Don T Just Squeeze Petronas Build Buffers

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Malaysia’s economy is still growing,  but barely. It’s now running more and more on domestic fuel: household spending and government projects. That sounds manageable in the short term, but the bigger picture is far more worrying.
Our external engine has stalled. Net exports plunged by a staggering 72.6 percent in the second quarter of 2025, and the current account - once our reliable safety net - has shrunk to a wafer-thin RM0.4 billion, just 0.1 percent of gross domestic product.
That’s not a buffer - that’s a blink. If oil prices slide or global demand weakens again, we could find ourselves flying without a parachute.
In this environment, Petronas becomes not just a national oil company but the national shock absorber. Its foreign exchange earnings, tax contributions, and dividends now carry disproportionate weight.
ADSBut here’s the danger: if we lean too hard on it, we risk damaging the very lifeline we’re depending on.
Demanding the full RM32 billion dividend payout while upstream profits are under pressure might look bold on paper, but it’s short-sighted.
It stretches Petronas’ balance sheet, delays vital capital spending, and undercuts investment in the exact assets - upstream gas, petrochemicals, and energy transition infrastructure - that we need to weather the next storm.
This isn’t policy. This is killing the golden goose just because the kitchen budget is tight.
Fix your plumbing before you paint the house
Don’t get distracted by surface growth. The export collapse isn’t just about gross numbers - it’s a GDP-accounting story.
Net exports were hammered by two factors: a spike in capital imports and a sharp drop after earlier front-loading of shipments to the US ahead of tariff deadlines. In simple terms, we rushed to ship goods before new taxes kicked in, and now we’re left with the hangover.
More volatility is coming, especially once tariff enforcement tightens and the US starts demanding strict proof of origin. We must be ready.
That means compliance must now be industrial-grade. Every shipment must be audit-proof. We need a single-window certificate of origin system, tighter vendor verification, and clean logistics routing to prevent transhipment accusations.
The US Customs and Border Protection hasn’t even finalised its test for transhipment - this is a legal and diplomatic minefield. Get ahead of it.
At the same time, Malaysia must shift toward service exports that are less vulnerable - like data centre operations, digital platforms, and shared services.
These bring in foreign earnings without the tariff headaches. And to bridge the next six-12 months - when front-loaded demand fades and inventories reset - we must deploy trade finance tools.
ADSMobilise Exim Bank, pre-shipment credit, and insurance guarantees to keep exporters afloat. Don’t wait for them to fail - support them now while they can still deliver.
No more one-trick pony fiscal strategy
With the current account nearly flat and exports under strain, the fiscal side must step up. The government needs to do more with less - without undermining growth or investor confidence.
Step one: Keep domestic funding as the anchor. Don’t gamble on volatile foreign appetite.
Step two: Ruthlessly prioritise capex. Fund projects with real economic returns - logistics, power grids, chip packaging - and cut the nice-to-haves and political vanity items.
Subsidy rationalisation must be steady, targeted, and humane. Protect real incomes, especially for the vulnerable, but don’t let political hesitancy stall overdue reforms.
And here’s the smartest move: set up a counter-cyclical energy buffer.
When Brent crude is high, channel part of Petronas’ dividends and petroleum tax into a sovereign stabilisation fund. When Brent falls below, say, US$70 - and the current account drops below one percent of GDP - draw from the buffer to stabilise expenditure.
That’s how you smooth the fiscal cycle without gutting Petronas’ investment engine.
Yes, the central bank has already done its part - lowering the OPR to 2.75 percent and releasing liquidity. But monetary policy cannot carry the weight of poor fiscal discipline or export erosion. Everything must work in concert.
Resilience isn’t a slogan, it’s a system
In the months ahead, policymakers must watch three indicators like a hawk.
First, the balance of payments - if the current account stays near zero, it signals our foreign income engine is broken.
Second, tariff enforcement trends - if the US clamps down harder, we’ll need watertight compliance and proactive diplomacy.
Third, energy prices - if Brent crude dips, both Petronas earnings and national revenues will wobble. That’s when the buffer rule becomes not optional but essential.
There’s one more opportunity. If Malaysia can fast-track its position as a services and artificial intelligence hub - especially in Penang, Johor, and Cyberjaya - we can build a tariff-proof, talent-driven earnings stream.
But this requires speed: visas for skilled workers, secure power for data centres, and fast-tracked grid infrastructure.
Malaysia cannot rely on a single company or a single export lane to carry the weight of a complex economy. Petronas can support, but it cannot substitute for a coherent strategy.
The ringgit, the budget, and investor confidence all depend on whether we build real buffers or keep pretending that one oil company can plug every hole.
So stop squeezing. Start planning. Use your head. - Mkini
SAMIRUL ARIFF OTHMAN is a Malaysian economist, policy adviser, and frequent media commentator.
The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

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