KL diverting portion of defence budget to bail out Tabung Haji, Felda

KUALA LUMPUR • Malaysia is putting its defence spending on the back burner as the government is channelling more than RM20 billion (S$6.56 billion) to bail out two key Malay institutions, Defence Minister Mohamad Sabu has said.

The Pakatan Harapan government is pumping money into Muslim pilgrimage fund Tabung Haji and landowners under the government's Federal Land Development Authority (Felda) scheme, after discovering financial discrepancies.

Mr Mohamad, in a media group interview on Friday, said a major portion of his ministry's budget had to be diverted to save the two "Malay institutions", Malay Mail online news quoted him as saying.

"It depends on need and, most importantly, financial ability because now a lot of our money is used to save the Malay institutions which have been destroyed - Tabung Haji and Felda," he said.

He did not give details on what the Defence Ministry had sacrificed, but indicated expenditures to improve Malaysia's defence were given a back seat.

Media reports in November said the Malaysian government, in announcing its budget for 2019, allocated RM15.3 billion for the Defence Ministry, RM100 million less than the previous year.

"So the Pakatan Harapan (PH) government is being attacked by those saying that (the government) does not care about the bumiputera and Malay issues and all that," Mr Mohamad said. "However, what happened now is that RM24 billion is used to save these collapsed Malay institutions."

He was referring to the slip in support for PH by Malays in the months after the May general election last year, with complaints that the new government has failed to rein in the cost of living and concerns over how it handles issues related to the Malay majority and Islam.

The government had announced that RM26.2 billion was being channelled to rejuvenate Tabung Haji and Felda.

The Mahathir Mohamad administration last December created a special purpose vehicle (SPV) to take over property and equity assets of Tabung Haji bought for nearly RM20 billion and now worth RM9 billion less. This has left Tabung Haji, which helps Muslim Malaysians save up money to perform their pilgrimages in Mecca, with a clean slate to continue.

The SPV will nurse these impaired assets to enhance their values and possibly sell them off later.

Due to the financial rescue, Tabung Haji paid its lowest dividend in history at 1.25 per cent earlier this month for the year 2018. This compares with the 6.25 per cent to depositors who have not performed the Haj pilgrimage, and 4.5 per cent to the rest of its depositors.

Earlier this month, the government said it was injecting RM6.23 billion into Felda to revive the agency, which owns a 33.6 per cent stake in listed FGV Holdings, with its shares deflated badly.

The cash injection will be used to repay Felda debts and improve operations, with RM2.7 billion used to financially assist Malay settlers.

The Felda land settlers are Malays, mostly with oil palm plantations on their smallholdings. They number more than 1.2 million voters and are spread across 53 of the country's 222 federal parliamentary wards.

A version of this article appeared in the print edition of The Sunday Times on April 21, 2019, with the headline 'KL diverting portion of defence budget to bail out Tabung Haji, Felda'. Print Edition | Subscribe