Who Owns the Oil in Sabah & Sarawak?

The retired Judge of the Court of Appeal explains the problem faced by Sabah and Sarawak, and suggests a radical solution to the East Malaysian states’ oil woes.

Initially, if oil was found within the boundaries of a State in the Federation of Malaysia, it is owned by the State. J.C Fong in his book Constitutional Federalism in Malaysia, wrote, on p. 98:

“But, the subject of ownership of petroleum (today, an important source of national wealth with current high global energy prices), found both on land and in the continental shelf of the States of Sabah and Sarawak which lies within the boundaries of Sarawak, was never a matter brought up to the Inter-Governmental Committee and hence, not included in its Report. Prior to Malaysia Day, the Borneo States exercised powers over petroleum found within its extended boundaries, i.e. the seabed and subsoil which lies beneath the high seas contiguous to the territorial waters of the respective states. With their boundaries maintained by virtue of Article 1(3) of the Federal Constitution, after Malaysia Day, the two states continued to exercise rights over petroleum found within its territories, including those found offshore.”

You will note that this passage I have quoted from J.C Fong’s book says “… the continent shelf of the States of Sabah and Sarawak which lies within the boundaries of Sarawak“. The footnote for this sentence is:

“20. See Sarawak (Alteration of Boundaries) Order 1954. A similar Order was made for North Borneo by the Queen in Council as both North Borneo (now Sabah) and Sarawak were colonies of Britain.”
Section 2 of the Sarawak (Alteration of Boundaries) Order in Council reads:

“2. The boundaries of the Colony of Sarawak are hereby extended to include the area of the continental shelf being the seabed and its subsoil which lies beneath the high seas contiguous to the territorial waters of Sarawak.”
The subject of ownership of petroleum was not thought of in the Malaysia Agreement, with the result that no safeguards were written into the Constitution of the Federation of Malaysia on the ownership of oil of these two East Malaysian States.

In the meantime, this happy state of abundant financial affluence was enjoyed by East Malaysia until the Petroleum Development Act 1974 was passed by the Federal Government.

Section 2 of this Act states:

“2.(1) The entire ownership in, and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether on-shore or off-shore of Malaysia shall be vested in a Corporation to be incorporated under the Companies Act 1965, or under the law relating to incorporation of companies.
(2)  …
(3) The ownership and the exclusive rights, powers, liberties and privileges vested shall be irrevocable and shall enure for the benefit of the Corporation and its successor.”
Section 3 is as follows:

3.(1) …
(2) The Corporation shall be subject to the control and direction of the Prime Minister who may from time to time issue such direction as he may deem fit.
(3) Notwithstanding the provisions of the Companies Act 1965, or any other written law to the contrary, the direction so issued shall be binding on the Corporation.
Section 4 is particularly interesting:

4. In return for the ownership and the rights, powers, liberties and privileges vested in it by virtue of this Act, the Corporation shall make to the Government of the Federation and the Government of any relevant State such cash payment as may be agreed between the parties concerned.
And section 5 provides as follows:

5.(1) There shall be established a Council to be known as the National Petroleum Advisory Council consisting of such persons including those from the relevant States as the Prime Minister may appoint.”
The corporation referred to in s. 2(1) of the Petroleum Development Act 1974 is, of course, the National Petroleum Corporation (PETRONAS). It is unproductive to muse over who is the chairman – whether former or incumbent – of Petronas. The point is, it is a creature of the ruling government which is the owner of all the oil in the country and the prime minister decides how the cake is to be shared.

Now you know why the BN cannot afford to lose the next general election.

Although Petronas owns the oil in Malaysia by virtue of the Act, surely it must still buy the land where the oil is found. I doubt Petronas had done that with offshore oil from the States in East Malaysia, probably on the assumption that the continental shelf is on the seabed – even though it is within the boundaries of Sarawak and Sabah – so that there would be no one for Petronas to buy it from, forgetting (as pointed out earlier in the passage from J.C. Fong’s book) that the East Malaysian States own the seabeds as well as the area within their own boundaries.

