Tuesday, June 16, 2015

PFI exists to allow Putrajaya to spend off-budget, PAC finds

BY ANISAH SHUKRY

The Ministry of Finance owns Pembinaan PFI Sdn Bhd which was supposed to fund development projects but these did not materialise. – The Malaysian Insider file pic, June 11, 2015.

The Ministry of Finance owns Pembinaan PFI Sdn Bhd which was supposed to fund development projects but these did not materialise. – The Malaysian Insider file pic, June 11, 2015.
Government-owned firm Pembinaan PFI Sdn Bhd exists as a vehicle for the government to carry out off-budget expenditure, the Public Accounts Committee (PAC) has found.
In its report tabled in the Dewan Rakyat today, the PAC found that while Pembinaan PFI was set up to fund development projects, this "concept was not applied in this case".
"In the PAC's opinion, this programme serves to allow the government to make off-budget loans. The private quarters (firms) did not fund the costs of the projects," it said.
Because Pembinaan PFI's loans did not show up as government liability, Malaysia's 3% deficit rate and 54% gross domestic product (GDP) was skewed, PAC added.
"Off-budget expenditure can create doubts over the figures produced in the budget and does not reflect the government's real financial position, including its contingent liability, deficit, and debts.
"Besides that, the loans under the Financial Accounts do not show up as government liability and the expenditure is not taken into account when calculating the country's deficit," said PAC.
It said the government's expenditure and debts would be much higher if it included PFI's expenditure.
According to the third series of Auditor-General's Report 2013, Pembinaan PFI, which was set up in 2006, has amassed RM27.862 billion in liabilities.
The A-G's Report also found that the projects being developed under PFI were not on schedule, had unsatisfactory construction quality and weak monitoring and did not follow specifications.
PAC in its report today said Pembinaan PFI used government funds to repay the various loans it took up.
In explaining how this was accomplished, PAC said the government leased federal land to Pembinaan PFI at a "nominal fee", then rented the same land back from Pembinaan PFI.
"Loans by PFI will be paid back using the rental money from the government for use of the land owned by PFI, which the government had previously leased to PFI at a nominal fee," said PAC.
"The expenditure is not tabled in the budget that is tabled in Parliament. Details of the allocation for the projects, which are funded by PFI, are also not tabled in Parliament (off-budget expenditure)."
DAP MP Dr Ong Kian Ming had previously said that Pembinaan PFI first took up an RM20 billion loan from the Employees Provident Fund (EPF) in August 2007, due to be paid in lump sum plus interest in August 2012.
But this loan was restructured in August 2012 to biannual payments for 15 years (until 2027), Ong said in a statement on March 17.
PAC recommended that any allocation and expenditure for PFI's projects be tabled and passed in Parliament, and that any off-budget expenditure similar to PFI be reported with transparency. – June 16, 2015.
- See more at: http://www.themalaysianinsider.com/malaysia/article/pfi-exists-to-allow-putrajaya-to-spend-off-budget-pac-finds#sthash.PLKY13Lo.dpuf

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