How did you get to work today? Unless work is conveniently walkable from home, it would've used X. What's for lunch? It would've also used X. Our daily activities guzzle X. Our country sources a significant amount of revenue from the X industry.
Yes, X = oil & gas.
Malaysian oil & gas reserves are bound to run out, so what should be done to prepare for this inevitable future?
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(Tania Loke here, as Research Officer to Wong Chen.)
The oil and gas (O&G) sector contributes to the Malaysian government’s revenue in three main streams: Petroleum Income Tax, PETRONAS dividend, and petroleum and gas royalty.
O&G contributions amounted to, on average, RM53.7bil or 31.6% of federal government revenue between 2005 and 2015.
We estimate that Malaysian oil and gas reserves will run out in 2050 and 2060 respectively. To prepare for the end of oil, the critical stage will be around 2028, which is halfway between peak production and eventual depletion.
As Malaysia approaches this critical stage, the government’s revenue base must be restructured immediately to reduce its dependence on oil money. We propose five ways to take action: 4.1 Save 50% of the O&G revenue into a heritage investment fund; 4.2 Pursue policies for wage increases, such that at least 50% of the working population earn enough to qualify to contribute personal income tax; 4.3 Widen the tax base by introducing inheritance and capital gains taxes; 4.4 Eliminate corruption wastages and leakages in government expenditure; and 4.5 Improve PETRONAS’s position by making it answerable to Parliament, rather than to the Prime Minister; and by using its profit as a baseline for its dividend payouts to the government.