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    Malaysia’s Oil and Gas Sector: Constant Expectations despite Diminishing Returns

    Bhattacharya, Pritish; Hutchinson, Francis E. | March 2022
    Abstract
    Since the oil and gas (O&G) sector’s take-off in the 1970s, this natural bounty has yielded myriad benefits to Malaysia. While not falling into the ‘resource curse’ of an unquestioned reliance on natural resources, the O&G sector is nonetheless a key enabler for many aspects of the country’s economy and public finances. Malaysia’s current account shows the significance of the sector, which has long accounted for a sizable proportion of merchandise exports and foreign exchange earnings. In 1990, for instance, the country’s global exports of fuel and derived products totaled US$5.4 billion and made up 18.3 per cent of all merchandise exports. In 2019, just before the COVID crisis struck, the corresponding figures were US$34.5 billion and 14.5 per cent. Beyond those in the country’s ledgers, indications of the O&G sector’s skyrocketing success are everywhere – most visibly in the country’s much-vaunted infrastructure. Examples include but are not limited to: the Petronas Towers, the erstwhile tallest buildings in the world and centrepiece of Kuala Lumpur’s skyline; Putrajaya, the country’s administrative capital; and the Kuala Lumpur International Airport. The sector has also underpinned many of Malaysia’s economic nationalist aspirations. Today, the government-owned corporate giant, Petronas, is a source of pride and, in 2021, was the nation’s sole Fortune Global 500 company. The government has also sought to foster an eco-system of local firms in the O&G sector to diversify the economy and foster more technologically-intensive tasks. And, when demand calls, it has used the country’s national flagship firm to bail out capsizing corporate captains. However, there are growing signs that, going forward, the sector will no longer be able to play such an outsized role. One statistic suffices to illustrate this trend. In 2009, as much as 40 per cent of government revenue was derived from O&G-related sources; in 2021, however, the corresponding figure had plummeted to a mere 19.2 per cent. Despite the O&G segment’s prodigious potential, it faces a number of structural constraints and policy challenges. In order to analyse these, this paper will first set out the historical development of the sector and the Malaysian government’s long-term policy objectives. The subsequent sections will look at the key challenges facing the sector and then conclude.
    Citation
    Bhattacharya, Pritish; Hutchinson, Francis E.. 2022. Malaysia’s Oil and Gas Sector: Constant Expectations despite Diminishing Returns. © ISEAS Yusof Ishak Institute. http://hdl.handle.net/11540/14894.
    ISSN
    2335-6677
    Keywords
    Household Energy Consumption
    Industrial Energy Consumption
    Results-Based Monitoring And Evaluation
    Evaluation Techniques
    Evaluation Studies
    Evaluation Methods
    Commercial Energy
    Urban Development Finance
    Trade Finance
    Small Business Finance
    Rural Finance
    Roundtable on International Trade and Finance
    Regional Development Finance
    Public Service Finance
    Public Finance
    Project Finance
    Private Finance
    Nonbank Financing
    Non-Bank Financial Institutions
    Municipal Finance
    Local Government Finance
    Local Currency Financing
    Limited Resource Financing
    International Financial Institutions
    Infrastructure Financing
    Industrial Finance
    Government Financial Institutions
    Government Finance
    Financing of Infrastructure
    Financial Sector Development
    Financial Regulation
    Domestic Energy
    Energy Demand
    Energy Prices
    Energy Pricing Policy
    Energy Supply
    Primary Energy Supply
    Development Indicators
    Social Participation
    Low Income Groups
    Income Generation
    Newly Industrializing Countries
    Taxation
    Public Accounting
    National Budget
    Municipal Bonds
    Local Government
    Local Taxes
    International Monetary Relations
    International Financial Market
    International Banking
    Central Banks
    Business Financing
    Capital Resources
    Budgetary Policy
    Capital Needs
    Corporate Divestiture
    Capital Instruments
    Pension Funds
    Insurance Companies
    Banks
    Portfolio Management
    Fiscal Administration
    Economics of Education
    Development Banks
    Subsidy
    Default
    Default risk
    Solar battery
    Renewable energy resource
    Green Energy
    Power resource
    Electric power
    Energy development
    Renewable energy resource
    Energy assistance
    Energy tax credit
    Electric power consumption
    Cost effectiveness
    Supply and demand
    Prices
    Energy resource
    Energy consumption
    Price Indexes
    Infrastructure
    Use tax
    Taxing power
    State of taxation
    Tax-sales
    Tax revenue estimating
    Tax planning
    Spendings tax
    Special assessments
    Tax administration and procedure
    Sales tax
    Real property and taxation
    Progressive taxation
    Effect of taxation on land use
    Effect of taxation on labor supply
    Intergovernmental tax relations
    Inheritance and transfer tax
    Energy tax
    Tariff
    Show allCollapse
    Citable URI
    http://hdl.handle.net/11540/14894
    Metadata
    Show full item record
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    ISEAS_Perspective_2022_21.pdf (1.622Mb)
    Author
    Bhattacharya, Pritish
    Hutchinson, Francis E.
    Theme
    Energy
    Finance

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    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise