Tug of Wealth: Malaysian States Seek a Fairer Deal

In early September, Sarawak issued an ultimatum to Petronas, Malaysia’s national oil company, to surrender all rights over the distribution and sale of liquefied natural gas (LNG) to its state-owned oil and gas company, Petros, by 1 October. Following this, reports confirmed that Petronas was mulling legal action to defend its monopoly over the country’s natural resources.

Since then, the deadline has passed with no news of legal action. Sarawak Premier Abang Johari’s office issued a statement on 24 September confirming that negotiations were ongoing between the Sarawak state government, Petronas and Petros. This would be concluded soon. Most recently, reports quoted the Sarawak premier as saying that Petronas has unofficially agreed in principle for Petros to be the sole gas aggregator in the state. 

Source; https://ms.m.wikipedia.org

If true, this is a major development since ceding rights to Petros would impact Petronas’ access to LNG supply in the state. Sarawak contributes almost 90 per cent of Malaysia’s LNG exports. Moreover, Putrajaya is focused on fiscal consolidation, and petroleum-related revenue is declining. In 2009, petroleum-related revenue contributed as much as 41.3 per cent of the federal government’s total revenue. However, this has fallen to 19.6 per cent in 2024. This is projected to further decline to 18.3 per cent in 2025. Moreover, a federal concession to Sarawak may encourage other state governments to follow in Sarawak’s footsteps.

Both Peninsular Malaysia’s east coast states of Kelantan and Terengganu have a long history of this. Under the National Front (Barisan Nasional) administration in the 1990s, oil royalties contractually agreed upon as part of production-sharing contracts were denied to both state governments when they were under the rule of Parti Islam SeMalaysia (PAS). Under the Pact of Hope (Pakatan Harapan) administration in 2018, wang ehsan (goodwill grants in lieu of royalties) were transferred to both states but not in full.

The current administration has made similar transfers, but the Terengganu state chief minister has claimed that these amounts have only been partially received. Negotiations with the federal government are often required to obtain full transfers. This ought not to be the case since the producing states possess the right over oil royalties as enshrined in the original production-sharing contracts (PSCs).

While the Petroleum Development Act 1974 provides for Petronas’ monopoly on oil and gas exploration and extraction, it is the three-way PSCs signed by Petronas, oil companies and state governments that spell out the revenue-sharing formula. This is made up of oil royalties (5 per cent to the federal government and 5 per cent to the producing state government); cost of oil (between 50-70 per cent as cost recovery to oil companies); and profit of oil (the remaining 20-40 per cent is split among Petronas, oil companies and PITA, or profit-income tax allowance paid to the federal government). It is unclear how the revenue-sharing formula would change if Petronas cedes its LNG monopoly to Petros, but this would be one key element of negotiation among all parties involved.

The demands over state natural resource autonomy come most aggressively from East Malaysia. In 2020, Sabah and Sarawak won a court case resulting in their ability to impose a 5 per cent sales tax on petroleum-related products, paid by Petronas. In 2021, regulatory power for gas supply was transferred to Sarawak and, in 2023, to Sabah. While Sarawak had the pre-existing Oil Mining Ordinance 1958, Sabah enacted the Sabah Oil and Gas Ordinance 2020 to assert its rights over oil and gas.

Both states have rejected the Territorial Sea Act 2012, which limits their territorial waters to three nautical miles from the coast. Sabah and Sarawak dispute the 2012 Act and argue that their maritime boundary — and hence their claims to their respective resources as part of the continental shelf, vis-à-vis the Malaysian federal government — should be 200 nautical miles.

Where will this end? In the courts? In political drama? Or, in some other mechanism? It is critical for the Federation and states to have an independent arbiter to determine a fair settlement for all parties. Will the states and Federal Government submit to that?

On 12 December, Bernama reported that The Federal Government and the Sarawak administration have decided on the gas distribution in the state between Petronas and Petros. Details are being fine-tuned. If that is the case, it is good that this issue is put to bed!

Reference:

Tug of Wealth: Malaysian States Seek a Fairer Deal in Oil and Gas, Tricia Yeoh, Fulcrum, 18 November 2024

PM announces gas distribution issue between Petronas, Petros settled, Bernama, 12 December 2024

Is This the Golden Age of Crypto?

The cryptocurrency world is buzzing with speculation that bitcoin could reach an unprecedented US$200,000 by 2025. While bitcoin has yet to stabilise around the US$100,000 mark, its meteoric rise in 2024 has emboldened investors and analysts to project a bullish future for the world’s leading digital asset.

The regulatory landscape in the United States has significantly improved following the 2024 US elections. President-elect Donald Trump’s embrace of cryptocurrencies marks a pivotal moment. 

Source: https://en.m.wikipedia.org

Crypto’s magnificent three – Bitcoin, Ethereum and Solanato – are to hit new all-time highs in 2025, with bitcoin leading the rise to trade above US$200,000. That’s a prediction by some analysts at Bitwise Asset Management (“Bitwise”).

In addition to Bitwise, other analysts projecting bitcoin to reach US$200,000 include Geoff Kendrick, head of crypto research at Standard Chartered, and analysts at Bernstein, led by Gautam Chhugani.

Essentially, crypto has emerged as a clear winner in the 2024 US elections, giving it a brighter regulatory outlook in the United States, Bitwise Asset Management notes.

