I did a quick press conference this morning in Parliament exposing an attempt by govt to tidy up their loan exposure. See below.
My press statement was also picked up by the Edge. Here is the link.
Ministry of Finance’s RM875 million Creative Accounting for Malaysia Debt Ventures and Prasarana
Items 14 and 18 in the Orders of the Day reveal that the Ministry of Finance intends to convert its loans to Malaysia Debt Ventures Berhad (MDV) and Prasarana Malaysia Berhad (PMB) into shares.
The loan amount to be converted are as follows:
· RM400 million for MDV
· RM475 million to PMB.
A debt to shares swap is not unusual for arms’ length deals between lender and borrower corporations. However it is unusual when both entities are related, in this case the Minister of Finance (Incorporation) owns both MDV and PMB. Even more intriguing is the fact that both MDV and PMB are not for profit corporations but government bodies to facilitate developments in their respective fields. So when a loan which is repayable is converted to shares (no longer repayable), how will the government ever recover the RM875 million loans, since MDV and PMB are not for profit therefore will not likely ever to pay any dividends back to the Ministry of Finance.
So what is the purpose of this loan to shares swap plans of the Ministry of Finance? It is obviously an attempt to artificially reduce government loan exposure, because with this debt to share swap, an outstanding loan will be converted into an investment of the government. It will artificially create a rosier picture of the state of Malaysian government finances. This is a blatant exercise of creative accounting and it is yet another attempt to hide and subvert crucial fiscal data from the rakyat.
PKR calls upon the Ministry of Finance to cease this unusual practice. We also urge the government to reveal how many government loans have been converted to shares in the last ten years, not limited to loans to government bodies but also to private companies. The government will also need to come clean on what return in dividends have they received from such a debt to share swap.