The distressing part is, the Petroleum Development Act 1974 itself cannot be challenged in a court of law because of the doctrine of separation of powers between the judiciary and the legislature which is fundamental in a parliamentary democracy (see Pickin v. British Railways Board [1974] AC 765). Unless, of course, the Act is intrinsically unconstitutional vis-a-vis the Federal Constitution which it is not.

The only way, it seems to me, is to kill the goose that lays the golden eggs – i.e repeal this Act of Parliament.

70 comments:

  1. Local contractors in Sabah are advised to let the oil and gas industry develop and lure more investments in before talking about increasing opportunities to join the business.

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  2. “When the industry has grown, and we have put Sabah as a state that everybody is looking at in terms of oil and gas businesses, then more investments from abroad would come in, thus encouraging greater opportunities for the local contractors to take part,” said Industrial Development Minister Datuk Raymond Tan Shu Kiah.

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  3. Speaking to reporters after representing Chief Minister Datuk Seri Musa Aman to launch the Second Sabah Oil and Gas Conference and Exhibition here, he said the state government had set its target on the oil and gas industry’s progress, and he would do, in his best capabilities to bring in investors to do business in Sabah, which would benefit the local players in the long run.

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  4. Asked on Sabah Oil and Gas Contractors Association’s (SOGCA) demands to have more representation in the giant oil company, Petronas, he said it was important to understand that it was important to ensure that the request be matched with the activities and things happening in Sabah.

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  5. “We have to be pragmatic and I think time will come that we will have stronger representatives. I think we can work on that but it is something that we could demand, and the best approach is to work closely with Petronas,” he said.

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  6. Tan added the oil company would knnow if there are capable Sabahans and able to contribute in terms of its operations in Sabah, adding that it would not only cover the state, but also the nation and globally.

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  7. “We cannot demand for more representations the same way as asking for more representatives in politics. I think we must make sure that we get ourselves more involved in the plans and operations of Petronas, to understand them better.

    “So when we get there, and more Sabahans are representing the state in Petronas, I would be the happiest person because we then know that there are capable abd able people to do the job,” he said.

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  8. According to PETRONAS, its total investment in Sabah since 1975 was RM61 billion, while the total amount of royalty paid to Sabah (until 2010) was RM6.8 billion.

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  9. The oil and gas industry in Sabah is relatively young compared to that of Sarawak, nevertheless it has to be developed along a planned approach, drawing the experiences of Kertih, Terengganu and Bintulu.

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  10. Petronas has already allocated gas for Sabah industrial development and it is now up to us to make sure that the gas is utilised for industries which will bring long-term economic benefits and jobs to Sabah.

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  11. Timbalan Perdana Menteri, Tan Sri Muhyiddin Yassin yakin badan pengendali pilihan raya di negara ini akan bersikap terbuka berhubung siasatan Suruhanjaya Pencegahan Rasuah Malaysia (SPRM) berkaitan dengan isu dakwat kekal pada PRU13 lalu.
    Menurut Muhyiddin, terserahlah kepada SPRM untuk menjalankan tugas mereka ke atas Suruhanjaya Pilihan Raya (SPR) dan kerajaan sama sekali tidak akan campur tangan dalam hal itu

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  12. Kedua-duanya ialah suruhanjaya, masing-masing mempunyai bidang kuasa tertentu," katanya kepada pemberita selepas mempengerusikan Mesyuarat Jawatankuasa Kabinet Mengenai Pekerja Asing di bangunan Parlimen, di sini, hari ini.
    Muhyiddin berkata demikian mengulas kenyataan SPRM semalam bahawa badan itu sedang melakukan siasatan ke atas SPR berhubung dakwaan pecah amanah membabitkan dakwat kekal.

