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Thursday, November 21, 2013

Petronas' contribution ratio to fall after GST: Wahid

Posted on 20 November 2013 - 05:39am
Liew Jia Teng

KUALA LUMPUR (Nov 20, 2013): Petroliam Nasional Bhd (Petronas), which gives up to half of its net profit as dividends to the federal government, will see its contribution ratio go down once the goods and sevices tax (GST) is implemented in 2015, said Minister in Prime Minister's Department Datuk Seri Abdul Wahid Omar (pix).

While actual revenue from petroleum has been increasing from RM65 billion to RM70 billion, but due to the larger revenue base going forward, Wahid said the proportion of Petronas' oil revenue to the government's total revenue will decline.

Petronas, which posted a net profit of RM17.6 billion for the three months ended March 31, 2013, will pay RM27 billion in annual dividends to the government this year, 10% lower than last year's payout of RM30 billion.

"The government gets petroleum revenue in the form of dividends and tax. We have been bringing it (the ratio of petroleum revenue to government total revenue) down from 35% in 2011 to 33% in 2012, and that should continue to go down as we increase other income sources," he told reporters on the sidelines of 18th Malaysian Capital Market Summit here yesterday.

"Moving forward, especially from 2015, with revenue from GST, the proportion of Petronas's revenue will come down as a percentage of total revenue. That is our long-term objective," Wahid added.

The GST is expected to provide a net increase of RM4 billion to the government's revenue in 2015, rising to RM9 billion in 2016.

Wahid said the government's total revenue in 2013 is about RM220 billion, and is forecast to reach some RM224 billion in 2014.

Earlier, in the question and answer session, Wahid deemed the dividend amount paid by Petronas to the government as "fair" and "balance".

Petronas has a dividend policy to distribute 30-50% of its net profit as dividend, compared with Malayan Banking Bhd's (Maybank) 40-60% dividend policy, said Wahid, the former president and CEO of Maybank.

"Even at 50% (payout ratio), Petronas can strike a balance between investing into the new growth area, as well as providing substantial return to the government," he said.

"In general, the (dividend) amount paid by Petronas is not more than half of what they need to re-invest. So, I don't think the rate of dividend is that high and unsustainable," he added.

Wahid added that the large oil and gas reserve in Malaysia is a result of the government policy to ensure the rate of extraction and production is less than the rate of new discovery.

"We must recognise Petronas is an investment by the government, and the way they manage (the resources) is in a sustainable manner."

Wahid also warned that the future macroeconomic risks may surface in the global economy and Malaysia should prepare itself to overcome the risks.

"We can't control the global environment, be it what happen in Europe, the US, China and our other trading partners. That's why we want to make sure there are enough investment in the local infrastructure and domestic activities so that a lot of growth will be driven by domestic forces, which is within our control," he added.

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