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Malaysia is one of Southeast Asia's primary oil and gas producers, and was world's third-largest exporter of liquefied natural gas in 2010. The petroleum sector generated 14 percent of government revenue and represented 10 percent of gross domestic product and 20 percent of exports in 2011.

Malaysia's Performance on the Resource Governance Index

Malaysia received a "weak" score of 46, ranking 34th of 58 countries. A "satisfactory" Enabling Environment contrasted with poor scores on the Institutional & Legal Setting and Safeguards & Quality Controls components.

(out of 58)
(out of 100)
34 Composite Score 46
49 Institutional & Legal Setting 39
Freedom of information law 0
Comprehensive sector legislation 33
EITI participation 0
Independent licensing process 17
Environmental and social impact assessments required 50
Clarity in revenue collection 50
Comprehensive public sector balance 44
SOC financial reports required 100
Fund rules defined in law 100
Subnational transfer rules defined in law 0
32 Reporting Practices 45
Licensing process 50
Contracts 0
Environmental and social impact assessments 33
Exploration data 50
Production volumes 50
Production value 67
Primary sources of revenue 100
Secondary sources of revenue 60
Subsidies 0
Operating company names 0
Comprehensive SOC reports 17
SOC production data 86
SOC revenue data 63
SOC quasi fiscal activities 50
SOC board of directors 50
Fund rules 0
Comprehensive fund reports 100
Subnational transfer rules 0
Comprehensive subnational transfer reports 33
Subnational reporting of transfers 100
44 Safeguards & Quality Controls 39
Checks on licensing process 0
Checks on budgetary process 100
Quality of government reports 72
Government disclosure of conflicts of interest 0
Quality of SOC reports 100
SOC reports audited 44
SOC use of international accounting standards 100
SOC disclosure of conflicts of interest 0
Quality of fund reports 67
Fund reports audited 50
Government follows fund rules 50
Checks on fund spending 0
Fund disclosure of conflicts of interest 0
Quality of subnational transfer reports 0
Government follows subnational transfer rules 0
12 Enabling Environment 60
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 65
Open Budget (IBP Index) 43
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 45
Government effectiveness (WGI) 82
Rule of law (WGI) 65
Satisfactory Weak
Partial Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional & Legal Setting (Rank: 49th/58, Score: 39/100) learn more

Malaysia's "failing" score of 39 reflects an inadequate legislative framework.

The Petroleum Development Act of 1974 gives the national oil and gas company, Petronas, the exclusive right to manage the sector with only broad policy guidance. Petronas grants licenses to companies, which must meet certain non-technical requirements, such as ethnic Malay involvement. Companies sign production sharing or risk sharing contracts and Petronas collects all payments, including taxes. Some of these revenues cover Petronas' expenses and are never deposited in the treasury. There is no independent regulator.

Malaysia requires companies to produce environmental impact assessments, but it is possible for projects to begin before assessments are complete. There is no freedom of information law and the Official Secrets Act restricts disclosure of information deemed crucial to national security.

Reporting Practices (Rank: 32nd/58, Score: 45/100) learn more

Malaysia received a "weak" score of 45, publishing little or no information on contracts or resource-funded subsidies.

Some information on licensing procedures is published, but key aspects of the process, such as auction rules and bidder qualification requirements, are not included. Petronas announces the award of licenses through press releases with few details; contracts and licensing terms are not disclosed.

The Finance Ministry publishes information on production volumes, prices, export values, royalties, petroleum-specific taxes, dividends, and license fees. The central bank publishes production volumes, prices and export values, but not disaggregated revenue figures. The prime minister's Economic Planning Unit publishes production volumes, export values, and information on investment in the petroleum sector. The National Audit Department reports dividend receipts.

Safeguards & Quality Controls (Rank: 44th/58, Score: 39/100) learn more

A lack of disclosure policies and checks on licensing authorities led to a "failing" score of 39.

The legislature does not play a significant oversight role in the petroleum sector. Petronas is accountable only to the prime minister, and the licensing process is often used to advance national interests and favor Malaysian companies. There is no procedure to appeal licensing decisions.

The Auditor General's Office reviews the Finance Ministry's accounts, but there is no specific audit of oil revenues. Audit reports are presented to lawmakers and are reviewed annually by the Public Accounts Committee, but without special focus on the resource sector.

Enabling Environment (Rank: 12th/58, Score: 60/100) learn more

Malaysia's "partial" score of 60 reflects a satisfactory ranking for government effectiveness, but lower scores on budget openness and democratic accountability.

State-Owned Companies (Rank: 20th/45, Score: 61/100) learn more

Petronas dominates Malaysia's petroleum industry. The company's annual reports contain data on reserves, production volumes, prices, export values, investment in the sector, production costs, the names of subsidiaries, disaggregated revenue figures, and some information on quasi-fiscal activities. The company is audited quarterly; audits are published but do not include the accounts of subsidiary companies. Petronas publishes the composition of its board of directors, but does not disclose its decision-making policies.

Natural Resource Funds (Rank: 12th/23, Score: 46/100) learn more

The National Trust Fund was established in 1988 to conserve resource wealth for future generations, and can only be used for development projects. While the fund is managed by the central bank, policy decisions are made by the Finance Ministry, which publishes the fund's balance in annual reports. Its legal framework does not specify the percentage of revenues Petronas is required to contribute.

Subnational Transfers (Rank: 26th/30, Score: 22/100) learn more

Malaysia's four petroleum-producing states have signed agreements with Petronas entitling them to 5 percent of the profits from local oil and gas production, but the agreements are not published. The central government does not report the transfer amounts, and only two of the four states include them in their budget statements. Malaysia's petroleum-producing states are also its poorest, and subnational governments have demanded a larger share of resource revenues.

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