The mechanism for managing petroleum royalty payments is currently seen as inefficient, as a significant portion of the allocation does not flow directly into the state government’s accounts.
Terengganu Menteri Besar Datuk Seri Dr Ahmad Samsuri Mokhtar said only about 48 per cent of the related revenue is channelled directly to the state government, mainly for expenses such as salary payments and administrative obligations. The remaining 52 per cent, which is considered state-related revenue in the form of royalties, is managed by the Ministry of Finance (MOF) and disbursed directly to project implementers and service providers within the state.
He said this arrangement limits the state government’s flexibility in decision-making and programme implementation, as most payments must go through federal-level processes.
“For example, payments for maintenance work and waste collection that should normally be paid directly by the state to contractors are instead made by the MOF straight to the companies involved,” he said after attending the 15th State Legislative Assembly sitting.
Ahmad Samsuri said this structure places the state in a position where it does not have full control over its financial flow, resulting in inefficiencies in administrative and operational matters.
He added that if Perikatan Nasional (PN) is given the mandate to form the federal government, reforms would be considered, including a review of the current petroleum royalty management mechanism.
