Press Statement
by Lim Guan Eng

(Petaling Jaya, Friday): Bank Negara should review the award of the RM 320 million contract to H & I Niaga Sdn Bhd to build the Financial Services Resource Centre (FSRC) when its latest financial reports recorded a loss of RM 251,563 in 2003. H & I Niaga was the surprise choice of Bank Negara over other bigger established rivals. More surprising was H & I’s failure to submit the 2002, 2003 and 2004 financial accounts to the Corporate Commission of Malaysia(CCM).

H & I’s submissions last week of 2002 and 2003 financial reports revealed that revenue rose in 2002 to RM 50.2 million and enjoyed a profit of RM 65,098. However in 2003, revenue dropped to RM 31.5 million incurring a net loss of RM 251,563. To-date the 2004 financial reports have still not been submitted.

For Bank Negara to award a major RM320 million contract to a loss-making company is an unusually bold move incompatible with generally accepted prudent banking practices. Such controversial decision-making can only erode Bank Negara’s moral authority and credibility to perform its supervisory and regulatory functions over the country’s banking and financial system.

On Sept 16 Bank Negara said the successful tender of the RM 320 million FSRC to H & I Niaga Sdn Bhd was selected through a rigorous evaluation process based on competitive pricing and expected to be completed in 2007.  Bank Negara needs to explain why it is wasting RM 320 million of public funds to build a new FSRC when there are so many empty buildings in Kuala Lumpur to be bought and refurbished at much cheaper prices.

According to Bank Negara, the FSRC is a knowledge and training centre, with a Money Museum and the Bank Negara’s art gallery. Is there any need to put so much resources into a showpiece whose real rate of return or contribution to the nation’s economy, corporate governance and accountability, regulation of the banking system for the benefit of ordinary consumers is doubtful at best and counter-productive at worst?

Bank Negara’s decisions, practices and supervisory functions have come under increasing scrutiny due to its failure to detect the RM 700 million losses incurred by Bank Islam. What is wrong with Bank Negara’s supervisory capacity when non-performing loans in Bank Islam can rise nearly 150% to RM 2.2 billion this year from RM 900 million last year?

Second Finance Minister Tan Sri Nor Mohamed Yakcop criticized Bank Negara in Parliament on 24 October 2005 for its failure to uncover the actual situation in Bank Islam when Bank Negara should have audited and known of this matter much earlier. To suddenly record non-performing loans of RM2.2 billion as compared to RM 900 million in 2004 shows that not only Bank Islam but Bank Negara is in need for a revamp.

Little is known about H & I Niaga Sdn Bhd., apart from the company being owned by one Amerudin Ismail (two million shares) and Ismail Mohd Hashim (three million shares). At the time Bank Negara awarded the RM 320 million contract on September 16, H & I Niaga Sdn Bhd:

·        had not filed profit and loss accounts with the Companies Commission of Malaysia since 2002;

·        Its last submitted accounts for the financial year ended Dec 31, 2001, which showed that it had bank charges of more than RM40 million, while its net profit was RM14,500.

How could Bank Negara behave so irresponsibly as to award a RM 320 million contract  on September 16, to a company that had not submitted its profit and loss accounts for the past three years of 2002, 2003 and 2004 to the Companies Commission Malaysia and suffering a loss of RM 251,563 in 2003? Bank Negara should stop behaving as if it can do what it likes with its own money and remember that it must be accountable to the people of Malaysia who own them.

H & I Niaga had claimed that accounting and computer problems caused the delay in submitting profit and loss accounts and has submitted the 2002 and 2003 accounts. With regard to the payment of levy to the Construction Industry Development Board (CIDB), H & I Niaga explained that the matter will be resolved before October 25.

Such an explanation may be acceptable to H & I Niaga Sdn Bhd and Bank Negara but not to the public. The public has a right to know why a RM 320 million contract is entrusted to a company that faces such basic accounting and certification problems not encountered by other companies that bid for the RM 320 million project. How can the public have confidence that the FSRC building will be completed as scheduled when H & I Niaga can not even get its financial accounts on time?

Bank Negara must also explain and justify the rationale and benefits to the public of spending RM 320 million on building a new FSRC, which is essentially a conference centre and art museum, and NOT choose the cheaper option of buying over the many empty buildings around Kuala Lumpur.

(28/10/2005)