This was written just as PKR announced its plans to abolish the PTPTN fund. It got me thinking about our national funds. This was published in theSun on 20th April 2012.
PTPTN and the lack of Petronas specifics
Parti Keadilan Rakyat (PKR) raised brows last week when it announced that if Pakatan Rakyat (Pakatan) were to form government, it would abolish the national higher education fund (PTPTN). The PTPTN was formed in 1997 with the objective of providing education loans to students unable to afford fees in local higher education institutions. The larger argument of this proposal is to channel PTPTN funds more effectively to ensure more Malaysians can access education, itself a policy debate that surely must be taking place today.
Public focus, unfortunately, has somewhat shifted away from the issue of higher education itself, following Pakatan leader Anwar Ibrahim’s suggestion that outstanding PTPTN loans of an estimated RM43 billion could be written off with Petronas funds. Deputy Prime Minister and Education Minister Muhyiddin Yasin stated in response that by doing so, this would mean “squeezing Petronas dry” and killing the goose that lays the golden eggs.
This is certainly an interesting development, since it brings the discussion to a different level. Have Petronas funds been effectively used anyway, for all these years? How, indeed, is our government making use of the country’s oil and gas revenues? Are they being responsibly managed? What kind of governance and accountability is assured to us in the process of managing such a tremendous amount of wealth, contributed by our natural resources?
Overseeing our oil funds
Malaysia is classified as a resource-dependent nation, since about 40 percent of our national revenues comes from oil and gas. I have written previously about the dangers of oil dependency and the need for better resource management (column published on 25th November 2011). In this piece the focus will be upon oversight of the oil and gas sector in Malaysia, and whether there is a sufficient institutional framework to support transparency and accountability of the funds involved.
The oil and gas sector is governed by the Petroleum Development Act 1974, which concedes full rights and responsibility over oil and gas to Petronas, which is a fully government-owned corporation. According to the Act, Petronas only has to report directly to the Prime Minister, who assumes full control and direction of the corporation. There is therefore no other party legally responsible over the country’s oil and gas resources apart from Petronas’ Board of Directors and the Prime Minister of Malaysia.
However, for a body that deals with a great amount of public funds, it would make sense for Petronas’ detailed financial accounts and operational reports to be submitted and tabled to Parliament. This would allow for some legislative oversight. At present, funds from Petronas are channelled directly to the Treasury, under the Ministry of Finance, with no external or independent body that monitors such transfers.
Using funds responsibly
The National Trust Fund was formed in 1988 to ensure “optimum use of our depleting natural resource revenues, in order to provide a stable stream of income for future generations”. These reports at least are tabled to Parliament annually (although the latest report that can be obtained is from 2008). However, the same problem of oversight and management applies, where the Act that governs this fund gives almost unchallenged authority to the Minister of Finance over any decision related to its collection and usage of funds.
Ultimately, the question for us as Malaysians is this. If the government can argue that Petronas funds should not be squandered away to write off student loans, then it is implying that these funds are currently being used wisely and responsibly.
But because oil and gas funds are put into a consolidated federal government fund, it is actually impossible to earmark how petrol funds are specifically being used in our country. It is therefore difficult to determine just how responsibly we are handling profits coming from our oil and gas industry. Of course, one could evaluate more generally how government expenditure is being managed.
When it comes to the specifics of Petronas expenditure, at least one historical case reminds us of the potential damage such discretionary powers over large funds can have. Petronas bailed out Bank Bumiputera by paying Permodalan Nasional Berhad (BMF’s major shareholder) RM1 billion and took over BMF-related loans at a write-down value of RM1.25 billion (Gomez & Jomo, 1999). Today, Petronas holds 84 percent of Putrajaya Holdings, and also owns Prince Court Medical Centre, the latter of which suffered a net loss of RM451 million in its 2010 fiscal year (The Star, August 24 2011).
This is not to say that the same carelessness will repeat itself, nor that this government will not under such circumstances act with wisdom. But what is clear is that the institutional framework that currently governs our oil and gas sector is nowhere near robust enough, should Malaysians truly want to monitor whether these funds are truly being used effectively or not. Stronger parliamentary oversight, and transparent publishing of detailed operations and accounts are some examples of what we should hope to expect in a more accountable environment.
