SELF-PRAISE IS NO PRAISE

  SELF-PRAISE IS NO PRAISE

‘Sarawak has sound financial and resource management and this has helped the state to implement various development projects.

                 Chief Minister Datuk Patinggi Abang Johari Tun Openg pointed this out at a community                           dinner  held at the Kapit Civic Centre on Sunday evening (Oct 4th 2020)’

Those were the opening lines in a news report captioned  ‘State has sound financial, resource management’ and carried by the New Sarawak Tribune dated the 5th Oct 2020.

The claim is something all Sarawakians would be proud of it was a completely truthful statement. Unfortunately, truth sometimes can be stranger than fiction and in this case, it is a fiction worthy of a literally award. The only thing that Sarawakians will agree about in the matter of financial management is Sarawak finances is shrouded in secrecy.

In June 2018, shortly after the GE14 in which the Pakatan Harapan (PH) showed Barisan Nasional (BN) the exit door, Sarawak DCM Tan Sri James Masing was reported as having said the the Sarawak BN government should use up all the state’s reserve in the amount of RM31 billion for projects before the PRN12. That was the first and the last time Sarawakians ever heard of the financial strength of the Sarawak government because after that revelation from James Masing there was no farther mention from any of the government leaders including from the chief minister himself. Indeed, I am inclined to think that most of GPS ADUNs including assistant ministers do not know of the existence of the reserve.

Sufficiently piqued by this revelation Sarawakians are now asking where is the money kept. It would not be logical to assume that the entire RM31 billion is kept in low interest paying bank accounts as that would not exactly be sound financial management. So where is the money spread? Treasury Bills, Malaysian Government Securities, Stock & Shares? Real Estate Investments?, Bonds like the 1MDB Bonds? If a significant portion of the reserve is kept in forms other than cash, then what is the current market value now? Is the RM31 billion still there? 

Sarawakians are asking because what they know of from information in public domain does not dovetail with this ‘brief flash in the pan’ revelation from James Masing. There was for example the issuance of USD1.6 billion through Goldman Sachs in 2011 and 2012:  US investment bank Goldman Sachs appears to have turned a blind eye to glaring corruption risks and conflicts of interest in order to underwrite US$1.6 billion in bonds for the Sarawak State Government, Malaysia, said Global Witness today (1). https://www.globalwitness.org/en/archive/goldman-sachs-underwrites-us16-billion-under-radar-bonds-corrupt-sarawak-regime-and-wins/

The scandal ridden jiwa murni roads in central and northern regions of Sarawak is another example which speaks of the possibility of the reserve not existing at all. The jiwa murni roads were crucial network of roads that was intended to provide rural communities with road connectivity. We now know that the ‘contracted’ sum was RM800 million which was less than a billion ringgit. Why did the Sarawak government not use the reserve to construct these roads, so crucial to the well-being of the rural folks? Not to mention the 24 hours electricity and treated water supply to communities that are still deprived of these most basic of utilities. Good financial management would have dictated that financing for these projects would be through sources carrying the smallest interest or opportunity cost burden to the state government and raising funding through issuance of bonds is definitely not the best option.

The Development Bank Of Sarawak (DBOS), incorporated in May 2016 and commenced business in Jan 2018 is one page from the annals of the financial management of the Sarawak government which raised many questions among Sarawakians. The following is an excerpt from a news report carried by Borneo Post on the 13th Jan 2019 :

‘As of Oct 23 last year, DBOS holds a total deposit of RM3.448 billion with credit facilities approved and disbursed standing at RM350 million and RM244 million, respectively.

Assistant Minister of Corporate Affairs Abdullah Saidol said the depositors are government-linked companies (RM7.5 million), local authorities (RM17.6 million), statutory bodies (RM23.2 million), and the public sector (RM3.4 billion)’

https://www.theborneopost.com/2019/01/13/dbos-an-alternative-financing-route-for-sarawak/

At that time DBOS had in their books deposits totaling RM3.448 billion, all from the Sarawak government, directly or indirectly and a paid-up capital of RM1 billion.

https://www.dbos.gov.my/page-0-9-6-tid.html

On the 13th Jan 2020 DBOS homepage published a media statement in which they said ‘ Besides this, he (Sim Kheng Boon,CEO of DBOS) said DBOS had already approved loans amounting to a few billion ringgit. Aside from financing mega development projects, the bank also finances smaller infrastructure projects……“DBOS will offer banking facilities to eligible borrowers which have at least 51 per cent state equity with management control.’

The last sentence quoted here presented at least one area of concern which is that, among the eligible borrowers are those with 51% state equity with the balance of 49% being privately held. What it means here is that DBOS was set up to help finance (with state funds) private business people. Here we are talking about financing for the elites, the privilege few who are able to dip their hands into the 49% share in these very lucrative areas.

https://www.dbos.gov.my/modules/web/pages.php?mod=news&sub=news_view&menu_id=0&sub_id=19&nid=11&m=1&y=2020

An article published in the Home Page of Sarawak’s DAP reveals some names which should ring many alarm bells.

https://en.dapsarawak.org/petros-board-members-beneficiaries-of-petronas-contracts/

Next is Petroleum Sarawak Berhad (Petros), another wholly state-owned enterprise incorporated on the 6th March 2018. Petros presently has an issued and paid-up capital of RM20 million. 

In the words of CM Datuk Patinggi Abang Johari, it was set up by the state government to enable Sarawak to actively participate in the extraction of oil and gas in Sarawak. The thinly veiled objective was to increase the revenue stream from the oil and gas sector as the federal government was saying signs that it will not bow to Sarawak’s demand for an increase in oil loyalty.

What significant success has Petros achieved since incorporation? It was reported in Feb 2020 that Petros has assumed the role of gas transporter and aggregator in Sarawak effective this year following the sales and purchase of gas distribution business and assets in Miri and Bintulu.

Petroleum Sarawak Gas Sdn Bhd (Petros Gas), a subsidiary of Petros, is now the operator of Miri Gas Distribution System (MGDS) and Bintulu Gas Distribution System (BGDS). Both facilities were previously owned and operated by PETRONAS Gas Berhad (PGB), a subsidiary of Petronas.

https://www.newsarawaktribune.com.my/petros-takes-over-gas-distribution-business/

How much is the segment worth yearly to Sarawak or how much did Sarawak compensated Petronas for it was never revealed. What we do know is PDA74 is still very much relevant in the oil & gas industry and will remain as a major damper on CM Abang Johari’s ambitions for Petros and for the ROE and ROI of Petros. 

And there is the matter of the SST payout of RM2.95  billion by Petronas. Sarawakians were told on the 17th Sept 2020 that Petronas has paid to the Sarawak government the sum of RM2.95 billion in court-awarded SST on O&G products. Nine days later, Sarawakians were told that the Sarawak government has agreed to buy all of Tabung Haji oil palm estates in Sarawak. The consideration price was not mentioned but a 2019 valuation of the estates placed the fair value at RM1.42 billion. 

In the final reckoning it was a case of the federal government, through Petronas, putting money through Sarawak’s left pocket and taking it back through the right pocket via the Tabung Haji’s rescue plans. Whether or not there was some arm twisting there is unknown but Sarawak certainly was short changed.

https://www.theedgemarkets.com/article/petronas-says-it-has-paid-sarawak-sst-2019

https://www.theborneopost.com/2020/09/26/swak-government-to-take-over-tabung-haji-oil-palm-plantations-in-the-state-says-cm/

And that, to my mind are unacceptable blunders in the managing of both the state’s financial and natural resources.