Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on October 11, 2021 - October 17, 2021

Last week, during the winding-up session of the 12th Malaysia Plan in parliament, Deputy Finance Minister II Mohd Shahar Abdullah said companies that have received government guarantees have not failed to meet their debt obligations.

He said as at June 30, 2021, the total debt guaranteed by the government amounted to RM300.44 billion, which is equivalent to 19.84% of the nation’s gross domestic product. He added that the total debt guaranteed by the government comprised domestic loans of RM273.93 billion or 91.2% of the total, and external loans guaranteed that amounted to RM26.51 billion (8.8%).

Interestingly enough, the Deputy Finance Minister II said these companies have good financial standing as they have their own financial resources. 

“Meanwhile, the government companies whose debts are guaranteed by the government are provided with an allocation based on the repayment maturity period of the debts,” he said. 

If the companies are indeed in a strong financial position, why does the government have to provide an allocation based on the repayment maturity period of the debts?

Are these companies, which the government assists, really well run, and capable of operating smoothly without government assistance?

If this was really the case, why is it that many of our government-linked companies (GLC) — which are the beneficiaries of government guarantees to begin with — not capable of venturing abroad and often get burnt when they do expand overseas and face competition from privately run entities?

Companies such as those under the Boustead group, which is a GLC, have not performed well even though large-scale contracts have been awarded to it.

There is also the case of the Federal Land Development Authority (FELDA), which is saddled with debts. In 2019, the government was ready to allocate RM6.3 billion to rescue FELDA, according to an Economic Affairs Ministry’s White Paper, which added that the capital injection was needed to manage FELDA’s RM14.4 billion in liabilities, and that the government agency had critical cash-flow problems.

What about Malaysia Airlines Bhd, Prasarana Malaysia Bhd and Lembaga Tabung Haji, which had to be rescued by the government, and not forgetting the elephant in the room, 1Malaysia Development Bhd?

Have these companies been able to pay their debts on their own without the government stepping in?

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