Oil corporation’s profits and crony capitalism provoke mass protest

People protested in Kuala Lumpur to voice their resentment over the big fuel price increases put through by the government of Abdullah Badawi. Petrol, diesel have all gone up by nearly 41%.

This recent development also shows how the attempted ‘humble and pious’ outlook of the Abdullah government, in comparison to the 22 years of Mahathir autocratic rule, could be tainted and dented by the greed for profit of the big corporations such as Petronas -Malaysia’s national petroleum corporation.

Although Petronas is a state-run corporation, since Mahathir’s era in the 1980s it has given immense authority and autonomy to its corporate managers and directors to exploit the market forces and government influences in order to develop its resources and profits. In addition to the growing pace of oil exploration activities at home, Petronas has its exploration and international business operations in oil resource-rich countries elsewhere such as Sudan, Myanmar, Turkmenistan, Nigeria, Chad, Egypt and the Malaysia-Thailand Joint Development Area. This means cooperating with a number of despotic regimes. It currently manages 59 energy ventures in 26 different countries around the world. Now Petronas, the only Malaysian company in the ‘Fortune 500’, like many other multinational energy companies, is riding the crest of the towering global fuel prices and raking in unprecedented revenues and profits.

The role of Malaysian state capitalism, especially in the case of Petronas, has clearly illustrated the function of the state in developing the national capitalist corporations in Malaysia and how its revenues and profits are being used to benefit the crony capitalists. Abdullah recently said, “Petronas has been very responsible. They have made a huge contribution towards the development of the country”. But during the Mahathir era, Petronas’ profits were repeatedly used to fund massive and extraordinary projects. These included the construction of the luxury, high-class administrative capital at Putrajaya, the sponsorship of a Formula One motor-racing team and the company’s spectacular twin-tower building in Kuala Lumpur, which is the tallest skyscraper in the world.

Double standards
Petronas’ profits have also been used to finance economically unsustainable ventures or to bail out politically connected firms in order to benefit certain cronies. For instance, in 1998 Petronas, through its shipping carrier Malaysian International Shipping Corporation Berhad (MISC Ltd.), without any explanation acquired a debt-laden shipping company, Konsortium Perkapalan Bhd (KPB Ltd.). Meanwhile, some government critics have speculated that the recent subsidy savings would be used to prop up Malaysia Airlines (MAS), the Malaysia's ailing national carrier.

The government justified the necessity to cut its fuel subsidy by about $1.18 billion to curb over-consumption, to discourage smuggling and to remove subsidy-generated market distortions. But the government never questioned Petronas’ generous billions in subsidies for Independent Power Producers (IPP) and Tenaga National Bhd (the national power corporation). These subsidies ensured that their ventures into the power industry have been largely profitable. Last year, the business magazine - ‘The Edge’ - identified the IPP beneficiaries as Genting Sanyen Power, YTL Power, Malakoff Bhd and Tanjong Plc/Powertek Bhd. It said, “These companies are controlled by the families of Lim Goh Tong, Yeoh Tiong Lay, Syed Mokhtar Al-Bukhary and Ananda Krishnan, four of the richest families and individuals in the country”.

Undoubtedly, the fuel hike - the biggest in Malaysian history - will further ratchet up inflation and especially burden working class families. The recent demonstrations established that public anger has focused on Petronas’ massive profits and its extravagance. More importantly, it has focused on how those massive profits are used and potentially abused by unscrupulous business-favouring politicians and the state. Meanwhile the essential needs of working people are being slaughtered such as a minimum or living wage, decent housing, accessible public facilities for all (transportation, recreation, education, health), a secure environment, basic public utilities (water, electricity, sewerage system). The fallacious rhetoric of the government is that, “They (Petronas) have made a huge contribution towards the development of the country”.

Ironically, Petronas, especially during every major festival celebration, has been highlighting in its TV commercials the essential need for harmony and tolerance in Malaysia’s multicultural society and the need for a friendly environment. In reality they are the most dangerous anti-social elements in society trampling on the fundamental rights and needs of the majority of the population in the interest of profits. This devious and deceitful character of Petronas is being enhanced by a few at the top of corporate management who are carrying through profit-orientated policies with the full approval of the government oligarchy. This is how the Malaysian capitalist economy works - for the profits of a few, rather than the benefits and needs of the majority.

In order for the billions in profits going to corporations like Petronas to benefit the majority - the working class and their dependents as well as other oppressed people - for their basic day-to-day routines and living, they must be taken into public ownership, under democratic working class control and management. The majority - the working class in Malaysia - has the leading progressive role to play together with all those exploited by capitalism, in order to end the rule of profit and establish a socialist plan of production for a socialist society to meet the needs of all.