State Government Uses Off-shore Loan to By-pass Scrutiny by DUN

28-11-2015
State Government Uses Off-shore Loan to By-pass Scrutiny by DUN
Over the last 10 years, the Sarawak Government has been engaging in off-shore loans to circumvent the scrutiny of Dewan UndanganNegeri on a major portion of its expenditure. For that, it is paying obscenely high interest in US dollar.
The State Government had been reluctant to disclose the amount of off-shore loans taken up by its subsidiary companies. I submitted the question before the April 2015 DUN sitting began and only received the answer to it on 26-11-2015, after I threatened to move a motion against the Chief Minister for failure to provide answers to my question.
The answer to my question provided by the Chief Minister reveals a large amount of foreign debt owed by the State Government. What is more shocking is the extremely high interest rates that the State Government is paying for these loans.
The followings are the particulars of the off-shore Loans owed by the State Government as at end of Financial Year 2015:
1. Sarawak Capital Incorporated Bond due in 2026. Principal amount still owing is US$165.0 million and balance of interest owing is US$148.96 million.
2. Equisar International Incorporated Notes due in 2026. Principal amount still owing is US$533.5 million and balance of interest owing is US$556.75 million
3. SSG Resources Ltd Notes due in 2022. Principal amount still owing is US$560.0 million and balance of interest still owing is US$238.00 million
In total, the State Government had a US2,202.21 million of foreign debt. With the present exchange rate of 1US$ to RM4.2, that is a whooping RM9.25 billion of foreign debt, 55% of which are for interest payment and forex losses.
In the answer provided, the Chief Minister tried to justify these borrowing but failed miserably. It only confirms my suspicion that there are great improprieties in these off-shore loans taken up by the State Government.
It is normal for Government to seek finance from the capital market (ie. to borrow), however, what is not normal in these loans are the extremely high interest payable by the State Government on these loans. On average, the State Government is paying more than 6% p.a. on these loans. That is 40% more than the average interest paid on sovereign loans taken up byMalaysia Government at the relevant times.
The State Government boasts of having RM27 billion reserves. These reserves, being fixed deposits, are at most earning 2 – 3% p.a. interest. Why borrow and pay interest at more than 6% p.a. when we have the money sitting in the bank earning 2 – 3% interest only? It doesn’t make sensible financial sense.
Who are the bond-holders? Are those bondholders someone related to the top BN leaders with a lot of money overseas? Why is the State Government paying so much interest on these loans?
The second impropriety of using these off-shore loans “for strategic investment and infrastructure development” is that it shields the use of fund from the scrutiny of the DUN and that the Ministers can then not be accountable to the DUN for the use of the money.
When fund is paid out from the consolidated account of the State Government, it is done through the DUN in the annual budgets and supplementary budgets. There and then, all items of the development have to be listed and the ministers have to be answerable to the ADUNs on questions raised in respect of the items listed under the budgets.
However, when the money is paid out from these off-shore loan, no questions can be asked. The Minister simply has to tell the DUN that the money is paid to repay the loan. As such, the answer that I received is as vague as can be, ie. a general statement “for strategic investment and infrastructure development”.
To whom the proceeds of these off-shore loans were paid? What are the projects involved? Whether any open tender being called for the award of these projects? Are these projects over-priced? How is the progress of these projects?
By financing these so-called “projects” through these off-shore loans, the Government needs not be answerable in DUN for the above questions.
However, if Adenan truly walk the talk, we call on him to give a full detail of the spending of these off-shore loans instead of hiding the details with general statements.