Trump has announced plans to create a strategic bitcoin reserve and nominated Scott Bessent as Treasury Secretary. Bessent’s earlier comment that “crypto is about freedom and the crypto economy is here to stay” reflects the administration’s pro-crypto stance. The reshuffling of the Securities and Exchange Commission (SEC), which has historically taken a sceptical view of digital assets, adds another layer of optimism.

Crypto equities mirrored this bullish trend. Companies like MicroStrategy and Coinbase saw their shares skyrocket by 525.39% and 97.57%, respectively. In comparison, traditional assets such as the S&P 500 and gold returned 28.07% and 27.65% over the same period, highlighting crypto’s dominance.

The factors driving bitcoin’s trajectory towards US$200,000 are multifaceted, Bitwise highlights. The launch of bitcoin ETFs in 2024 shattered expectations, and Bitwise believes 2025 will see even greater inflows.

At present, major financial institutions such as Morgan Stanley, Merrill Lynch, and Bank of America have yet to fully embrace bitcoin ETFs. Bitwise anticipates this to change in 2025, unlocking a wave of institutional investments. “The trillions of dollars these firms manage will start flowing into bitcoin ETFs,” Bitwise predicts.

While bitcoin remains the focal point, other cryptocurrencies like Ethereum and Solana are also poised for substantial gains in 2025. Bitwise’s price targets for Ethereum and Solana are US$7,000 and US$750, respectively. Ethereum, despite its impressive 2024 performance, has faced competition from faster- growing programmable blockchains. Solana’s resurgence, driven by memecoin mania in 2024, is also expected to continue as serious projects migrate to its network, it says.

Meanwhile, JP Morgan points out that the role of crypto in portfolio construction is mostly a function of risk tolerance.

While the outlook for bitcoin and the broader crypto market is overwhelmingly positive, risks remain. Regulatory clarity, though improving, is still a work in progress. The global economic environment, including interest-rate policies and geopolitical tensions, could also impact investor sentiment.

However, the convergence of favourable regulatory developments, institutional adoption and technological advancements positions bitcoin as a strong contender to achieve new heights, potentially reshaping the global financial landscape. 

Reference:

Heralding the Golden Age of Crypto, Cecelia Kok, Star Biz7 , The Star, 14 Dec 2024

Drop in School-Based Exam Passing Grade?

The Education Ministry has been urged to respond to parents’ complaints on social media that the passing grade for the academic session’s final examinations (UASA) has been lowered to 20%. National Union of the Teaching Profession secretary-general said the union will raise the matter with the ministry. The final school-based examinations replaced national centralised exams such as the UPSR for Year 6, and PT3 for Form 3 students, which were abolished in 2021 and 2022, respectively.

UASA was introduced during the 2022/2023 academic session. The exams are held at the end of the school year for students in Years 4 to 6 and Forms 1 to 3. UASA passing grade had recently been reduced from 40% to 20%. 

Source:https://www.wikiimpact.com

Previously, ‘D’ was considered a failing grade, with the minimum passing grade set at 40%. Now it’s been lowered further. (Currently) 20% to 34% is considered a passing grade (and) 35% is regarded as satisfactory.

A poster outlined the examinations’ grading scale:

Excellent (A) 82% to 100%;

Credit (B) 66% to 81%;

Good (C) 50% to 65%;

Satisfactory (D) 35% to 49%;

Meets minimum standard (E) 20% to 34%;

Does not meet minimum standard (F) 0% to 19%.

In November 2024, Education Minister told the Dewan Rakyat the government will not reverse its decision to abolish the UPSR and PT3 examinations. The school-based examinations are designed to reduce stress for students compared to national exams and are on par with international best practices. They focus on improving education by using continuous classroom-based assessments that encompass not just academic skills, but also personal growth and social development, according to the Education Minister.

Meanwhile, Sarawak is returning to standardised tests as students still need to be gauged against one another. Already, it was reported that 122,062 Year 1 pupils were identified as not having mastered basic reading, writing and arithmetic skills (3M).

Children must understand the basics before enrolling in Year 1, yet such a large percentage have not mastered them. To make matters worse, it was reported that 10,177 SPM candidates did not sit for the exams in 2023. Problems with 3M were among the reasons for the dropout number. Such students would not have not fallen through the cracks had there been periodic standardised testing and having them move onto Form Five unimpeded. The tests can assess just how capable students are before they enter institutions of higher learning.

As Sarawak returns to standardised assessments, the Education Ministry, however, is sticking with the Federal Minister’s stand that the School-Based Assessment (SBA) system provides a more holistic and integrated approach to evaluate students’ development compared to traditional examination-based methods.

When will we ever learn? There are four ingredients for a top-rate education system: the headmaster; the teachers; the parents; and of course, the students. Curriculum is not the issue; it is the people! When things don’t work, the Government blames it on the system, curriculum or some other silly reason---like facility or building. That is not the case! And if there is no meritocracy; no urgency; no ambition to be the best; no hard work then, you most certainly know the outcome – disaster!

References:

Explain drop in school-based exam passing grade, ministry urged, Anne Muhammad, FMT, 10 Dec 2024

Testing times for education, Jagdev Singh Sidhu, Insight, The Star, 14 December 2024