Wednesday, October 1, 2008

Petroleum Development Act

In terms of institutional arrangements, PETRONAS, established under the Petroleum Development Act (1974) as a state-owned enterprise, has exclusive rights of ownership, exploration and production.

It comes under the direct purview of the Prime Minister and is responsible for its planning, investment and regulation of all up-stream activities.

The Ministry of International Trade and Industry (MITI) as well as the Domestic Trade and Consumer Affairs (MDTCA), through the Petroleum Regulations of 1974 (amended in 1975 and 1981), are vested with powers to regulate all downstream activities. MITI is responsible for the issuance of licences for the processing and refining of petroleum and the manufacture of petrochemical products, whilst MDTCA issue licences for the marketing and distribution of petroleum products.

Petroleum Industry

Subsequent to the passing of the Petroleum Development Act , replacing the system of concession.

  1. Upstream

    Through the Petroleum Development Act, 1995, The Federal Government vested all petroleum resource of Malaysia to a wholly owned Government company called Petroleum National Berhad. (PETRONAS) www.petronas.com.my. PETRONAS, enters into Production Sharing Agreements with other petroleum companies, which explore, and develop the resources. The main Petroleum companies which had entered into production sharing contracts with PETRONAS are as follows:-

    • Pertronas Carigali
    • Esso Production Malaysia
    • Shell Sabah Selatan
    • Nippon Oil
    • Lundin Malaysia
    • Sabah Shell Petroleum
    • Sarawak Shell Berhad
    • Sante Fe Energy Resources
    • AMERADA HESS
    • YPF Malaysia
    • Mitshibishi Corporation
    • Murphy Sarawak
    • Mobil
    • JAPEX
    • NORSK Hydro

  2. Downstream

Downstream in the petroleum sector comprise several activities undertaken by many different players. There are as follows: -

Crude oil refining

  • Petronas Penapisan (Terengganu) Sdn. Bhd.
  • Petronas Penapisan (Melaka) Sdn. Bhd.
  • EssO
  • Shell

Petroleum product retailing

  • Petronas Dagangan
  • Shell Trading
  • Esso Malaysia
  • Caltex

Natural gas processing, transmission and wholesale

  • Petronas Gas Bhd.

Natural gas retailing

  • Gas Malaysia Sdn. Bhd. ( no website as yet )

Shipping of crude oil and petroleum products

  • Manufacture of Liquified Natural Gas
  • Malaysia LNG

NATIONAL DEFENCE POLICY

Malaysia’s defence policy is a manifestation of its goal for the protection of its national strategic interests and the preservation of national security. The defence policy outlines three basic fundamentals namely national strategic interests, principles of defence and the concept of defence. It emphasises on the need for the maintenance of a stable and peaceful environment of the immediate areas of its strategic interests.

Malaysia’s strategic interests are viewed from three-tiers encompassing the areas of immediate vicinity, regional and global. The areas of its immediate vicinity comprise the land territories, territorial waters, airspace, the Exclusive Economic Zone (EEZ), the Straits of Malacca and its approaches, and the Straits of Singapore as well as the sea and air lines of communication connecting Peninsular Malaysia and Sabah and Sarawak.

The regional areas of interest to Malaysia cover Southeast Asia, including Andaman Islands as well as the South China Sea. Malaysia views any development affecting the region as invariably impinging her security and development. This is particularly significant as Malaysia shares either common land or sea boundaries or both with most of the ASEAN states. Any infringement to the region’s security, whether in the form of intra-regional or extra-regional conflicts, will have consequential effects on Malaysia’s security.

Malaysia’s growing trade links, new markets for its products, increasing foreign investment and the acquisition of private enterprises with worldwide interests have broadened its interests beyond the immediate vicinity and the region. In view of this, it is in Malaysia’s interest to ensure that global peace is maintained.

Taking cognizance of its strategic and competing interests, Malaysia’s defence revolves around the fundamental principles of Self-Reliance, Regional Cooperation and External Assistance.

Being an independent and sovereign state, Malaysia has realised that the preservation of its national interest and security is best attained through the pursuit of self-reliance which is the core of its defence policy. This principle emphasises Armed Forces self-reliance within the structure of national self-reliance. It involves not only the combat forces but also logistical support network of military-industrial cooperation in line with the country’s development priorities. Self-reliance in this regard should not be limited to the efforts of the Armed Forces but should also involve all relevant agencies of the government and the people. However, taking into account its limitations, Malaysia’s self-reliance capability can be drawn from two premises. These are, firstly, having the capability to act independently without the need for foreign assistance in matters concerning internal security and secondly, having the capability to act independently in protecting its territorial integrity and security interests within the immediate vicinity from low and medium level external threats.

Due to its geographical location in Southeast Asia, Malaysia’s strategic interests and concerns inevitably coincide with those of the other countries in the region. Given the above situation Malaysia’s security becomes quite indivisible from that of its fellow ASEAN countries. Hence, a threat to ASEAN or any of the ASEAN countries would also be viewed as a threat to of Malaysia. Accordingly, Malaysia attaches great significance to regional cooperation.