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  13. imbalan Pengerusi BN, Tan Sri Muhyiddin Yassin dilantik sebagai Ketua Pengarah Pilihan Raya Raya di Dun Kuala Besut bagi mempertahankan kerusi itu pada pilihan raya kecil kelak.
    Perkara itu disahkan sendiri oleh beliau kepada pemberita, hari ini.

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  14. Menurut Muhyiddin, Pengerusi BN, Datuk Seri Najib Tun Razak sudah memaklumkan kepada beliau berhubung perkara itu sebelum berangkat ke luar negara.

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  15. Kita (BN) sudah sedia untuk menghadapi PRK itu, PM pun telah putuskan dengan melantik saya untuk mengepalai jentera BN di Kuala Besut," katanya kepada pemberita selepas mempengerusikan Mesyuarat Jawatankuasa Kabinet Mengenai Pekerja Asing dan Pendatang Asing tanpa izin di bangunan Parlimen, di sini.

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  16. Beliau berkata demikian ketika ditanya pemberita tentang persediaan BN bagi menghadapi PRK Dun Kuala Besut ekoran kematian penyandangnya, Datuk A.Rahman Mokhtar,

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  17. Dalam pada itu, jelas Muhyiddin, beliau akan dibantu oleh Datuk Seri Idris Jusoh sebagai Timbalan Ketua Pengarah Pilihan Raya Dun itu bagi mempertahankan kerusi berkenaan.

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  18. Saya harap dengan bantuan beliau (Datuk Idris Jusoh), BN boleh menang dan kekal di sana," jelasnya
    Tambah Muhyiddin, berdasarkan kekuatan dan pengalaman Idris sebagai bekas Menteri Besar Terengganu, beliau mampu menyumbang kemenangan besar kepada BN pada pilihan raya itu nanti.

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  19. Sabah menerima dan meluluskan 48 projek sektor pembuatan yang melibatkan pelaburan bernilai RM5.83 bilion tahun lepas, peningkatan sebanyak 373 peratus berbanding 54 projek pada 2011 dengan nilai pelaburan RM1.56 bilion.

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  20. Timbalan Ketua Menteri Datuk Raymond Tan Shu Kiah berkata daripada jumlah itu, sebanyak RM5.55 bilion merupakan pelaburan tempatan manakala selebihnya merupakan pelaburan asing dan pelbagai sumber lain.

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  21. Tan yang juga Menteri Pembangunan Perindustrian negeri berkata pelaburan berkenaan dijangka menyediakan kira-kira 3,060 peluang pekerjaan.

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  22. Beliau berkata nilai pelaburan asing di Sabah, berjumlah RM11 juta pada tahun lepas, kebanyakannya dari Thailand untuk pembinaan kilang pengeluaran makanan laut sejuk beku, kilang pembuatan baja biokimia dari Amerika Syarikat dan Switzerland serta Rusia bagi mengeluarkan perabot berasaskan kayu serta buluh.

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  23. Ada juga pelabur dari China yang mendirikan kilang memproses tayar terpakai, Singapura yang melaksanakan perusahaan mengetin makanan laut, daging serta buah-buahan dan Korea Selatan.

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  24. Sementara itu beliau berkata penemuan kawasan penerokaan minyak dan gas baharu di persisiran Sabah menjanjikan potensi yang besar kepada pembangunan industri hiliran minyak serta gas di negeri ini.

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  25. Pembinaan Terminal Pendaratan Minyak dan Gas (SOGT) di Kimanis, paip penyaluran gas dari Kimanis ke Bintulu serta pembangunan Taman Perindustrian Minyak dan Gas di Sipitang adalah sebahagian daripada projek yang menerajui era perindustrian minyak dan gas.

