude oil price during the period ranged between a low of US$50 in April to a high of US$75 achieved in August, averaging in the region of US$67. With the global crude oil price languishing around US$75 since September, it does not appear that the October 2009 to March 2010 period will improve significantly.

Therefore, the estimated annual profit expected from Petronas for financial year ending March 2010 will be in the region of RM 65 billion as compared to RM89 billion, or an overall decline of RM24 billion.

As a result, the sharp drop in Petronas profits will add further pressure onto the Government's revenue source for the 2010 financial budget as it's original estimates of RM56 billion collection from the petroleum sector may not materialise in full. If the Government is unable to either find additional revenue or reduce its expenditure, then the budget deficit for 2010 is expected to increase significantly above the projected 5.6%.

It is hence disappointing that despite the Government having collected bumper revenues amounting to RM217 billion from Petronas over the past 4 years (2006-2009) as a direct result of escalating oil prices, it did not have the simple foresight of putting aside any of these income for future use when the oil price declines. In fact, not only was every cent of the oil and gas windfall revenue over the past decade has been spent in full, the Government incurred additional debts on top.

As a result of the past excesses and wastages through irresponsible expenditure, corruption, incompetence and mismanagement, the Government is now caught with declining revenues and is finding it difficult to pay for its operational expenses, including servicing its rapidly increasing debt obligations.

In the light of the above, we call upon the Government not to take the easy way out to tax the rakyat more to make up for the revenue shortfalls by implementing measures such as the credit card tax, the real property gains tax and the proposed goods and services tax.

Instead, the Government to take this valuable crisis opportunity to restructure the large and bureaucratic Government machinery to be more lean and efficient. Before the Government even consider taxing the rakyat more, it should firstly implement fully transparent and accountable best practices for the implementation of Government procurement and projects.

In addition, the Government must also seek to implement additional measures to raise revenue from other sources which does not affect the livelihood of the masses, such as implementing an open auction system for the Approved Permits issued to import luxury foreign cars which can raise more than RM2 billion a year.
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