Within the context of regional cooperation Malaysia also encourages the establishment of bilateral defence cooperation within ASEAN. A strong bilateral defence network amongst ASEAN countries will assist in the process of confidence building and promoting transparency. Concomitant with this approach Malaysia will promote and contribute towards the development of a strong and effective ASEAN community in order to ensure a secure Southeast Asia.

Malaysia views the formation of ASEAN Regional Forum (ARF) as another significant development towards the continued peace and stability of the region. This initiative by ASEAN has successfully brought together participants to share views on mutual security concerns. The dialogue process has proven to be an important mechanism towards confidence building. The ARF activities will foster cooperation and better understanding among its participants.

To complement regional cooperation, Malaysia also acknowledges the need for external assistance from countries outside the region. The assistance includes moral and physical support, training facilities, transfer of technology and supply of equipment. In pursuing this effort, it has undertaken steps to establish and reinforce relations with countries outside the region. Hence, despite the commitment to ZOPFAN, the reality of the situation should not allow Malaysia to preclude the need to request for assistance from sources outside the region. This is especially so when the level of threat is of a proportion that goes beyond the capability of the local force.

Malaysia regards the Five Power Defence Arrangements (FPDA), which comprises of Singapore, United Kingdom, Australia and New Zealand, as an avenue for external assistance. The FPDA is the only formal defence arrangement which Malaysia has with extra-regional powers. At the time of its inception, Malaysia realised that self-reliance could only be achieved over a period of time. The FPDA thus became the mechanism through which it could develop its defence capabilities with the assistance of traditional allies. The loose consultative mechanism of the FPDA gave Malaysia some measure of external support and assurance of security. In this regard, Malaysia firmly remains committed to the continued relevance of the FPDA. Nevertheless, in view of the present strategic scenario and the enhanced capabilities of the Malaysian Armed Forces (MAF), the role of the FPDA has been streamlined to meet the current needs.

Malaysia’s firm commitment to the United Nation’s Charter has made it to adopt a defensive defence posture. Accordingly, its defence policy calls for the strategy that is based on deterrence and total defence. The policy also stipulates the need to prevent conflict from occurring within its own territory either through preventing it from happening or by engaging the adversary as far away as possible from the Malaysian territory.

The concept of deterrence is aimed at discouraging potential adversary from pursuing policies that are against any peaceful means of resolving conflicts. It calls for the application of the denial strategy and the development of a credible armed forces with an effective war fighting capability to deter any act of hostility or aggression by the adversaries.

On the other hand, the concept of total defence refers to the total and integrated efforts taken by the government, non-¬governmental agencies, private sectors and the citizens to defend the nation. Safeguarding Malaysia’s sovereignty and territorial integrity necessitates the commitment of all citizens and not just the Armed Forces. While the defence of the country is the physical responsibility of the security forces, the burden of ensuring that such forces are able to meet the challenges confronting them is a national responsibility.

Even though it recognises the importance of regional cooperation and external assistance, Malaysia believes that self-reliance should continue to be the cornerstone of its defence. In this regard Malaysia will strive towards enhancing and developing its Armed Forces capabilities as well as promoting defence consciousness and patriotism among its citizens.

Yahoo! brings developer network to SEA

KUALA LUMPUR: The passion and patience of a Yahoo! Inc employee resulted in the introduction of a Yahoo! developer network for the South-East Asia region.

Chang Sau Sheong, head of engineering at Yahoo! SEA who quipped that software development is part of his genetic make up, said the regional developer community will now be able to mingle and exchange ideas among themselves.

“I have been given the driver’s seat for this initiative and I see this as a chance for Yahoo! to contribute to the community,” said the Malaysian who is working in Singapore.

The network is open to all developers in the region, regardless of skill level. “Yahoo! also recognises the strategies of extending its reach through software developers so it has put increased emphasis on the developer network,” Chang said.

Although the region did not have its own chapter until now, developers still managed to got together at other international user meetings, such as BarCamp.

Seeing this phenomenon, Yahoo! decided it would be a good idea to spread its wings and reach out to developers in the region, Chang said.

“There has also been an increase in developers using Yahoo! APIs (application programme interface) in the region to build new products and we want them to be a part of our developer network,” he said.

The establishment of the Yahoo! Developers Network here is a big deal for Chang because he said the Internet giant previously did not make an effort to set up such a chapter. Before this, interested developers here had to join the US chapter.

“I believe that many developers here welcome the SEA chapter because having a local identity is always good,” said Chang.

The SEA chapter will function as a platform for Yahoo! to promote and drive its technology.

“We regard it as a tool for us to gain a stronger foothold in the global IT industry and we don’t just want to be big but we’d like to the prove that we are big by offering developers different capabilities from our APIs,” he said.

Yahoo! would also like to guide developers toward making it big in the IT sector, he added.

As excited as he may be about the new chapter, Chang said there are still some challenges in rolling it out in the region. One of these is a shortage of people to run the network.