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  26. Sektor minyak dan gas ini bakal menjana peluang pelaburan bernilai lebih RM30 bilion sehingga 2020. Kementerian saya akan bekerja keras untuk membangunkan sektor ini dengan lebih pesat termasuk menarik pelaburan,

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  27. IF JC FONG IS CORRECT THEN SABAH AND SARAWAK STILL OWN THE OIL

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  28. Mega Petronas projects in Sabah are expected to generate about RM18 billion worth of investments and create about 23,000 jobs. The granular urea and ammonia plant (SAMUR) in Sipitang alone, which is expected on-stream by 2014, is estimated to bring in about RM4.5 billion worth of investment value and provide over 2,000 jobs,” said Chief Minister Datuk Seri Musa Haji Aman.

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  29. Speaking at the opening of the 2nd Sabah Oil and Gas Conference and Exhibition with the theme “Opportunities and Growth in Oil and Gas Industry in Sabah” at a resort here Tuesday, Musa said: “The decision by Petronas to establish mega projects in Sabah in relation to oil, gas and energy (OGE) is an indication that they were convinced of the sector’s commercially viability in the state

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  30. “Projects include the Sabah Oil and Gas Terminal (SOGT) at Kimanis, the Sabah-Sarawak Gas Pipeline, the 300 megawatt gas-fired plants in Kimanis and Lahad Datu, and the re-gasification plant in Lahad Datu, are now in various stages of development. “Once fully completed and in full swing, some 23,000 jobs would be available and I belive the bulk of it will go to Malaysians in Sabah”.

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  31. In his speech read by Industrial Development Minister Datuk Raymond Tan Shu Kiah, the Chief Minister urged the small and medium entrepreneurs (SMEs) to explore and identify their business niche along the oil and gas value chain. He said their active participation will help in further boosting the creation of value added products and in creating opportunities for local start-ups.

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  32. Musa assured that the State Government is fully committed to the development of the oil and gas industry in Sabah by constantly engaging with the Federal Government to discuss provision of funds for physical development of infrastructure and industrial facilities, with Petronas on matters such as gas supply. “Sabah will also continue to work with Petronas and the Malaysian Investment Development Authority (MIDA) to attract investors to establish oil and gas industrial activities in Sabah, apart from our own efforts in nurturing local investments.

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  33. As a sign of commitment, he said the State Government had in 2010 formed special purpose company, the Sipitang Oil and Gas Development Corporation (SOGDC) to spearhead, oversee and development of the oil and gas industry in Sabah. The first initiative of SOGDC is to embark on the development of the Sipitang Oil and Gas Industrial Park (SOGIP, an integrated industrial area specifically designated for petrochemical and chemical-based industries and other related initiatives through high-value adding industrial clustering.

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  34. Among the infrastructure that will be available in SOGIP include a single carriage way road in the initial stage which could be upgraded to a dual carriage way road later on, electricity supply planned at 118 megawatts upon construction of a transmission line from Kimanis to SOGIP, a water treatment plant to generate 40 million litres per day and a jetty with 16 metres depth, he said. “Upon completion and full development of this 4,065 acres site, SOGIP is expected to generate a total investment of about RM30.6 billion, and will create jobs for locals.

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  35. The SOGDC has received inquiries and proposals by potential investors, a clear indication of interest in the setting up of oil and gas projects in SOGIP. “These interests include the setting up of a methanol plant, a dimethyl ether (DME) plant, an ammonium sulphate plant, crude oil storage tank farms and oil refineries and even a shipyard.

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  36. “With these developments, Sipitang and surrounding districts will experience tremendous transformation within the next few years. “In addition, to manage challenges, a master plan is being developed on various guiding principles such as availability of natural gas, alignment with the Economic Transformation Programme (ETP) and Sabah Development Corridor, and maximizing gas usage for downstream industries.

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  37. Musa assured that the State Government is fully committed to the development of the oil and gas industry in Sabah by constantly engaging with the Federal Government to discuss provision of funds for physical development of infrastructure and industrial facilities, with Petronas on matters such as gas supply. “Sabah will also continue to work with Petronas and the Malaysian Investment Development Authority (MIDA) to attract investors to establish oil and gas industrial activities in Sabah, apart from our own efforts in nurturing local investments.

