Saturday, February 27, 2010

Debunking The Wang Ehsan

Hantu Laut

'Royalty' or 'Goodwill'? The UMNO boys like to call it 'Wang Ehsan'.Tengku Razaleigh thinks otherwise even at the expense of being sacked from UMNO.One man who stood by his principle.

The BN government says Kelantan is not entitled to oil royalty payment.On the other hand, Tengku Razaleigh Hamzah, founding chairman of Petronas, whom I presumed knew better, insisted that Kelantan is entitled to such payment by virtue of the Petroleum Development Act.The relevant section which Razaleigh refering to is reproduced below.I presumed, the section become relevant in relation with the agreement signed by the state with Petronas.

4. Cash payment by the Corporation.

In return for the ownership and the rights, powers, liberties and privileges vested in it by virtue of this Act, the Corporation shall make to the Government of the Federation and the Government of any relevant State such cash payment as may be agreed between the parties concerned.

Full text of the Act here.

One of the reasons given by the Federal government that disqualify Kelantan from receiving the oil royalty was that the oil fields were beyond the state's three-mile territorial waters.The oilfields in Sabah, Sarawak and Terengganu are well beyond the three-mile limit.

Are there no more honest people in government that can stand up and show sense of probity. Be honourable enough to admit that what Razaleigh claimed is true.

I am very familiar with most of the oil fields in the west coast of Sabah.From Semarang off Labuan to the North Furious rig west of Kudat.Being a blue water angler my fishing trips take me close to some of the rigs.The whole stretch of the west coast are dotted with rigs at various distances from the mainland, ranging from 25 to 50 nautical miles from the mainland.None are inside the 3-mile limit.Yet, Sabah along with Sarawak and Trengganu get paid 5% oil royalty.

What example are our leaders setting by this blatant disregard of probity and disrespect for written agreement which Razaleigh claimed was signed between the Kelantan state government and Petronas and by virtue of Article 4 of the Petroleum Development Act entitled Kelantan to the 5% royalty payment.

If the Federal government, the legislative makers of this nation can dishonour an agreement with its own state and at its whim and fancy what chance has ordinary citizen like us against the might of government and big corporations.

I wonder what kind of advises Prime Minister Najib Tun Razak gets that every time he announces a policy he loses more credibility and rebuff him from the people.The many unpleasant things that happened recently have ridiculed his 1 Malaysia effort.His government has become a government of "contradiction in terms"

Instead of spinning the untruths, it would be better for him to own up and admit that his government refused to pay Kelantan the oil royalty because it is govern by the opposition and giving them lots of money is like putting a noose around his government's neck.Former Prime Minister Mahatir Mohammad did that to Terengganu. Holding back payment when PAS ruled Terengganu and channelling it directly through Federal agencies.

If Kelantan is entitled to the money than the Federal government, if fearful of putting the money in PAS's hands, should directly pump it into developments in Kelantan instead of giving all kind of lame excuses which only make the people angrier and more determine to kick them out of office.

If Kelantan did sign an agreement with Petronas and by virtue of the Petroleum Development Act than that money is due to Kelantan as of rights, not Wang Ehsan.


Kongsi said...

Please read the column by Shad Faruqi which was publishe in the star recently.

The constitutional rights of states in the peninsula are confined to fees for permits and licences for extraction of petroleum from their land and territorial waters. However, there are moral and political issues at play here.

DOES Kelantan have a constitutional right to the oil and gas being extracted off its shores? This question raises engaging issues of constitutional law, of federal-state relations, and of the interpretation of the Petro­leum Development Act 1974, the Petroleum Mi­ning Act 1966 and the “Assignment Deed” between Kelantan and Petronas dated May 9, 1975.

If one were to believe Tengku Razaleigh Hamzah, the highly respected Kelantan Prince and former Petronas chief and Finance Minister, the answer is clearly in the affirmative. If one were to read the 1975 “Assignment Deed” signed respectively by the then Kelantan Mentri Besar Datuk Haji Mohamad Nasir and Tengku Razaleigh, then Petronas chairman, the answer then is in favour of Kelantan.

The Assignment Deed states that Kelantan grants in perpetuity to Petronas exclusive rights to “petroleum whether lying onshore or offshore of Malaysia”. In return Petronas, in a separate agreement, promises a yearly sum amounting to “5% of the value of the petroleum won and saved in Kelantan and sold by Petronas”.

Unfortunately for Kelantan, the matter cannot end with these two agreements. There is a supreme Constitution in Malaysia with a federal-state division of legislative and financial powers. The constitutional allocation cannot be altered except by constitutionally permitted procedures and amendments. Even mutual agreements cannot override the constitutional scheme of things because jurisdiction is a matter of law and not of consent or acquiescence.

Pls read the balance of the article at

eddy said...

Interesting article of yours Bro so is Prof Shad Saleem Faruqi's enlightening analysis on the issue in the Star as pointed out by "kongsi".

Seems Sabah and Sarawak does have their own benefits Bro, lucky you:

The Prof said "In addition to the rights of other states, Sabah and Sarawak enjoy some special sources of revenue.

> Schedule 10, Part V, Para 1 assigns import duty and excise duty on petroleum products to Sabah and Sarawak.

> Schedule 10, Part V, Para 3 assigns royalty and export duty on “mineral oils” totalling 10% to Sabah and Sarawak. “Petroleum”, as defined in the Petroleum Development Act, falls within the meaning of “mineral oils” and, therefore, 10% combined royalty and export duty on it constitutes part of the guaranteed revenue for Sabah and Sarawak"

Due to historical reasons, the states in the peninsular are treated different under the relevant Constitutional and legal articles apparently. I support the suggestion to drop the word "wang ihsan" or even "bayaran royalti" for the Discretionary Payments made by the Federal Government. It is not just patronising but satu mainan orang politik sahja untuk meraih undi. The Federal Government should just pay the money and just make sure it falls to the rightful recipient i.e the rakyat and not fall not on to the hands of the corrupt few.

If the Kelantan state Government still insist and Tengku Razaleigh still holds his position maybe the question of Discretionary Payment be brought to the Courts for interpretation and final ruling, it is after all a matter of the Federal Constitution no matter who the Federal Government will be in the future.