Auditor-General Tan Sri Ambrin Buang lauded the improvements made by Minister of Finance Inc (MoF Inc) to enhance its monitoring and the performance of government-linked companies (GLCs) although the National Audit Report 2009 made few specific comments on their financial performance.

Ambrin reminded government representatives to “closely monitor” the GLCs to ensure their continued compliance with directives issued by the Treasury.

Among other things, Ambrin noted that the Treasury secretary-general had in April 2009 directed MoF Inc’s wholly-owned units which had reported losses to cut operational costs by at least 10% without affecting operations.

Ambrin added that the Treasury had also directed GLCs to use key performance indicators for proposed dividend payouts and efforts to shave operational costs.

National auditors had looked into the financials of 40 of the 58 companies in which the federal government held more than 50% equity.
The remaining 18 companies could not be audited because some were inactive, while financial data (2006 to 2008) for the others could not be obtained, the report said.

As the audits were conducted last year, the latest data available was 2008.

The aims of the audit were to determine whether the federal government’s interests were being looked after and ensure that investments were managed efficiently, effectively and prudently.

Dividends and taxes
MoF Inc’s dividend report revealed that only 11 of the 25 profitable GLCs had paid dividends amounting to RM119.26 billion to the federal government in 2009.

The four GLCs paying dividends over three consecutive years were Petroliam Nasional Bhd (Petronas), Percetakan Nasional Malaysia Bhd, Technology Park Malaysia Corp Sdn Bhd and Amanah Raya Bhd.

Unsurprisingly, the top dividend payer was Petronas, which distributed RM84 billion from 2006 to 2008.

However, the audit report said there were “doubts” about the accuracy of MoF Inc’s data pertaining to dividends as the numbers were found to be different from those in the federal government’s financial statements.

In 2008, only 27 of the 40 GLCs audited had paid taxes amounting to RM30.63 billion, with Petronas contributing the lion’s share of RM30.08 billion.
Total taxes paid by GLCs in 2008 were 24.9% higher than the RM24.52 billion remitted in 2007.

Revenue, profits and losses
The 40 GLCs that were audited reported combined revenue of RM116.48 billion in 2008, some 0.6% lower than the RM117.23 billion recorded in 2007.

Only 17 GLCs reported revenue growth over three consecutive years. These include Felcra Bhd, KTM Bhd, Indah Water Konsortium Sdn Bhd and IJN Holdings Sdn Bhd.

Among those reporting three years of consecutive revenue decreases were Malaysia Venture Capital Management Sdn Bhd, Kedah Aquaculture Sdn Bhd and International Rubber Consolidated Ltd.

In 2008, 25 GLCs reported combined pre-tax profits of RM56.39 billion, with the remaining 15 seeing RM700 million in total losses.

The pre-tax profits reported by the GLCs in 2008 were significantly lower than the RM82.36 billion in 2007 and RM70.35 billion in 2006.
It was noted that 19 GLCs saw pre-tax profits for three consecutive years (2006 to 2008) totalling RM209.8 billion while 11 companies reported total losses of RM1.49 billion over the same period.

According to the audit report, some of the losses came from newly-established companies that were still not generating operating profits. Other loss-making companies were established as special-purpose vehicles or for social purposes.

Assets and liabilities
On the whole, total assets under the GLCs grew 51.73% to RM304.89 million in 2008 from RM200.95 million in 2007.

Total assets in 2007, however, fell 43.11% to RM200.95 million from RM353.25 million in 2006.

Petronas and Khazanah had the most assets at RM171.53 billion and RM52 billion, respectively.

The audit also noted that liabilities for the GLCs soared 50% to RM151.8 billion in 2008 from RM101.2 billion in 2007.

The three GLCs with the most liabilities in 2008 were Syarikat Prasarana Negara Bhd (RM7.71 billion), Pembinaan BLT Sdn Bhd (RM5.46 billion) and Syarikat Perumahan Negara Bhd (RM2.7 billion).

As at Dec 31, 2008, 17 of the 40 GLCs audited had borrowings from the federal government totalling RM9.69 billion.

Seven companies had higher outstanding loan balances at end-2008 compared with 2007.

Analysis also showed that 20 GLCs had good liquidity in 2008, while 17 companies had unsatisfactory liquidity positions.

Those with insufficient liquidity for three consecutive years included Sepang International Circuit Sdn Bhd, Kedah Aquaculture Sdn Bhd, KTM Bhd (KTMB) and Piramid Pertama Sdn Bhd.

The audit report also ticked off KTMB for its unsatisfactory financial performance. The company recorded three years of consecutive net losses — RM99.17 million for 2006, RM81.82 million for 2007, and RM116.28 million for 2008.

The audits showed that KTMB had chalked up cumulative net losses of RM1.45 billion as at end-2008.

From 1994 to 2008, the government had to meet a funding gap of RM760 million for KTMB.

The auditors also recommended that KTMB take appropriate action to address its outstanding debt to avert greater cash flow problems in the future.

This article appeared in Special Report page, The Edge Malaysia, Issue 831, Nov 8-14, 2010