By Khairie Hisyam
While attention had been on controversial fund 1Malaysia Development Bhd this week, another issue is brewing at the doorstep of Putrajaya as another mountain of debt, with monies mysteriously spent, grows.
Most eyes are on the sudden change of guard at controversial state investment fund 1Malaysia Development Bhd (1MDB) earlier this week but another issue of similar weight (if not more worrying) with debts of RM30 billion brews closer to the federal government’s home in Putrajaya.
At the turn of the new year, the customary six-month deadline for Pembinaan PFI Sdn Bhd, a company wholly owned by the Ministry of Finance, to submit its annual audited accounts for the 2014 financial year ended Dec 31, 2014 (FY14) began ticking as the company needs to file the accounts by June 30 this year.
This deadline is set by Section 169 of the Companies Act 1965 and applies to all companies registered with the Companies Commission of Malaysia (CCM), which falls under the Ministry of Domestic Trade, Co-operatives and Consumerism.
But Pembinaan PFI had not even submitted the previous annual audited accounts, which was for FY13 ended Dec 31, 2013. This set of accounts would have been due by June 30, 2014 at the latest according to Section 169, which means Pembinaan PFI had missed the deadline by six months and counting.
It is absurd. What message does it send when a government-owned company fails to adhere to the law of the land, enforced by an arm of the same government, for something that should be a matter of course?
For make no mistake, filing annual audited accounts should be a matter of course. The numbers should be there. If there is nothing untoward in the books, it should be a matter of compilation and then passing them on to respectable auditors for auditing.
It is strange then that Pembinaan PFI cannot seem to do this simple thing. It has no real business operations apart from providing funding for selected Bumiputera contractors awarded private finance initiative (PFI) jobs, a process which is terribly secretive and shrouded in mystery.
Get this: Over the years Pembinaan PFI had awarded RM23 billion in PFI jobs, according to the Auditor-General’s findings, yet it does not have a website or any publicly available resource for the general public who might be curious as to who are getting these jobs, what public infrastructure is being built, where and what the costs are for each project.
Other things Pembinaan PFI does include collecting rent from the government. Recall that the government previously entered into a strange deal whereby it leases to Pembinaan PFI 186 land parcels in exchange for RM20 billion upfront – money that was its seed funding borrowed from the Employees Provident Fund (EPF) to kickstart the whole PFI drive in the first place – and in return the government rents the 186 land parcels over 15 years, paying RM29.18 billion in total.
This artificial income is then used by Pembinaan PFI to repay its EPF loan. (For KiniBiz’s previous investigation into the issue, look here, here and here.)
In other words, Pembinaan PFI is not a conglomerate of far-flung holdings which brings complications in accounting matters. If Pembinaan PFI is having difficulty putting together its annual accounts and have a respectable auditor verify its numbers some 12 months after the financial year ended, the emerging question is why.
What’s wrong with the figures at hand? Why such a long delay for a company with no real business operations and therefore little reason to expect accounting complications? Does Pembinaan PFI have something to hide?
The government should explain this strange tardiness. After all the government has a responsibility to lead the way in such things: Obey the law, observe regulatory requirements and do things by the book. In this case, that means meeting CCM deadlines.
Failing to do so puts CCM in a difficult spot – how can it go after errant companies in this matter when government-controlled companies are also flouting the same law the Commission is trying to enforce?
Coming back to Pembinaan PFI, the long delay for FY13 audited accounts means the public remains in the dark about its current financial situation. The latest available figures are for FY12 and two full financial years had passed since then.
Already the figures from FY12 make less than encouraging reading. Debt amounted to RM27.86 billion against assets worth RM27.89 billion, likely government land leased to the company to create collateral for the loans extended to the company.
With a second round of funding of at least RM10 billion in 2013 – the financial year for which the audited accounts are so very late – the public has every reason to expect that Pembinaan PFI’s current debt would be in the region of RM30 billion at least.
It is a huge figure. Consider that 1MDB, with all the controversies over its bond mispricing, funds mismanagement and strange corporate moves – getting short-term loans for long-term investments, leaving piles of cash doing nothing, investing for paltry returns against high borrowing costs – has debt amounting to over RM40 billion.
This means Pembinaan PFI is not that far behind 1MDB in terms of debt, although a difference is that Pembinaan PFI is likely borrowing all its funds from the EPF.
Worse, Pembinaan PFI unlike 1MDB may not even have any real assets to generate income with. Instead the artificial income from the government is what Pembinaan PFI relies on to repay its debt to EPF, essentially meaning that the government is taking a loan from EPF in a roundabout manner.
So here we have a government-owned company quietly growing its debt mountain, catching up to 1MDB it looks like, without any real income-generating asset to back its debt apart from artificial income created by the government.
Said company is spending double-digit billions for PFI projects by awarding projects to mysterious contractors whom the public has no way of identifying and for some reason it cannot put together its full-financial year accounts despite a whole year passing by after said financial year ended. In other words, no transparency.
If that doesn’t sound like a recipe for disaster, what is? Right now Pembinaan PFI looks like another 1MDB in the making. Worse, one that is much more closely hidden from public view.
GRRRRR!!!
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