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| Cover Story:Terengganu’s right royal achievement |
| Features | |||
| Written by R B Bhattacharjee | |||
| Monday, 25 May 2009 00:00 | |||
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In addition, TIA expects to receive another RM11 billion in matching investments from joint-venture partners like the Abu Dhabi-based Mubadala Development Co — the SWF on which the Terengganu entity is modelled. For comparison, the Kuala Lumpur International Airport, which was the largest infrastructure project undertaken by the Malaysian government when it was built in 1998, cost about RM10 billion. TIA officials who spoke to The Edge argue that the high-impact start is necessary to undertake the kind of strategic investments that will keep the state’s economy humming long after its oil reserves have dried up. Ironically, the oil-rich state has the second-highest level of poverty in the country. So, the authority’s plans to engage in tourism, energy and agriculture-related developments promise to give the somnolent state a long-overdue economic stimulus. “We’re starting from a rather low base,” says TIA’s executive director for business development Casey Tang. “So, we are optimistic about achieving a high rate of growth on our planned investments.” Significantly, TIA’s point of differentiation from the myriad development initiatives that have come off the economic planning assembly line is its attempt to measure up to private-sector investment criteria while striving to achieve deep socio-economic objectives. For instance, to keep the interest of investors, TIA’s projects are based on a hurdle rate of 8% return on investment and a 15% internal rate of return. “Otherwise, why should the investors stay with us?” asks Tang. Indeed, Tuanku Mizan Zainal Abidin, the Sultan of Terengganu and current King, who had mooted the idea of the SWF in March 2008, may have begun a new chapter in the nation’s economic management by being the first to establish such a fund. It is noteworthy that TIA secured the agreement of the state government in principle to share the 5% oil royalty with the authority. The exact apportionment is still being discussed, say senior TIA executives. Just as importantly, the federal government has agreed that the oil royalty be paid to the state directly by Petronas, the national oil company, on a half-yearly basis. This is a far cry from the situation in 2000, when the federal government decided to stop such payment after Terengganu fell under the control of PAS in the general election of the previous year. Instead, the royalty would be paid into a special fund and channelled to Terengganu through federal agencies in the form of “compassionate money” (wang ehsan). To this day, there is still confusion over the exact amount of oil royalty that is due to be paid to the state, with federal and state leaders citing differing figures. On May 13, 2008, Minister in the Prime Minister’s Department Tan Sri Amirsham Aziz told Parliament that RM7.4 billion had been paid to Terengganu from March 2004 to March 2007. No information was provided about the the amount of oil royalty due to Terengganu from 2000 to 2003, although a sum of about RM1 billion a year has been suggested, based on the average price of oil at the time. Indeed, the word in the grapevine was that the standoff between the Sultan and then prime minister Tun Abdullah Ahmad Badawi over the reappointment of Datuk Seri Idris Jusoh as menteri besar after the general election last year was partly due to the ruler’s unhappiness over the lack of visible benefits for Terengganu from its oil royalty. In December 2008, the present Menteri Besar Datuk Ahmad Said told the state assembly that the state government had received RM6.2 billion in oil royalty. “We are not sure of the actual sum in royalty owed to us between 2000 and 2008 as the Finance Ministry has not figured out how much of it, which was included in the special fund, is left,” said Ahmad. In a startling admission of the opacity of federal development spending, Ahmad told the House he was unsure how much of the RM6.2 billion was spent on projects by the federal government in Terengganu. On Jan 9, 2009, online newspaper The Nut Graph reported that the state government had asked the federal Treasury to list all the federal projects funded by Terengganu’s oil royalty in the past. “When we get the list, we’ll be able to check whether the money was spent on projects in Terengganu or elsewhere. Then, we’ll be able to know how much to claim back,” Ahmad said. In April, the menteri besar told the state assembly that Terengganu had claimed RM1.4 billion in oil royalty from the federal government which had been spent by Syarikat Perumahan Negara Bhd (SPNB) on projects around the country. Ahmad said SPNB had used RM873 million of Terengganu’s oil royalty on housing developments nationwide and only RM102 million of that was for projects in the state. The state was also in the process of claiming another RM2.6 billion that had been used by various ministries, which Terengganu wants to use for its own development. In addition to TIA’s ambitious economic development goals, there is a strong social development agenda in its blueprint. To address these social objectives, TIA Foundation (TIAF) has been mooted as an integral part of the fund’s vision. Using seed capital from TIA and subsequently enjoying 10% of TIA’s after-tax profits, the foundation will serve to provide educational opportunities, eradicate poverty and promote self-reliance among the people of Terengganu. Among the initiatives being planned is a micro-finance scheme to help the target groups break out of the poverty trap. What is most remarkable about the TIA paradigm is that the federal government has now accepted the principle that the oil royalty should be fully accounted for to the state instead of claiming the right to deploy it as the federal authorities see fit. Indeed, the principles of public accountability call for nothing less. Perhaps, the position of Sultan Mizan as the current King has lent him the additional weight to rewrite the rules of development allocations. Whatever the view, the new order of things augurs well for more balance in federal-state relations all around. This article appeared in the Cover story page of The Edge Malaysia, Issue 756, May 25-31, 2009.
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