Sabah still the poorest despite being oil-rich

Comment by Awang Abdillah

Sarawak and Sabah have been giving away oil for decades yet both share the 'honour' of being poor states.

The oil royalty re-negotiations which both Sabah and Sarawak chief ministers have suddenly agreed to would have to take into account history and the actual numbers earned by Petronas and the federal government.

It is vital that the leaders go into these discussions with Putrajaya knowing the true facts of the agreement and the events leading up to how both states were “coerced” into signing the agreements.

If I recall correctly, Sarawak commenced its oil production in the early 1900s. Sabah has been producing oil for 30 years now.

Petronas, a petroleum company wholly owned by the federal government, was established in 1974 to explore and exploit the oil and gas resources in the country, on land and offshore.

Sarawak signed the oil-sharing agreement with Petronas in 1975. Many believe that the state leaders signed the agreement under duress.

The oil royalty for the state was fixed by the federal government at 5% of the value of the gross production.

Sabah, too, agreed to the same percentage share but only after the fatal June 6,1976 air crash which wiped out almost the entire Sabah state cabinet including chief minister Donald Fuad Stephens.

The accident was believed – but not proven – to have been an act of sabotage to foil the original agreement that gave Sabah the agreed rate of 20% oil royalty.

The saboteurs’ original plan was allegedly to wipe out not only most of the Sabah state cabinet members but also Sarawak’s then chief minister Abdul Rahman Yaakub and the federal finance minister Tengku Razaleigh Hamzah, who is also Gua Musang MP.

Abdul Rahman is the uncle to current Chief Minister Taib Mahmud.

Federal budget depended on oil

However, at the last minute, the top-level conspirator had a change of heart upon realising that the death of the former chief minister of Sarawak and a federal minister could have far-reaching repercussions.

Hence the plan was allegedly aborted at the last moment.

The intention to include the former chief minister of Sarawak in the death list would act as a veiled threat to scare the Sarawak government from demanding the same royalty amount as Sabah.
(Details of the critical moments leading to the fatal crash on June 6 were revealed by Razaleigh during a speech in Sabah last April. Razaleigh, a former Petronas chairman, had said that he had already buckled up on the ill-fated plane when Harris Salleh, then Sabah deputy chief minister, had asked him to disembark and join him on another Nomad flight to Banggi Island to inspect a cattle farm.

(But Harris later countered this with a statement saying that [the [plane] was never scheduled to fly to Kota Kinabalu with Stephens but was intended to fly with then Sarawak chief minister Rahman Yaakub to Kudat on the second Nomad plane and then by helicopter to Banggi Island.)

This piece of history aside, let us illustrate how the meagre 5% royalties received by Sarawak and Sabah contribute to the main cause of poverty in the two states.

Going through the charts (below), we can deduce that the oil revenues allocated to Sarawak and Sabah are meagre sums.

However, the actual development funds returned and allocated to the two states from the petroleum revenue earned by the federal government fall far below the requirements of the two states.

This can be judged by the slow development of the state transport and infrastructure projects such as highways and bridges ,and the state of poverty prevalent in the rural areas.

Even if there are substantial allocations of funds for development projects, most of them would go to the BN crony companies with very much inflated, unreasonable contract prices.

The federal government budget then would very much depend on the two states’ petroleum revenue in the years to come to finance development in Peninsular Malaysia and to feed the greedy Umno political masters.

Awang Abdillah is a political analyst, writer and FMT columnist.