11 Nov 2018

Press statement by MCA Central Committee Member Lau Chin Kok

Pakatan govt’s repeated request for higher dividend from Petronas is to kill the goose that laid the golden eggs

Since Pakatan formed the federal government, it has created many ‘‘historical records’’, whereby even Petronas which all of this while achieving outstanding performance, was downgraded by international rating agency Moody’s Investment to ‘‘negative’’ from ‘‘stable’’.

The rating downgrade was mainly due to the Petronas’ higher dividend payout to the Pakatan government, in an attempt to support future budgetary needs. Such practice is tantamount to killing the golden goose that laid the golden eggs, taking cash advance without considering the possibility of failing oil prices in the future.

In facing severe challenges of lower global oil prices and unfavourable business environment, the national oil and gas company Petronas was able to maintain good rating outlook all the while with multi-pronged business rationalisation and streamlined management policies. It was the only oil and gas company which has not been downgraded then!

However, this outstanding record was destroyed in less than a year after Pakatan Harapan came into power.

Last week, the Pakatan government announced that Petronas will be made to pay a dividend of RM54 billion, with increasing dividend payout to the government in the future. This move has indirectly reduced the value of financial capital of Petronas, and thus affected its financial flexibility. The worrisome future prospect has hampered Petronas’ capability to pay higher dividend in the future, while the government’s dependence on its dividend payout continues to rise.

The former Barisan government realised that it must reduce its over-reliance on dividend payout from Petronas. Therefore, it prioritised national economic sustainability while formulating economic transformation plan, reducing its dependence on oil-related revenue and diversifying income sources. Now that Pakatan government abolished the goods and services tax (GST), it was taking an old path to dig into Petronas’ reserves.

The Moody’s report also stated that if the government continues to request higher dividend payout from Petronas, its financial performance will dip, especially when global oil prices decline. Judging by a prolonged trade war between China and the United States, reduced government revenue, dipped national exports, depreciation of Malaysian ringgit, widening fiscal deficit, as well as the unsatisfactory country’s economic growth, it is bewildering that the Pakatan government still lives in a bubble, thinking that everything is good.

Lau Chin Kok
MCA Central Committee Member


-MCA Online-