Why Compare Brunei To Malaysia When It Comes To Retail Fuel Prices?

A comment by a Brunei citizen on Asia Times (http://www.atimes.com)

I received the following WhatsApp message from my father earlier today:

The government has to stop its lies and bullshit. Everybody in the oil industry globally confirms one thing. Malaysia has the “sweetest” crude oil in the world. What this means is this, we produce the highest quality oil in the world. The best of the best. But the rakyat don’t see this. This is exported for other people in the world to use. Then Malaysia reimports low grade and low quality oil at a very cheap price for the rakyat to use. Dirty oil.

The question is this. Isn’t the beautiful sweet high grade quality oil Malaysia produces belong to the rakyat of Malaysia? Why sell it of at a higher price to other countries? The oil belongs to the rakyat of Malaysia. It should be given to the people of Malaysia first. Why import dirty and filthy oil and give the rakyat of Malaysia? Why are Malaysians treated like dogs and be given the bones when other people are given the nice flesh to eat?

Another issue is subsidy. There is no such thing of subsidy. The Government of Malaysia has been lying to Malaysians the past 20 years about subsidy. You see, what you produce, you cannot subsidise. If the government does not sell our high grade oil overseas and give it to Malaysians to use, what is there to subsidise?

This story has been going around a long time to fool the people of Malaysia, especially, the kampung people that petrol need to be subsidised. We don’t need to subsidise any petrol or fuel because Malaysia produces ample oil not only for its rakyat but also for export. So, if you produce your own oil, what is there to subsidise?

If you grow vegetables in your garden to eat, you cannot go around telling people that your vegetables are subsidised. You are growing it. You are producing it. You don’t have to buy it at all from an external source. The same with oil. We produce it. We should be using it first. This is how the Sultan of Brunei thinks. That is why he gives his rakyat very cheap fuel. Then the balance, he exports it at global prices. For him, rakyat comes first. he gives the rakyat clean and cheap oil because he cares.

Our government, terbalik. Rakyat comes last. And our oil resources are far more than Brunei. Few years ago, in the global media, Petronas struck the largest oil reserve and land in the world. Global media confirmed it was the largest oil reserve in the entire world. Then the next day, our government covered it up as mere speculation. So, in actual fact, Malaysia’s petrol company Petronas has unlimited reserves of oil for the next 50 yrs. Can we Malaysians please have the priority to get this fuel first for the rakyat cheaply?

My reply is somewhat simple:

Brunei has a population of 434,000 and produces 110,000 barrels of oil per day. Malaysia has 32 million population and produces only 659,000 barrels of oil per day. Of course Brunei can afford to produce, refine and supply to her own citizens while Malaysia becomes a net importer of processed oil.

Furthermore, Malaysia produces the Tapis crude which is sweet and light with a API gravity of 45.5 degrees and sulphur content of only 0.1 percent, making it expensive on the market.

Petronas sells the Tapis crude to get more money and purchases cheaper crude oils for consumption in Malaysia.

Between 14 August 2017 and 20 November 2017 the average value of retail petrol per liter was RM2.20 with a minimum of RM2.12 and a maximum of RM2.38. For comparison, the average price of petrol in the world for the same period was RM5.80 per liter.

As at 20 November 2017, Malaysia’s retail petrol price is 20th cheapest at USD 0.58 per liter. Among the Asian countries only Myanmar is cheaper than ours – by one US cent. Indonesia is 4 spots higher at USD 0.65.

The Brunei government does not publicise its retail petrol price and is therefore not listed. It subsidises its fuel very heavily. However, in 2008 it increased prices for foreigners to B$1.18 per liter (RM2.832 in November 2008).

If Brunei is the model for Malaysians, let it be known that last year its fiscal deficit hit 16 percent of its GDP as a result of the decline in oil prices. Its 2017 budget was slashed by USD100 million to B$5.3 billion. In 2016 it was B$5.6 billion. It was B$7.3 billion in 2014 when the slump in oil prices began.

The government has frozen new staff hires for the bureaucracy. Certain civil servants benefits such as housing, electricity and petroleum subsidies have been cut.

The grass is always greener elsewhere, until you look hard.

The Government Should Offload Its Burdens

Will we see the re-introduction of fuel subsidies?

I find it puzzling that the government has shut its doors on Maju Holdings’s intention of buying the PLUS concessions (Govt Shuts Door On Maju’s Bid for PLUS – Malaysian Digest, 26 November 2017) when I don’t think they have actually met with Maju Holdings to discuss the proposed deal.

Although the Second Finance Minister said in September that the Finance Ministry would first and foremost get some clarification from Maju Holdings on how they plan to execute the no-toll-hike deal before deciding whether or not to allow the deal to happen, I can bet my bottom dollar that at the time of writing this post, they have not met.

