In Sarawak, it appears state patriotism trumps economics and common sense. Economists from across the government and private sector are saying the government should restore its fiscal health and weigh the implications on Petroliam Nasional Bhd’s (Petronas) balance sheet first before fulfilling the request of oil-producing states for an increase in royalty payments.
Petronas is already burdened with the RM30 billion extra dividend (which goes to all states) to worry about additional royalty payments. According to Sunway University Business School Professor of Economics Dr Yeah Kim Leng royalty payments can wait another two to three years. He highlighted that a higher royalty payment will jeopardise Petronas’ balance sheet and reduce its capacity to refund services tax and income tax refunds. This could have a knock on effect on companies which need cash flow to run their businesses.
All businesses get the refund even those from Sarawak and other oil producing states and unless the states have got a clear cut plan on what to do with the additional royalty payments, these can wait.Continue reading →