PETRONAS: THE BEST CORPORATE REPORTING STATE-OWNED ENTERPRISE IN EMERGING MARKET
Petaling Jaya, 11 July 2016 - Transparency International Malaysia (TI-M) is pleased to announce the performance of PETRONAS, the only company in Malaysia featured in the latest transparency in corporate reporting (TRAC) study by Transparency International (TI) today. PETRONAS maintained its index score at 6.3 out of 10.0 in this reassessment study since 2013 and ranked No. 9 among 100 large emerging market companies, paralleled the regulated reporting practices of Indian public listed companies. TI-M lauds the outstanding voluntary disclosure of PETRONAS in both organizational transparency and reporting on anti-corruption programme, awarded 100% and 88% respectively. PETRONAS also showed a small improvement in country-by-country reporting by 0.8% as compared to previous study in 2013.
Comprehensive public reporting has been constantly highlighted by TI as a key component to address corruption and to maintain the level of business integrity and good governance regardless of the ownership structure of the company. State-owned enterprises like PETRONAS are often confronted with specific governance challenges grounded in the intrinsic closeness between government and the company, including political interference. Corruption risks arise from the complexity of accountability chain, favoritism and unfair procurement practices[i]. We have seen how Petrobras’s massive corruption scandal had brought disastrous political, economic and social instability to Brazil. Thus, adequate and robust governance framework is crucial to safeguard the national interest at all time.
For PETRONAS, TI-M calls for immediate action to prohibit political contributions without any exception. PETRONAS policy allows political contributions with certain disclosure, yet it remains ambiguity and opaque without specifically naming the politicians or parties and the amount involved. TI-M opines that PETRONAS, as the caretaker of national resources should be neutral and non-partisan in managing the assets and revenues. It is unjustifiable to provide contributions without any favor in return.
TI-M strongly urge PETRONAS to disclose financial data in terms of revenues and taxes for key subsidiaries, joint ventures and key associates that operate in foreign countries. Country basis financial disclosure is useful to detect fraudulent activities, minimize the corruption risk and provide greater public scrutiny. We believe this reporting regime can contribute significantly for PETRONAS to penetrate markets like America and EU where stringent legislation are imposed to extractive companies.
The report further revealed that 31 out of 100 large emerging market companies are doing business in Malaysia, among which 26 companies do not publish a policy prohibiting facilitation payments and 22 companies do not disclose tax payments. However only Indian companies have such disclosures as required under their Country’s Companies Act and they have performed fairly well. On the other hand Chinese companies operating in Malaysia have shown weak disclosures in all three dimensions measured in this survey. From the observed trend, governments and regulatory bodies play crucial roles to adopt and enforce the highest possible reporting standard to all companies that operate in Malaysia. TI-M welcomes the introduction of 2016 Malaysian Code of Corporate Governance by Securities Commission that mandates non-financial disclosure for operation, sustainability and promotion of business integrity as a whole.
Dato’ Akhbar Satar
Transparency International-Malaysia is an independent, non-governmental and non-partisan organisation committed to the fight against corruption.
 Transparency of State-owned Enterprises http://www.transparency.org/files/content/corruptionqas/Transparency_of_state_owned_enterprises.pdf