According to Natural Resource Governance Institure (NRGI), Malaysias Performance on the Resource Governance Index received a weak score of 46, ranking 34th of 58 countries. A satisfactory Enabling Environment contrasted with poor scores on the Institutional & Legal Setting and Safeguards & Quality Controls components. Institutional & Legal Setting (Rank: 49th/58, Score: 39/100) Malaysias failing score of 39 reflects an inadequate legislative framework. The Petroleum Development Act of 1974 gives the national oil and gas company, Petronas, the exclusive right to manage the sector with only broad policy guidance. Petronas grants licenses to companies, which must meet certain non-technical requirements, such as ethnic Malay involvement. Companies sign production sharing or risk sharing contracts and Petronas collects all payments, including taxes. Some of these revenues cover Petronas expenses and are never deposited in the treasury. There is no independent regulator. Malaysia requires companies to produce environmental impact assessments, but it is possible for projects to begin before assessments are complete. There is no freedom of information law and the Official Secrets Act restricts disclosure of information deemed crucial to national security. Reporting Practices (Rank: 32nd/58, Score: 45/100) Malaysia received a weak score of 45, publishing little or no information on contracts or resource-funded subsidies. Some information on licensing procedures is published, but key aspects of the process, such as auction rules and bidder qualification requirements, are not included. Petronas announces the award of licenses through press releases with few details; contracts and licensing terms are not disclosed. The Finance Ministry publishes information on production volumes, prices, export values, royalties, petroleum-specific taxes, dividends, and license fees. The central bank publishes production volumes, prices and export values, but not disaggregated revenue figures. The prime ministers Economic Planning Unit publishes production volumes, export values, and information on investment in the petroleum sector. The National Audit Department reports dividend receipts. Safeguards & Quality Controls (Rank: 44th/58, Score: 39/100) learn more A lack of disclosure policies and checks on licensing authorities led to a failing score of 39. The legislature does not play a significant oversight role in the petroleum sector. Petronas is accountable only to the prime minister, and the licensing process is often used to advance national interests and favor Malaysian companies. There is no procedure to appeal licensing decisions. The Auditor Generals Office reviews the Finance Ministrys accounts, but there is no specific audit of oil revenues. Audit reports are presented to lawmakers and are reviewed annually by the Public Accounts Committee, but without special focus on the resource sector. Enabling Environment (Rank: 12th/58, Score: 60/100) Malaysias partial score of 60 reflects a satisfactory ranking for government effectiveness, but lower scores on budget openness and democratic accountability. State-Owned Companies (Rank: 20th/45, Score: 61/100) Petronas dominates Malaysias petroleum industry. The companys annual reports contain data on reserves, production volumes, prices, export values, investment in the sector, production costs, the names of subsidiaries, disaggregated revenue figures, and some information on quasi-fiscal activities. The company is audited quarterly; audits are published but do not include the accounts of subsidiary companies. Petronas publishes the composition of its board of directors, but does not disclose its decision-making policies. Natural Resource Funds (Rank: 12th/23, Score: 46/100) The National Trust Fund was established in 1988 to conserve resource wealth for future generations, and can only be used for development projects. While the fund is managed by the central bank, policy decisions are made by the Finance Ministry, which publishes the funds balance in annual reports. Its legal framework does not specify the percentage of revenues Petronas is required to contribute. Subnational Transfers (Rank: 26th/30, Score: 22/100) Malaysias four petroleum-producing states have signed agreements with Petronas entitling them to 5 percent of the profits from local oil and gas production, but the agreements are not published. The central government does not report the transfer amounts, and only two of the four states include them in their budget statements. Malaysias petroleum-producing states are also its poorest, and subnational governments have demanded a larger share of resource revenues.
Posted on: Tue, 25 Nov 2014 00:28:19 +0000
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