Malaysian govt throws financial lifeline to haj fund

Consultants appointed by the seven-month-old Pakatan Harapan government have said that Tabung Haji has accumulated up to RM10.2 billion (S$3.3 billion) in losses of its domestic and international equities as of October. Its liabilities outstripped to
Consultants appointed by the seven-month-old Pakatan Harapan government have said that Tabung Haji has accumulated up to RM10.2 billion (S$3.3 billion) in losses of its domestic and international equities as of October. Its liabilities outstripped total assets by RM9 billion. PHOTO: UTUSAN MALAYSIA
De facto Islamic Affairs Minister Mujahid Yusof Rawa says the fund has been ''illegally'' paying dividends.
De facto Islamic Affairs Minister Mujahid Yusof Rawa says the fund has been ''illegally'' paying dividends.

Tabung Haji to offload $6.6b of underperforming assets; central bank to inject $3.3b in loans and supervise fund

KUALA LUMPUR • The Malaysian government has thrown a financial lifeline to Muslim pilgrimage savings fund Tabung Haji (TH), a day after de facto Islamic Affairs Minister Mujahid Yusof Rawa said it had been "illegally" paying dividends in the four years to last year because its liabilities were higher than its assets.

TH will offload nearly RM20 billion (S$6.6 billion) of underperforming assets to a Ministry of Finance (MOF) company, and the central bank will inject RM10 billion (S$3.3 billion) in short-term loans to improve its liquidity, the fund said on its website yesterday.

Furthermore, TH will be supervised by the central bank, Bank Negara Malaysia, from next month. It is currently managed by the Prime Minister's Office.

Pakatan Harapan (PH) leader Anwar Ibrahim said placing TH under Bank Negara would allow it to refocus on its original purpose as a savings fund for pilgrims.

"Tabung Haji is an example of how the damage has been inflicted and trust betrayed. It is not the fault of the institution nor investors, but the management that misused power to rob the people, and action should be taken against them," Datuk Seri Anwar was quoted by the Malaysiakini news site as saying.

TH has been a widely respected institution in the Islamic world, seen as an efficient manager of pilgrims' savings and an organiser of the annual haj to Mecca.

However, it has also been used as a political tool in the country over the years, with high dividend payouts often seen as a reward for Malay Muslims to continue supporting the previous Barisan Nasional (BN) government.

MISUSE OF POWER

Tabung Haji is an example of how the damage has been inflicted and trust betrayed. It is not the fault of the institution nor investors, but the management that misused power to rob the people, and action should be taken against them.

PAKATAN HARAPAN LEADER ANWAR IBRAHIM

The 2017 dividends were paid out in February this year, amounting to as high as 6.25 per cent for depositors. This was just three months before the historic May 9 general election which saw PH replacing BN in Putrajaya.

Another controversial transaction involving TH occurred in 2015, when it paid what many considered above market rates for a 0.63ha plot of land owned by scandal-hit state fund 1Malaysia Development Berhad (1MDB).

TH's chief executive and managing director Zukri Samat, providing more details of the government's lifeline, said that RM19.9 billion of the fund's underperforming assets, primarily real estate and equity holdings, would be transferred to a Special Purpose Vehicle, an MOF company.

"This is to ensure that (TH) would have a clean balance sheet, with assets equal to liabilities," Malay Mail quoted Datuk Seri Zukri as saying at a news conference yesterday.

 
 
 

Turning to the purchase of the 1MDB land, Mr Zukri said: "We bought that land for RM196 million, and until now, we haven't gotten any returns."

Consultants appointed by the seven-month-old PH government have said that TH had accumulated up to RM10.2 billion in losses of its domestic and international equities as of October. Its liabilities outstripped total assets by RM9 billion.

In a report presented to Parliament on Monday, the consultants said the pilgrimage savings fund would not be able to declare dividends for many years if the balance sheet was not restored.

"The gap between the assets and liabilities is RM9 billion. If the RM9 billion hole is not covered, no hibah (dividends) distribution is possible, not just for 2018, but also in the coming years," said the report, which was titled Rehabilitation and Restructuring Plan of Tabung Haji.

The report was released after the government-appointed accounting firm Pricewaterhouse-Coopers performed a review of TH's financial position for last year and up to June this year.

A version of this article appeared in the print edition of The Straits Times on December 12, 2018, with the headline 'Malaysian govt throws financial lifeline to haj fund'. Print Edition | Subscribe