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5 May 2008: Cover Story: The wang ehsan money trail
The statistics speak volumes of the discord between Terengganu's government expenditure and the socio-economic status of the people in the state.
Terengganu would easily qualify as the state with the biggest budget in peninsular Malaysia. Thanks to its natural resources, it gets more than RM1 billion each year from the federal government in oil royalties that give the state enough firepower to undertake fairly large projects on its own.
For instance, in the 2008 Budget, the budget was RM1.67 billion, of which RM1.5 billion was non-revenue income (penerimaan bukan hasil), which mainly constitutes the state's share of oil royalties from the federal government.
To give an idea of how large the budget is — in comparison, Selangor's budget is only RM1.3 billion. And Selangor's population is nearly five times more than Terengganu, which has slightly more than a million people. The Sultan is the present Yang di-Pertuan Agong.
While Selangor can claim to be the most developed state in the country, Terengganu comes nowhere close. In fact, the state has one of the highest poverty levels in the country. According to past budget speeches, in 2004 Terengganu's poverty rate was 10.6% — far higher than the national average of 5.1%.
Couple this with allegations of lavish spending by the state administration when Datuk Seri Idris Jusoh was the Menteri Besar, and it's enough to send ripples through the state. In Terengganu's case, it went right up to the palace.
After the general election, the Terengganu palace refused to swear in Idris as the menteri besar. Although nothing is official, speculation is rife that the palace, among other things, was generally unhappy with the way the money from Dana Khas (special fund), also commonly referred to as wang ehsan, was spent. Idris lost his job and was reluctantly replaced by Datuk Ahmad Said, who does not pretend that all's well in the state as far as the finances are concerned.
While there is no dispute that the state receives a princely sum each year, Ahmad wants to know the exact amount and be given a free hand to use and invest.
“They (federal government) gives us RM1 billion. We don't know the balance," says Ahmad, who seems to have the backing of the palace and the Terengganu People's Solidarity Council in his quest to get the entire royalty payment channelled back to the state coffers. He also has the support of political rival PAS.
His main complaint is that the state does not have any say in the projects that are supposedly financed by oil royalties.
“There are too many people managing the money. When a certain ministry implements a project, it is based on its own interest and does not take into account the needs of the people of Terengganu," he says.
Ahmad had been unhappy with some of the projects because of the high cost and lack of priority for the people.
"t is other people, not us, who make the decisions," he says.
Mega projects
Among the major projects that have hogged the limelight are the Monsoon Cup and Taman Tamudun Islam. The Monsoon Cup, which the state has a 10-year obligation to organise, is said to cost RM250 million annually, while the yet-to-be-completed Taman Tamadun Islam has a price tag of RM249 million.
Surprisingly, Ahmad, who was a state executive council member during Idris' term as Menteri Besar, says he does not know the cost of organising the Monsoon Cup.
“Actually, the Monsoon Cup is good to promote Terengganu to the world. But we have our doubts on the cost," he says in an interview with The Edge recently.
To a question on whether the cost came up to RM250 million, Ahmad retorts: “That is what they said. I have yet to check."
The annual race during the monsoon season is organised by the state government, with T-Best Events Sdn Bhd as the event manager, while the State Economic Development Corporation (SEDC) bears the title of strategic partner. While the yearly budget speech touched on the Monsoon Cup, there was no mention of figures or where the funding would come from (see separate story on T-Best).
On the RM249 million Taman Tamadun Islam project, Ahmad says it was channelled straight to the SEDC without consultation with the state.
Built on a 22.3ha site on Pulau Wan Man, the Islamic-themed park houses the floating Crystal Mosque and 21 replicas of Islamic monuments from around the world.
He says with the state having full control of the oil royalties, it would be easier to budget and plan as it would have its own priorities.
It was only after the Barisan Nasional lost the state in 1999 that the issue of oil royalty cropped up. The federal government re-channelled the oil royalty to the special fund or wang ehsan to prevent the PAS-led Terengganu government from laying hands on the money.
According to Terengganu PAS commissioner Datuk Mustafa Ali, the PAS government received only RM432 million in March 2000.