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  38. Pembelian hartanah di London oleh para pelabur Malaysia melonjak tinggi sejak akhir-akhir ini dengan kuota untuk rakyat Malaysia bagi apartmen-apartmen di projek pembangunan semula Stesen Janakuasa Battersea di selatan ibu negara United Kingdom ini telah pun habis ditempah.

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  39. Perdana Menteri, Datuk Seri Najib Tun Razak memberitahu sidang akhbar bersama Datuk Bandar London, Boris Johnson di sini hari ini bahawa perkembangan itu merupakan petanda baik kepada ekonomi United Kingdom.

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  40. Malaysia akan menjadi pemain besar dalam sektor hartanah di London," kata beliau sambil menambah bahawa Majlis Amanah Rakyat (Mara) dan Kumpulan Wang Simpanan Pekerja (KWSP) juga sedang mencari projek-projek hartanah untuk dibangunkan.

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  41. Najib yang dalam rangka lawatan kerja selama empat hari ke negara ini bersama Johnson; Menteri Negara bagi Perdagangan dan Pelaburan United Kingdom, Lord Green of Hurstpierpoint dan Pengerusi Yayasan WIEF, Tun Musa Hitam sebelum itu memberikan taklimat kepada media British mengenai rancangan untuk menganjurkan Forum Ekonomi Islam Sedunia (WIEF) yang kesembilan di London. Ia dijadualkan diadakan pada 29-31 Oktober depan.

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  42. Kerajaan Malaysia dan United Kingdom akan menjadi hos forum tersebut yang bakal melibatkan 1,500 orang peserta dari negara-negara Islam dan bukan Islam. Ia merupakan forum WIEF yang pertama di luar Asia dan di luar negara Islam.

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  43. Datuk Bandar Johnson memberitahu para wartawan bahawa sidang akhbar tersebut diadakan sebelum upacara pecah tanah projek di Battersea esok yang ?memperlihatkan peningkatan hubungan dua hala dan hubungan ekonomi antara Malaysia dan United Kingdom".

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  44. Konsortium dari Malaysia yang membangunkan Stesen Janakuasa Battersea menjual apartmen dua bilik pada harga sekitar 388,000 pound sterling (RM1.94 juta) manakala untuk penthouse, harganya boleh naik sehingga 6 juta pound sterling (RM30 juta).

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  45. Konsortium itu diketuai oleh SP Setia, Sime Darby dan KWSP. Apabila siap nanti, jumlah keseluruhan nilai pembangunan Stesen Janakuasa Battersea ialah 8 bilion pound sterling (RM40 bilion).

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  46. Najib pula memberitahu, SP Setia yang telah pun terlibat dengan projek Stesen Janakuasa Battersea tentu sedang mencari projek baharu untuk dilaksanakan di London.

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  47. Akhbar The Financial Times di sini melaporkan kelmarin bahawa Malaysia kini merupakan pelabur kedua terbesar dalam sektor hartanah di London selepas Amerika Syarikat.

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  48. Akhbar itu menyebut, pasaran bon dan saham-saham yang memberikan pulangan rendah telah menyebabkan banyak pelabur institusi seperti KWSP melabur di seberang laut untuk mendapatkan dividen pelaburan yang lebih besar.

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  49. Akhbar itu memetik seorang penganalisis JP Morgan di Malaysia, Steve Clayton berkata: ?Mereka ini ada buku cek yang besar di Asia? mereka masih lagi di peringkat awal mencari dan membuat pelaburan rentas sempadan. Tetapi, apabila mereka telah menemui dan membuat pelaburan, pengaruh global mereka tidak diragukan lagi akan meningkat

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  50. Perdana Menteri, Datuk Seri Najib Tun Razak mahu generasi kedua Felda menjadi warga global, meningkatkan status mereka dalam ekonomi dan karier untuk mentransformasikan kejayaan ibu bapa mereka sebagai peneroka tanah rancangan.