The Second Finance Minister wants to obtain clarification from Maju Holdings before deciding

I have written on this matter before and I have laid down my reasons and Tan Sri Abu Sahid’s explanation that he made to the press during his interview sessions, but I am writing this again because I am alarmed at how the government has made a decision without even doing its due diligence on the matter.

The government’s decision to do away with four tolls beginning 1 January 2018 may be good news for those in the Klang Valley and those who go shopping at Bukit Kayu Hitam or drive into Thailand, but we also know that it costs 20 sen to 30 sen to use a public toilet.  So, nothing is for free.  While the people in the areas mentioned above enjoy their toll-free highway, the rest are made to pay in the form of an extension to the conclusion of the concession of other highways operated by PLUS beyond 2038.

That is not all.  The government would have to fork out RM110 million a year as compensation to PLUS, not inclusive of the compensation the government would have to pay every time they disallow a toll rate hike.  Multiply that figure alone by 20 years, it would come up to RM2.2 billion.  Now that is not a small sum of money.  RM2.2 billion could get you 22 80-bed hospitals that could benefit especially the rural areas of Sabah and Sarawak, or in a term that I am more familiar with, four squadrons of the KAI FA-50 supersonic advanced trainers and light combat aircraft. That is almost 50 badly-needed aircraft altogether.

Not only does the government have to think about finding money to compensate PLUS every year for the loss of income from the four tolls, the government also has to think about compensating PLUS and other concessionaires every time they are allowed to increase their rates.

With the global oil price rebounding, the government has also announced that it would think of a measure to not allow retail petrol (RON95). That sounds like more money flying away in the form of a subsidy – something the government has fought hard to do away with.

The proposed deal by Maju Holdings sounds sweet to me now.  Question is, what is the Finance Ministry and/or Khazanah afraid of?

Is it because Abu Sahid is perceived as Mahathir’s crony?  Then again, which owner of a Malaysian conglomerate isn’t a crony of Mahathir’s?  Out of the 10 richest persons in Malaysia in 2016 perhaps only a couple are not Mahathir’s cronies.

Is it because the Finance Ministry and/or Khazanah thinks that Abu Sahid does not know what he is talking about because he only operates a 26-kilometre highway therefore what does he know about a 800-kilometre one?  The question is what highway did UEM even operate before it was given PLUS? How different is Maju Holdings to MTD Prime and Anih Berhad that are now running the 358-kilometre East Coast Highway after running only the 60-kilometre KL-Karak highway?

Or are people on different levels making PLUS their cash cow? I’m just throwing my thoughts here because I cannot see what are they so afraid of if someone can help them lower their financial burdens.

The Finance Ministry keeps saying that it does not want to have to bail out Maju Holdings should the deal go wrong in the future, I ask myself, and perhaps the Finance Ministry and Khazanah too, should they not pray for the Maju Holdings to fail?  Abu Sahid wants to give the UEM and EPF RM4 billion in cash for free as a return on investments made in PLUS. That is a 20 percent Internal Rate of Return (IRR).

On top of that Abu Sahid through Maju Holdings, with the backing of his financiers, seeks to forfeit the government’s compensation of about RM900 million owed to the toll road operator, which arose as a result of toll hikes not being implemented.  Imagine what the government could do by chanelling this money to sectors that badly need such funds.

In other words, the government should pray for Abu Sahid to fail after giving him PLUS – the government takes back the highway which is already toll-free then as there would not be any concessionaire, while Maju Holdings would have to face its financiers.  The highway and all its infrastructures already belong to the government no matter what, and the government can still impose tolls albeit minimal to help maintain the PLUS highways.  So, what has the government got to lose?

Loss of income by EPF that affects its contributors?  I find that hard to swallow.  EPF has so much money that it would seek to re-invest in PLUS even after the deal takes place.  EPF needs to make money for its contributors. Or it could just seek to invest in another company.  EPF has so much money that it is investing in both money-making and money-losing companies as it is now.

Therefore, as a rakyat, I reiterate my concerns taking into account the amount of money needed to compensate PLUS for abolishing the four tolls, the amount of money needed to compensate PLUS and other concessionaires to not increase toll prices, and the imminent need to subsidise RON95 – has the government seen the assumptions made by Maju Holdings? Has the government called Maju Holdings or its financial adviser Evercore for a meeting like it said it would, before even deciding to shut the door on Maju Holdings? Has the government done a due diligence on the proposal by Maju Holdings?

The government should seriously rethink its stance in this issue.  There is just too much money that needs to be involved if the government continues to keep PLUS.  This is money that could be used to pay the other concessionaires to not hike up their rates as PLUS under Maju Holdings would not be increasing theirs until the concession agreement runs out.  Or the savings could go to building more schools, hospitals or buy more fighters for the Air Force.

The government has an opportunity to offload its financial burdens.  But why is it so afraid to take that step?