“We have a small team here so I’m trying hard to rally everyone to participate in the project,” he said. To get the ball rolling, Chang plans to have the SEA chapter get involved in existing developer group activities.

“We plan to conduct talks and workshops to help developers use Yahoo! APIs to their full potential,” he said.

There are also plans to get the custodian of the MSC Malaysia initiative, the Multimedia Development Corp, to co-organise some of the activities because of its longer and wider reach in the region.

Hybrid Investments A Cross Between Debt & Equity

Given the development and evolution of products in our capital market, there are now some hybrid investments that are part equity and part debt.

Loan Stocks
You may have heard of CULS, which are unsecured loan stocks. A loan stock is a security issued by a company for a loan made to it by investors. CULS combine certain advantages of bonds (which are loan securities) with the option of converting into ordinary shares, known as the conversion privilege. The bond characteristics of CULS are they pay investors a fixed rate of interest and the principal sum on maturity. The equity part of ICULS materialises when they are converted into shares where the investor can enjoy possibilities of capital appreciation.

CULS can be issued in the form of redeemable (RCULS) or irredeemable (ICULS) convertible unsecured loan stocks. If the loan stocks are irredeemable, the holder must convert the ICULS into shares on maturity (normally after four to five years) at a predetermined conversion ratio and conversion price. If redeemable, then on maturity the holder can either convert the RCULS into shares or redeem the RCULS from the issuing company at their par value.

Companies issue CULS because they make the bonds more saleable with the addition of a conversion privilege. CULS also lower the cost of borrowing money and may enable the company to raise equity indirectly on more favourable terms than through the issue of new shares. To the investor, CULS gives him a security that combines much of the safety and income certainty of a bond with the option to convert into common shares and benefit from any increase in share prices.

Preference shares
Preference shares are also a form of equity hybrid, which carry a prior right to a fixed dividend (ordinary shares do not have a right to a fixed dividend). This fixed dividend is usually expressed as a percentage of the share's nominal value, and is paid when sufficient profits are earned. Preference shares that also carry the right of any arrears of preference dividend which has not been paid, is known as cumulative preference shares. Preference shares that are not entitled to such arrears in dividends are called non-cumulative preference shares.

Should I Invest for Growth or Income?

One of the common questions that plays in the minds of most investors is the purpose of investing - should an investor invest for growth or income? Before deciding on which of the two is best suited for an investor, we, first and foremost need to understand the differences between an income stock and a growth stock.

What are Income Stocks?
An income stock is basically a stock that pays dividend. The main purpose of owning an income stock is to earn a high dividend consistently as a source of current return, and not to hope for spectacular price appreciation in the stock. The price of income stocks tend to be less volatile compared to other stocks available in the market. As such, during a market down turn, these stocks would show slower decline in price as the investors would be holding on to the stocks for as long as the companies continue to pay the dividend. You can find these stocks in industries that are less affected by the business cycle, where the products or services generated by the companies in the industry are required regardless of the stages of economy we are in. These would include utilities, food and daily essential items. It also means that the stocks of companies providing these products or services bear relatively lower risks.
However, you need to watch out for the interest and inflation rates when investing in these stocks. They are sensitive to the increases in these rates. When the interest rate increase and if the dividend yield of a particular income stock remains the same, or worse still, lower than the interest being paid by other investment options (such as corporate bond or bank’s fixed deposit), the price of this stock may go down. In addition to this, in a situation where the inflation rate rises and if the stocks are maintaining the same dividend rate year after year, in real terms the dividend will become lower.

What about Growth Stocks?
In contrast to an income stock, a growth stock usually pays little or no dividend; instead, it exhibits high growth potential. A typical growth stock will have a higher than industry-average growth rate (usually double digit growth), for more than three years consecutively. You will find that most good growth companies are in the industries that are currently fast expanding, such as Information Technology or Biotechnology. These companies would typically be the market leaders or have the potential of becoming one. One of the notable caharacteristics of these companies is their research and development expenses, are usually very high as compared to their revenue. In addition, companies that have built up strength in a particular niche market or have high entry barrier also fall into this category.
Bear in mind that there are risks in investing in these stocks. As growth potential is something which has yet to be realized and with the fast changing business environment, these companies also bear relatively higher risk in the event their products or services fail to catch-up with the latest development within their market.

So, which one do I choose?
By now, you should have a basic understanding an income stocks and growth stocks and how they differ. In order for you to decide which one to invest in, you will have to look at your own situation and determine your financial goals. Generally, if you fall within any of the following categories, income stocks would be more suitable as you would benefit from the lower risk and relatively higher predictability that income stocks have:

  • you are looking at earning regular income from the stock market to support your expenses; or
  • you are currently approaching the retirement stage and relying on the income from the stock market for lifestyle maintenance; or
  • you are just about to start investing in the stock market.

On the contrary, investing in growth stocks would be the choice for you if:

  • you currently have a pool of money and you would like to look for long-term investment for capital appreciation.