Oil Royalty Warrants
Kota Kinabalu (20 November 2008): State
Government has been urged to initiate a review of the 1976 Petroleum
Agreement between the State and Federal Government with the view to
revise the oil royalty from five percent to no less than 20 per
Luyang Assemblywoman Melanie Chia, who relinguished her post as
Assistant Finance Minister in September, said under normal
circumstances of contract, 32 years is a long time.
“If we take the five year review period allowed under the Article
1120 of the Federal Constitution for the Special Grant, we could
already have had six reviews,” she said.
“In the interest of Malaysians in Sabah, I urge the State
Government to review and revise Sabah petroleum royalty to not less
than 20 per cent.
“I seek the support from members of the House for the interest of
the people in Sabah,” she said to thumping of tables by her two
opposition colleagues, Datuk Liew Teck Chan (likas) and Jimmy Wong
At the same time, Chia asked who is representing Sabah in the
National Petroleum Advisory Council as allowed under Section5 of the
1976 Petroleum Development Act.
She said in the 2009 Budget, revenue from the sales tax of crude
palm oil and oil royalty totaling about RM1.5 billion represented 58
per cent of the State’s total revenue.
Any changes to the prices of these commodities would affect the
revenue estimates for next year, she said, adding she wanted to know
what is the revenue forecast formula and if there is any contingency
plan to cushion any changes in the forecast.
Perhaps, she said, it would be an opportune time for the State
government to review its sources of revenue, especially through the
direct revenue and grants from the Federal Government.
She said the Special Grant given under Schedule 10 Part IV
Section 2 (I) was reviewed by the Sabah Special Grant (first review)
Order, 1970 and had since remained at RM26.7 million per year in
1973 until today.
“Although the Constitution allows a review every five years, it
has not been done since 1973. It seems the formula for deriving the
amount has also never been clearly spelt out”, she said.
Chia said since the formation of Malaysia, the Federal Government
in exchange for development funds, had assumed the collection of
income tax, customs duties, sales and services tax, stamp duty, road
tax and others such as petroleum revenues, premium/bonuses in
addition to royalties and licence fees.
She said the Special Grant stipulated under Schedule 10 Part IV
Section (I) states that “in the case of Sabah, a grant of an amount
equal in each year to two-fifths of the amount by which the net
revenue by the Federation from the Sabah exceeds the net revenue
which would have been derived in the year 1963…”.
“It seems there are many parameters here. Perhaps, the Government
can enlighten us and hope the State Government will be able to get a
very good revision to the RM26.7 million fixed since 1973,” she
Also, the revision should take into account the discrepancies in
the State’s socio-economic status and higher cost of living, she
Chia said Malaysians in Sabah do not take note that Federal
spending in Sabah had been increasing over the Malaysian Plans but
it is also noted that the major portion of these allocations went to
the operating costs of the Federal Departments and agencies in Sabah
to the extent of more than 60 per cent.
She called on the State Government to inform the House on the
total number of Federal departments and agencies in Sabah at this
moment and their personnel as well as their annual operating costs.
Chia also raised the Kimanis-Bintulu gas pipeline project issue,
saying she disagreed with the statement that sending the gas to
Bintulu and using the rest of the supply to support the downstream
industry at the petrochemical plant in Kimanis was the only
Instead, she said the first thing that needed to be considered
was the setting up of the petrochemical plant.
Meanwhile, Chia said the commotion involving the Queen Elizabeth
Hospital (QEH), which is located within her constituency was
saddening because the Government should have prioritized the
interest and be sensitive to the needs of the people.
Based on the QEH Master Plan that began in 1995 and implemented
in stages that was to be done in two phases up to 2010, it was
planned in a way to give the hospital a prominent role in the 21st
“But the fact is the plan was implemented properly causing the
healthcare service sector to be upside down,” she said, adding that
the present scenario gave a negative impression on the quality of
life in Sabah due to the failure of the Federal Government in
fulfilling its responsibility.