KUALA LUMPUR, 31 August 2006 — Malaysian state oil company Petronas yesterday disputed the Chad government’s claim it failed to pay millions of dollars in back taxes, but said it was attempting to resolve the issue with the African nation. Petronas and Chevron Corp. were ordered out of the country by Chadian President Idriss Deby last week after he claimed the oil giants failed to settle a $450 million tax bill.
“Petronas would like to clarify that it has fully complied with its contractual obligation including all tax payments under the agreements that has been signed with the government of Chad in the year 2000,” the company said in a statement. “Petronas is proactively working toward finding an amicable solution on this matter,” Petronas said. “It is regrettable that the government of Chad acted in this manner while discussions were ongoing.”
Exxon Mobil, along with Chevron and Petronas, had agreed to finance a $4.2 billion underground pipeline to deliver oil from landlocked Chad to the Atlantic port of Kribi, in Cameroon. Exxon holds a 40 percent stake, while Petronas has 35 percent in a project expected to produce about a billion barrels of crude during its 30-year duration.
The companies agreed to invest the money after the World Bank gave the project its blessing and after Chad passed a World Bank-backed oil revenues law that required most of the money to be allocated to health, education and infrastructure projects. Berlin-based Transparency International ranked Chad the most corrupt on its 2005 list, and said the expulsion order could erode investor confidence for its much-needed foreign investment even further.
Petronas said the issue raised by Deby “relates to the validity of one of the agreements signed between the parties which had previously been accepted.” It did not elaborate. Three Chadian government officials who signed off on the deal have also been suspended by Deby.
Deby’s administration has also ordered Petronas to cease all activities and leave the country, the company said. It said it does not have any staff in Chad at the moment. Dieudonne Djonabaye, director general of communications at Deby’s office, told Dow Jones Newswires late last week an injunction to pay the taxes was sent to Petronas Aug. 10. Chevron Corp. also has said it has met all its tax obligations in Chad, while Exxon Mobil remains in good standing with Deby’s administration.
Meanwhile, Malaysia’s economy grew by 5.9 percent in the three months to June, outpacing 5.5 percent expansion in the previous quarter, the central bank said yesterday. Bank Negara Governor Zeti Akhtar Aziz said the strong result was mainly led by the private sector, supported by the manufacturing and services sectors.
Zeti said private consumption recorded robust growth of 7.3 percent in the second quarter and was likely to stay strong in the second half of the year. “The impact of the fuel hike in February and electricity tariffs hike in July has been largely reflected in the first half,” she said. For the first half of 2006, the economy grew by 5.7 percent from a year earlier.
Malaysia’s government has tipped economic growth of 6.0 percent in 2006, and under an ambitious 15-year industrial plan targets brisk economic growth of 6.3 percent over the period, driven by manufacturing as the star sector. Zeti said economic growth momentum will be sustained in the second half, with inflation expected to be moderate during the period. The central bank will maintain its current monetary policy stance in coming months, she said.
During the second quarter, manufacturing activities expanded by 8.4 percent year-on-year, compared with 3.1 percent growth in the same period last year, on the back of a recovery in the global semiconductor cycle. The services sector registered growth of 6.0 percent year-on-year in the second quarter against 5.9 percent growth a year earlier.
The agriculture sector recorded growth of 5.8 percent year-on-year against negative growth of 1.5 percent in the corresponding period last year. The mining sector continued to see contraction of 0.4 percent in the second quarter after a decline of 4.2 percent in the second quarter of last year. Malaysia Airlines also posted yesterday a net loss of 498.2 million ringgit ($135 million) in the first half to June, adding to the red ink which has forced it to embark on a major turnaround plan. The result compared to a 166.2 million ringgit loss in the same period a year ago.
Managing Director Idris Jala said however that the national carrier was on track to break back into the black by 2008 which is its goal under a crisis plan unveiled in March.