Ballooning debt of gov’t-linked firms a time bomb

MP SPEAKS The BN government will surely play up the fact that it is a prudent government that is managing its finances well, with its projection in Budget 2014 that the annually growing budget deficit will be reduced to RM37 billion or 3.5% of GDP in 2014.

However, this ignores an extremely worrying problem of a huge increase in the deficit position of the companies that are owned or controlled by the government and statutory bodies – or non-financial public enterprises (NFPEs).

For 2013, the projected deficit is RM93 billion or a massive 9.4 percent of the GDP. This represents a six-fold increase from the R15.6 billion deficit recorded in 2012.

The NFPEs refer to 30 “government-owned and/or government-controlled companies and agencies owned by the government”, whereby “ownership and control refer to government or a public sector agency controlling more than 50 percent of total equity”.

These would include companies such as Petronas, Tenaga Nasional Bhd, Telekom Malaysia Bhd, Axiata Bhd, Malaysia Airlines, UEM Group as well as more recent additions such as 1MDB, Prasarana and MRT Co.

The financial positions of these companies affect the fiscal position of the government directly and indirectly. These companies contribute directly to government coffers by paying corporate taxes (and the petroleum tax by Petronas), as well as dividends.

They (or via special purpose vehicles related to them) also issue bonds that carry an explicit as well as an implicit government guarantee, that is, the government has to pay for these bonds if these companies run into financial trouble (think PKFZ).

Financial Position of the Non-Financial Public Enterprises (NFPEs)

What is shocking about the figures in Table 1 is that the deficit position of the NFPEs, which have been in surplus for 2010 and 2011, is projected to reach RM93 billion in 2013!

Ballooning debt of gov’t-linked firms a time bomb
Ong Kian Ming
Oct 26, 2013 – Malaysiakini

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