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  51. sekumpulan 130 pelajar, dengan 100 daripadanya anak peneroka Felda yang dibawa khas ke United Kingdom untuk menuntut selama satu semester di Universiti LimKokWing cawangan London di sini, Najib berkata, program khas Felda itu telah berjaya mentransformasikan para pelajar terlibat dari segi ilmu pengetahuan dan membina keyakinan mereka.

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  52. Beliau yang menerima sambutan hangat daripada para pelajar itu yang antaranya menyanyikan lagu 1Malaysia dan iM4U berkata, ibu bapa para pelajar yang berasal dari tanah rancangan Felda itu berjaya membuka tanah rancangan getah dan kelapa sawit serta membangunkannya menggunakan tenaga fizikal.

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  53. Tugas anda pula sebagai generasi kedua ialah membuka minda. Generasi pertama Felda adalah sangat lokal dan domestik? anda adalah warga global

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  54. para pelajar berkenaan tidak henti-henti memuji, memberi semangat kepada Najib dan dengan penuh meriah meneriakkan kata-kata ?We Love PM

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  55. Dunia, kata Najib, telah berubah dan generasi kedua Felda tidak boleh kekal dengan apa yang ibu bapa mereka lakukan selama ini.

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  56. Kita tidak boleh bergerak maju sebagai sebuah negara jika kita kekal dengan apa yang kita ada selama ini

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  57. Dalam merancang pendidikan anak-anak Felda, Najib menjelaskan, negara amat memerlukan rakyat yang terlatih.

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  58. Kita mempunyai visi, kita mempunyai impian dan kita mempunyai matlamat. Apakah yang menjadikannya suatu kenyataan?

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  59. Pertamanya, kita perlukan rakyat - rakyat yang telah ditransformasikan," kata Perdana Menteri.

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  60. Kerajaan akan meneruskan projek ini (menghantar para pelajar yang berasal dari Felda ke London) pada masa hadapan. Anda semua adalah testimoni kepada kejayaan program ini

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  61. Felda mempunyai program pendidikan strategik dengan Universiti LimKokWing di Cyberjaya. Kumpulan pelajar tajaan Felda belajar di universiti itu di Cyberjaya dan sebahagian daripada mereka dihantar oleh Universiti LimKokWing ke cawangan universiti itu di Piccadilly di sini selama satu semester.

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  62. The opposition's promise of increasing Sabah's oil royalty from the present 5% to 20% will kill off interest in developing the offshore petroleum industry, Datuk Seri Najib Tun Razak said.

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  63. The Prime Minister said under the current arrangement, petroleum companies continue to tap into marginal fields that would eventually spell increased revenue for Sabah.

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  64. 'This will not happen with the Opposition's promise of a 20% royalty share for Sabah. There will be no incentive for petroleum companies to develop our fields,'' he said when launching Yayasan Sabah roadshow in Kuala Penyu near here.

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  65. ''What the Opposition wants to do, in essence, is to kill the proverbial goose that has been laying the golden egg,'' Najib said to the cheers and applause of the large crowd.

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  66. He said though Sabah now gets 5% of petroleum revenues, the state receives more in terms of development funds and numerous special financial allocations from the federal government.

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  67. ''This is all possible when we have a strong mandate,'' Najib said, adding that, among the special funding for the state, was a RM250mil grant that was the federal government's contribution for an international standard convention centre costing some RM500mil in Kota Kinabalu.

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  68. At the event, the Prime Minister also launched the 1.2km long Sitompok Bridge costing some RM59.6mil located just outside of Kuala Penyu town.

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  69. He said the long bridge was just one of Barisan Nasional's many achievements in Sabah that included reducing the poverty rate from 19.7% in 1999 to 8.1% last year.

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  70. Najib said the opposition on the other hand could only be counted on to make unrealistic promises in their manifestos.

    For more election stories, please visit The Star's GE13 site

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