State firms to go bankrupt without secret bailout

State firms to go bankrupt without secret bailout

February 27, 2018 0 By WFTV

Photo credit – Photo by CEphoto, Uwe Aranas: State firms bailout is of great concern to Malaysia’s debt

State firms in Malaysia are not doing well. Thus government is pumping money to save them from bankruptcy.

This is what a Straits Times Singapore article suggested.

These “off the books” bailouts are secret in nature.

On the other hand, these transactions are less transparent in the national Budget statements.

In other words, there are good reasons for the secrecy.

Nevertheless, the names of the state firms are not in the Budget statements.

Comparatively, those undisclosed government payments are helping state firms from insolvency.

On top of that, the Finance Ministry does not record these payments as debt service.

They are under obscure items such as “strategic sector payments” and “other repayments”.

These two items will amount to RM8 billion this year, or 3.3 per cent of revenue.

According to disclosures made to Parliament, RM4 billion is for “PFI repayment”.

Since 2006, the government leased land worth RM30 billion in stages to Pembinaan PFI.

This was done for a nominal sum.

The reason behind was for PFI to obtain loans to fund projects such as the building of schools and hospitals.

The government then injects money back into PFI so that it can repay its debt.

Another example is the National Higher Education Fund Corporation.

Tasked with helping the Malaysians finance tertiary education, it receives government grants worth nearly RM2 billion annually.

Among the loss making entities there is the National public transport firm Prasarana.

In 2016 it’s annual losses spiked to RM2.1 billion.

Part were due to RM644 million in financing costs.

The government has injected fresh capital from time to time, including RM2.2 billion in 2013.

Accumulated losses of RM8.3 billion surpassed a total outlay of RM7.3 billion.

Experts say Malaysia needs more development expenditure, not operating expenditure.

The country must invest in needed infrastructure and human resources development.