This article first appeared in The Edge Malaysia Weekly on March 23, 2020 - March 29, 2020

LEMBAGA Tabung Haji (TH) has been mulling over a subsidy rationalisation plan for years due to the rising cost of the haj pilgrimage, says managing director and CEO Datuk Nik Mohd Hasyudeen Yusoff.

The Edge Financial Daily had reported last month that the pilgrim fund may remove the subsidy for first-time pilgrims, except those in the bottom 40% income group, likely from next year onwards.

Nik Mohd Hasyudeen says a targeted subsidy scheme is one of the options being considered to address the situation, which has seen overall haj costs nearly double to RM22,900 last year from RM12,603 in 2009.

This was despite TH maintaining the haj payment at RM9,980 per person throughout the 11 years, resulting in the subsidy covering more than half of the total cost in 2019, compared with a mere 21% in 2009.

To put it simply, each first-time pilgrim was subsidised as much as RM12,920 last year, involving a total allocation of RM321 million, compared with RM2,623 and RM54 million respectively in 2009. TH had spent RM1.66 billion in subsidies in the 

11 years, which saw an average year-on-year increase of 6.13% in haj costs.

“I think it is important to note that the money that pays for [the difference in total cost] comes from the profit that we get through the depositors’ savings with Tabung Haji. The challenge is, how long can we do this, given that the cost is expected to continue to rise,” he tells The Edge.

“Of course, this issue was discussed by the previous administration. It has been discussed for many years. We are waiting for the opportunity to revisit the issue and see what the policy direction is. Being a statutory body, we stand guided by the policy of the government.”

Nik Mohd Hasyudeen says another option on the table is increasing the haj payment, which will effectively reduce the subsidy allocation. However, he says such a decision will have to be approved by the Prime Minister’s Department.

Asked if the subsidy rationalisation plan will be implemented next year, he says he is unable to give a timeline, but stresses that the matter can no longer be ignored and must be addressed accordingly.

“I think the concept of subsidy was introduced in 2001, but there was no issue back then. However, the gap between the haj payment and overall costs kept growing over the years, which is something that cannot be ignored anymore,” says Nik Mohd Hasyudeen, who is a former executive director of the Securities Commission Malaysia.

Last month, The Edge, quoting sources, reported that TH was making some arrangements to reduce the impact of the subsidy rationalisation programme on the public. One source said the move could be carried out as early as next year.

Understandably, things may remain status quo next year, given the recent change of government, coupled with the unfavourable economic conditions in Malaysia and abroad.

It is worth noting that in the letters sent out to those who have been chosen to perform their haj this year, pilgrims have the option to accept or forfeit the subsidy.

Four months ago, TH announced that it had restored its financial health after completing its restructuring exercise last May by transferring underperforming assets, with a market value of RM9.63 billion, to Urusharta Jamaah Sdn Bhd (UJSB) in exchange for RM19.9 billion — sukuk totalling RM19.6 billion and RM300 million in cash.

UJSB is a special-purpose vehicle set up by the Ministry of Finance to manage TH’s underperforming assets.

The transfer was completed on Dec 28, 2018.

TH is a statutory body established by the government in 1963. The fund, governed by the Tabung Haji Act 1995, provides facilities for Malaysian Muslims to save for their pilgrimage.

The sole haj institution in Malaysia has more than 50 years of experience in savings, haj services and investments, with over nine million depositors and 125 branches nationwide. It also has an office in Jeddah, Saudi Arabia.
 

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