"t was supposed to be the second instalment to the 1999 royalty. The state government never received further oil royalty money from the federal government," says Mustafa, who was one of the key members of the PAS-led Terengganu government from 1999 to 2004.
The then Prime Minister Tun Dr Mahathir Mohamad in his 2001 Budget speech announced that the royalty would be channelled to the state via federal government agencies.
According to the budget, the money would be provided to the state through the Wang Ehsan Financing Programme. The committee at the federal level responsible for the programme had identified programmes, which include provision of water and electricity, village roads, education, infrastructure, housing, cultivation of cash crops and assistance to coastal and deep-sea fishermen.
“They (federal government) built a lot of schools during our time, though. Usually when they want to build schools, the state only imposes a nominal charge on the land. But we charged the federal government based on market price because it was the only way we could increase our revenue.
“A lot of schools were built because Umno wants the projects to carry on because they need the money. In Terengganu, we had the highest number of schools built during our time because the projects were from the federal government," laughs Mustafa.
Suit against Petronas
During PAS rule, money was channelled to the people in every constituency via an appointed coordinator from Umno. The Jawatankuasa Kemajuan dan Keselamatan Kampung (Village Safety and Development Committee) would be tasked to identify the hardcore poor.
According to Mustafa, about RM40 million was allocated for this purpose. PAS, however, was not able to trace the movement of the money into the state.
Interestingly, PAS took the matter to court by filing a civil suit in 2001 against Petronas and the federal government for not paying the oil royalty allegedly because of political differences.
The case was filed as “The state of Terengganu versus the government of Malaysia and Petronas" since PAS did not and could not file the case on its own behalf as it was the ruling political party.
Mustafa says the PAS government was informed of the termination via a faxed letter from Tun Daim Zainuddin, the then finance minister.
He says he met Petronas chairman Tan Sri Hassan Merican, who explained that Petronas abided by the agreement and disbursed the money.
“But Petronas is under the federal government. Previously, it was given directly by Petronas to the state government," he adds.
“The oil royalty accounted for 75% of the state budget. We had to survive on 25%. We had to abandon some programmes for the people such as housing and education," he says.
Umno-led Barisan Nasional reclaimed the state in 2004 and since then, the state gets between RM1 billion and RM1.5 billion in cash annually. The money makes up a good 90% of the state's annual budget.
Interestingly, even though the state has been under the control of Umno since 2004, it (the state) has not dropped the suit. The case is still pending in the courts.
Case not retracted
The oil royalty issue was left on the back burner until a few weeks ago when Ahmad officially made it known to the federal government that the state wants the money back. He also has no intention of dropping the lawsuit.
“PAS had already brought the matter to court. The case is still pending. We have never retracted it," he says.
To a question as to whether the state would withdraw the case, Ahmad says: “We need discussion. We only hope for the money to be returned."
Considering that the state already gets in excess of RM1.2 billion per annum in oil royalties, are there any more funds due to the state?
It is hard to tell but based on the rising oil price, the amount could be much more than what the state receives now.
In 2000, when PAS received the RM432 million part payment, oil was about US$25 to US$26 per barrel. Today, oil prices hover between US$116 and US$120. That is a huge sum and if managed well, could beef up the state reserves for years to come.
It is reported that Terengganu's oil wells will dry up by 2012 and hence, there is an urgency to regain the funds.
Perhaps Ahmad feels it is time for the state to be prudent in spending or utilising the funds for projects that generate higher returns.
While what he and the state plan to do with the money is a story for another day, there are a multitude of questions that need to be answered first.
Considering that Ahmad does not know how the money was spent, isn't it time perhaps to reveal who decided how the money should be spent? Did those projects benefit the people of Terengganu as they were meant to? Was there a proper accounting of how much in cash and kind the oil royalty amounted to? Will the oil royalty account in entirety be open for scrutiny?
Strangely, the chairman of the SEDC is the menteri besar; four exco members, including Ahmad, were part of the previous board. Is Idris going to maintain silence in the face of allegations? He lost his job because of these allegations; has he got much more to lose?
For a small state supposedly flush with oil money, it is difficult to comprehend that it has the second highest level of poverty. What ehsan is there?
