Asset Sales Worth Nearly RM10 Billion Saved Tabung Haji

Lembaga Tabung Haji (TH), the Malaysian Hajj savings fund, implemented a significant restructuring plan in 2018 to rescue itself from a severe financial deficit that threatened its solvency. The plan required immediate financial intervention, or a bailout, from the government to protect the institution from collapse.

Concerns regarding TH's financial health had been mounting since 2014, with Bank Negara Malaysia (BNM) flagging the practice of paying high profit distributions despite low reserves. This practice eroded TH's financial cushion, potentially exposing it to the risk of large-scale deposit withdrawals. The Auditor-General's report for 2017 further highlighted inconsistent accounting practices that failed to present a true financial picture, noting that a clean audit certificate should not have been issued with mere 'Emphasis of Matter' remarks.

The gap between TH's assets and liabilities had widened substantially, exceeding RM10 billion by the end of 2018. Had this deficit not been addressed, TH would have been unable to declare any profit distributions for that year, as required by the Tabung Haji Act. The potential consequences included a financial market crisis and national instability if TH were forced to sell assets at distressed prices to meet a 'deposit run', a scenario where a large number of depositors withdraw their funds simultaneously.

To avert this crisis, the government and TH opted for a recovery and restructuring plan that involved selling non-competitive and problematic assets at a premium to the government. This strategic move aimed to close the asset-liability gap and ensure TH's solvency. Urusharta Jamaah Sdn Bhd (UJSB), a Special Purpose Vehicle wholly owned by the government, purchased these assets valued at RM9.7 billion for RM19.9 billion. This transaction, financed by UJSB's sukuk issuances, successfully covered the deficit and allowed TH to declare profit distributions for 2018. TH retains the Right of First Refusal on these transferred assets should UJSB decide to sell them in the future, subject to commercial valuations and TH's investment criteria.