KUALA LUMPUR, Sept 3 (Bernama) -- The issuance of sukuk worth RM11.5 billion is not a new bailout for Lembaga Tabung Haji (TH), but rather a refinancing process that provides the institution with the advantage of continuous cash flow.
Senior director of economics and finance at the Prime Minister’s Office Nurhisham Hussein said the new sukuk issuance replaces the previous sukuk issued by Urusharta Jamaah Sdn Bhd (UJSB).
“The original sukuk issued by UJSB was a zero coupon, which means TH does not earn annual returns from the sukuk.
“Once (the previous sukuk) matures, it is replaced with a new sukuk, but this sukuk provides returns every year. So, this is beneficial to TH as it gets cash flow each year,” he said.
Nurhisham said this during a panel session titled “Dialog Ummah: Realiti dan Masa Depan Tabung Haji” organised by Himpunan Gerakan Islam Malaysia here today.
As for the issuance’s risk profile, Nurhisham said that the potential financial risk of the sukuk issuance was actually borne by the government and not by TH or its depositors.
He said the sukuk’s value largely depends on the existing value of the assets placed under UJSB’s management.
“Should UJSB be unable to realise the full value of the assets, the government will still assume its responsibility under the Tabung Haji Act (to protect all depositors’ funds),” he said.
As for the government’s ability to fulfil its duties, Nurhisham said Malaysia’s debt-servicing record is very strong and has never failed to meet any of its financial obligations.
“The Malaysian government has never failed to fulfil its promises in terms of financial obligations. We still pay, and there is no need to worry about this matter,” he said.
However, he said the impacts need to be seen in the context of the government’s broader liability management, including several current financial commitments.
“We have to examine this in the broader context. Apart from TH, the government is also managing other liabilities involving Felda and FGV issues, 1MDB bonds, and private financing initiative commitments worth billions of ringgit.
“In fact, expenses to address COVID-19 -- vaccine purchases, among others -- (were large). Hence, the government is now implementing several financial discipline measures to gradually reduce the deficit over the next two to three years,” he said.
Regarding UJSB’s role, Nurhisham said it is similar to a special purpose vehicle, like Danaharta Nasional Bhd’s model, which is established to take over and restore non-performing assets.
He said the TH and FGV issues share similar governance patterns, especially the purchase of assets at excessively high prices without adequate security holdings and weaknesses in the due diligence process.
He said that it is indeed difficult to fully recover equity assets that have declined in value for a long period.
“Hence, for UJSB, the strategy that needs to be taken is to dispose of or absorb the depreciation of assets gradually (amortise over time), similar to the approach of Bank Negara Malaysia to manage foreign exchange losses in the past.
"This will take time and depend on the government’s financial ability, but in terms of direction, the actions taken by UJSB at this time are required steps to be implemented,” he added.
-- BERNAMA