This article first appeared in The Edge Malaysia Weekly on July 9, 2018 - July 15, 2018

A key highlight of the 2012 due diligence conducted by PwC on the NFC controversy was that the RM250 million loan from the Ministry of Finance (MoF) was recoverable.

PwC had urged the government to immediately cut its losses and recover what it could.

In its briefings to senior government officials, the audit firm also presented multiple paths of urgent action that the state could take.

But as at Jan 31 this year, NFC still owed the government over RM248.2 million, according to MoF in March, indicating that the BN government had not taken PwC’s recommended actions for financial recovery.

So, why didn’t the Barisan Nasional government do so? And will the Pakatan Harapan government reopen the file?

Senior government officials whom PwC briefed back then included the then prime minister Datuk Seri Najib Razak, who was also the finance minister at the time.

PwC’s recovery scenarios were expected to recoup the entire RM250 million soft loan within 19 years or more, excluding the time value of money and any potential recovery from legal action against the family of Datuk Seri Dr Mohamad Salleh Ismail.

Based on investigation documents recently reviewed by The Edge, PwC had urged the government to secure all NFC assets urgently as a short-term recovery option.

This would have recovered at least RM118.3 million from frozen cash balances, acquired land and other properties bought with the loan money.

That would have left a potential loss of RM131.7 million.

As a short-term strategy, PwC had suggested that if the RM118.3 million recovered was invested with a minimum annual return of 6.1%, the RM131.7 million loss could be recovered by the end of year 19.

However, this projection did not take into account the opportunity costs from the time value of money and any further recovery from pressing legal actions against the Salleh family.

A second, longer-term, approach was for the government to continue the national feedlot project in order to recoup the losses. This would have entailed either the government or a new concessionaire managing the assets recovered from NFC.

These assets are the RM118.3 million in funds and others recovered from NFC, some RM27 million’s worth of infrastructure and feedlot facilities already set up.

This long-term plan assumed that the government or a new investor would achieve an internal rate of return on equity of 15% or more.

Whichever option the government chose, the first step was for the Salleh family to acknowledge its indebtedness to the government, PwC noted in its report.

Then, the Salleh family had to concede control of operations to the government’s agents so that a new management team could be appointed that would look at pursuing either recovery option.

It is unclear whether the Salleh family took the first step but NFC’s indebtedness to the government indicates that it did not.

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