Wednesday, 23 October 2013
PETRONAS scored 6.3 out of 10.0 in terms of transparency in corporate reporting (TRAC) by Berlin-based anti-corruption watchdog, Transparency International (TI) on a scale where 0 is least transparent and 10 is most transparent. This index is based on the unweighted average of results in three categories namely, (a) reporting on anti-corruption programme; (b) organizational transparency; and (c) country reporting covering revenues, capital expenditure and tax payments. PETRONAS came out in the fifth place of 100 emerging markets companies from the Boston Consulting Group’s list of Global Challengers 2011.
PETRONAS scored 88 percent for reporting on anti-corruption programme and among the initiatives is its No Gift Policy. Transparency International Malaysia (TI-M) lauds this initiative as a positive step in building and reinforcing a culture of business integrity within its corporate structure. Full marks (100 percent) were given to PETRONAS along with other corporations such as the Emirates Airlines (UAE), Johnson Electric (China), Shanghai Electric (China) and United Company Rusal (Russia) for organisational transparency.
By organisational transparency, it means that information about ownership structure of PETRONAS is easily available in public domain where citizens, civil society, regulators, lawmakers and investors know where PETRONAS is operating, and making it more accountable.
However, TI-M is of the view that this can be improved, especially since PETRONAS is tasked with the management of the country’s revenue from oil and gas where it contributes approximately 40% of the Malaysian Government’s revenue. Last year saw PETRONAS contributing RM28 billion as dividend to the Government, compared to RM27 billion in 2011.
It was echoed in this TRAC survey that PETRONAS could only manage a one percent mark for the country’s reporting covering revenues, capital expenditure and tax payments. PETRONAS could have won the first place for Transparency in Corporate Reporting (TRAC) this year if it had been more open and exercise greater financial performance transparency.
Since its inception in 1974, PETRONAS reports only to the Prime Minister of its annual financial position. TI-M opines that PETRONAS should be answerable to parliament instead of the Prime Minister alone, in the interest of greater transparency and good governance, given the fact that PETRONAS is state-owned. Malaysia is a government of the people and therefore, the people would want to know how the money is being spent or where the money is being channelled.
There is still room for improved transparency in the way PETRONAS is being run. For example, according to Reuters , after PETRONAS sold a 10-percent stake in the integrated shale gas development and liquefied natural gas to Japan Petroleum Exploration (JAPEX), financial details have not yet been made public. TI-M is also interested to know more about the purchase of Canada’s Progress Energy Resources Corp at C$5.2 billion and the status of PETRONAS’ investment in a number of other joint-ventures such as in Uzbekistan and Mozambique.
The Wall Street Journal  also revealed that French petroleum company, Total SA had bought a 40% stake in a production sharing contract in a field offshore Mozambique, Petronas Gas Bhd, also for an undisclosed sum. This again reflects a lack of transparency which the Malaysian parliament should look into.
It should be of concern after the 2013 Revenue Watch Institute and Transparency International Report which covers 58 resource-rich countries, revealed that Malaysia had scored three percent lower than 2010, because it performs poorly in the area of accountability (such as reporting practices), safeguards and quality control. The country’s ranking also dropped to 34th spot this year from 22nd in 2010, which is largely attributed to PETRONAS’ overseas agreements disclosures.
Just as much as TI’s TRAC survey have given good marks to PETRONAS, we, at TI-M would like to urge PETRONAS to be more transparent in the interest of good governance. It is about time PETRONAS is answerable to parliament and NOT only to the Prime Minister.