According to the latest Auditor General Report 2014, Series 3, a little known Ministry of Finance owned company – Pembinaan PFI Sdn Bhd – had racked up liabilities of RM27.8 billion as of 2012 making it, then, the company with the 3rd largest liability among all government owned companies after Petronas and Khazanah (See Figure 1 below).[1]
Figure 1: Top Three Government Owned Companies with the largest liabilities as of 2012
However, unlike Petronas or Khazanah, which were the two most profitable government owned companies in 2012 (See Figure 2 below), Pembinaan PFI Sdn Bhd does not have its own revenue stream and hence, profit generation capabilities.
Figure 2: Petronas and Khazanah as the top two most profitable government owned companies as of 2012
According to its company filings, the nature of Pembinaan PFI’s business is to “source for financing to undertake government projects”. According to an extensive report in the Edge, PFI was set up to disburse RM20b worth of spending under the 9th Malaysian Plan which ran from 2006 to 2010.[2] In addition, preference for the contracts under PFI would be given to small scale bumiputera contractors.
Up till today, there has been very little transparency about how exactly this RM20b has been spent and also the terms of the concession agreements between the contractors and the governments for the rental or lease of the buildings constructed under PFI. There is not even a website for Pembinaan PFI! In contrast, for example, Pembinaan BLT Sdn Bhd, which was set up in 2005 as a special purpose vehicle to construct police offices and staff quarters which would then be leased back to the government, not only has a website but lists out all of the buildings which it has completed since 2008.[3]
The recent AG’s report also highlighted that a 2nd round of funding worth RM10b had been allocated to PFI out of which RM7.57 billion had been set aside for 16 Ministries / Agencies to undertake 313 projects. As of 31st December, 2013, a total of RM4.9b has been spent from this 2nd tranche of funding. According to the company filings of Pembinaan PFI Sdn Bhd, all of its borrowings come from the Employees Provident Fund (EPF).
What is more worrying is the fact that the government has tried to hide this spending from the budget. The government set up a convoluted agreement whereby 186 parcels of land owned by the Federal Lands Commissioner was leased to PFI after which the Federal Lands Commissioner was asked to sub-lease this land back from PFI with half yearly payments from 2012 to 2027 totalling RM29.2billion (Appendix 1 below). PFI would then use these payments from the Federal Lands Commissioner to service the interest payments to EPF. This land lease agreement (attached in the email) is important because the land ‘owned’ by PFI is listed as part of its assets. This is why the recent Auditor General’s report also showed PFI has have the 3rd largest asset holdings among all government owned companies, after Petronas and Khazanah (Figure 3 below). In reality, these ‘assets’ are merely land holdings which PFI itself does not really own but were leased from the Federal Lands Commission.
Figure 3: Top Three Government Owned Companies with the largest assets as of 2012
I call upon the Finance Ministry to disclose the full list of projects and the cost of each project that was awarded by Pembinaan PFI and to ensure full transparency for future projects. I also call upon the Auditor General to conduct a thorough investigation into Pembinaan PFI including whether government Standard Operating Procedures (SOPs) were followed in the awarding of its contracts.
Appendix 1: Schedule of payments from the Federal Land Commission to Pembinaan PFI Sdn Bhd
[1] If the same exercise was done for 2013 accounts, 1MDB would probably occupy the third spot.