Authentix Fuel Marking Program for Malaysia 2005-2011

Authentix works with governments to ensure authentic products are sold in-country to benefit law-abiding citizens – not criminals. Fuel marking solutions enable governments to collect more excise taxes without raising taxes for the benefit of citizens and legitimate industries. Prior engagements include a program for Malaysia from 2006 to 2011 that we want to present so that decisions are based upon technical and operational facts about the program.

In 2005, the Malaysian government was spending $3 billion on fuel subsidies and made the decision to look for a way to combat the sale of subsidized diesel to industry, mainly manufacturing, construction and agriculture. The government sought a fuel marking program to mark subsidized diesel across the country with sampling and testing done at various industrial locations.

A local Malaysian company, Teras Kimia (TK), was awarded the five-year contract and used Authentix fuel markers, test kits and analyzers. After an initial trial period, the program kicked off nationally in September 2006.

In the initial three months of the program, the government’s enforcement team identified 39 publicly-listed, large companies using subsidized diesel, and charged two companies in court. In 2010, the Domestic Trade, Cooperatives and Consumerism Minister (MDTCC) reported that since the program started in 2006, 594 cases were filed with 6.86 million liters of fuel seized, preventing the loss of approximately US$900 million in subsidies annually.

Marking the subsidized diesel fuel was effective throughout the five year program. In June 2011, the last year of the program, there was an attempt to steal subsidized fuel with reports citing evidence collected from the fuel marking program being used in the process of making arrests.

The news article covering these arrests can be read here.

The possibility of laundering the class of marker that was being used in Malaysia became an issue in early 2008. In response, TK / Authentix added a second marker to the fuel to address these laundering issues. A problem arose with the second marker in that over time the marker would leave deposits in the truck tanks that would color and partially mark any fuel that was place in the tanker. When made aware of the issue, Authentix quickly adjusted the formulation of the marker and the issue was resolved to the satisfaction of the Malaysian government.

Though the media brought some attention to the launderability issue, it did not prove to be as significant as the press made it out to be. In March 2010, there was a raid and arrest of several criminals caught in the act of trying to launder the marker from the subsidized fuel. Even after being treated in the criminal’s ‘neutralizing machine’, the marker was still detectable in the fuel. Additionally, the change in the concentration of the marker could be used as evidence of attempted laundering.

The news article covering attempted laundering can be read here.

In late 2009 some negative articles appeared on the Internet without bylines and using unnamed sources, which questioned if the Malaysian fuel marking program was worth the cost.

These articles were incorrectly pointing to the 81% reduction in illicit fuel seizures since the inception of the program as a negative. The author of these articles failed to recognize that when fuel marking programs are successful there is less subsidy abuse and therefore there are fewer police raids and less illicit fuel seized.

A reputable media outlet ran a balanced story in November 2009 that outlined the overall situation and included quotes from former and current oil ministers that the program was effective. This same organization also ran a second article the following day allowing the leaders of TK to rebut the negative arguments.

The program continued for several months after the end of the contracted five-year and came to a full stop in October 2011.

The balanced story quoting government officials can be read here.

In 2014, there have been several articles in the media about reinstating the Malaysian fuel marking program. One includes an un-named government official from the Anti-Corruption Commission who is urging the government to take action, but oil ministry officials say there is no budget for such a program.

Malaysian Program Timeline