KUALA LUMPUR, July 31 — Lembaga Tabung Haji (TH) today defended its 2018 restructuring exercise, saying the sale of nearly RM10 billion worth of assets was necessary to prevent insolvency and protect depositors following the release of the Royal Commission of Inquiry (RCI) report into the pilgrimage fund.
In a statement posted late last night on Facebook, TH said it undertook the restructuring after facing what it described as a widening financial deficit that required urgent government intervention to ensure the fund remained solvent and could continue declaring profit distributions under the Tabung Haji Act.
The fund said the gap between its assets and liabilities had widened to more than RM10 billion by the end of 2018, warning that failure to address the shortfall before the end of that year could have prevented it from declaring profit distributions and triggered large-scale withdrawals by depositors, with wider implications for financial market stability.
TH said Bank Negara Malaysia had, since 2014, raised concerns over the practice of paying high profit distributions despite dwindling reserves, while the Auditor-General had highlighted inconsistent accounting practices in its financial statements for the year ended 2017.
It also noted that the RCI had criticised the Auditor-General for issuing an unqualified audit opinion with only an emphasis of matter instead of classifying the financial statements as non-compliant.
According to TH, the government considered four options before deciding to transfer underperforming and problematic assets to special purpose vehicle Urusharta Jamaah Sdn Bhd (UJSB), a wholly government-owned company, as part of the recovery plan.
TH said UJSB acquired assets with a value of RM9.7 billion for RM19.9 billion through two sukuk issuances backed by government letters of support, which it said closed the gap between assets and liabilities and enabled the fund to declare profit distributions for 2018.
The fund stressed that it retained a right of first refusal should UJSB decide to dispose of any of the transferred assets, but said this did not oblige TH to repurchase them.
It said UJSB had made several offers over the years, but TH only reacquired assets that met its commercial and investment criteria.
This year, TH said it repurchased land in the Tun Razak Exchange (TRX) for RM270 million, compared with its original sale price of RM400 million, and reacquired UJ Estates (Holdings) Sdn Bhd’s oil palm plantation for RM695 million, below its original disposal price of RM800 million.
TH said the transactions reflected its approach of only reacquiring assets that added value to its investment portfolio while safeguarding the interests of depositors.
The fund said the restructuring and subsequent recovery measures had addressed RM12.6 billion in investment losses, comprising RM10 billion through the 2018 recovery plan and a further RM2.6 billion absorbed progressively until the end of 2025 through impairments on assets that were not transferred to UJSB.
It said its financial position had since strengthened, with profit distributions increasing from 1.25 per cent in 2018 to 3.25 per cent in 2024 and 3.5 per cent in 2025, while reserves had begun to recover.
TH also said reforms implemented since 2023 had already addressed about 75 per cent of the recommendations contained in the RCI report.
The fund said governance reforms, strategic planning and stronger management had enabled it to return to a more sustainable footing without further government intervention.
TH maintained that the 2018 restructuring was a strategic decision to safeguard depositors’ savings and ensure the institution’s long-term financial sustainability after what it described as years of misconduct dating back to 2014.
