Is PTPTN Unsolvable?

On October 1, 2018, The Edge Financial Daily published an article by Prof. Geoffrey Williams of ELM Graduate School at HELP University regarding the above.

Moral arguments aside, the real problem is the issue of loans to fund higher education. Is that true? If loans to fund higher education are met, then universities will have steady stream of cash flows to ensure their survival. So it is not just finding a solution that is financially elegant but having borrowers with a commitment to repay. Otherwise any financial “quick-fix” will fail in the long run.

So the good Professor suggested three ways to fix the problem:

(i)        Monetise the debt – i.e. the RM39 billion debt is acquired by Bank Negara Malaysia (BNM) who then repays RM4 billion per year over ten years. For BNM, it is issuing more BNM bills and then fulfilling its obligations. The Professor suggested the easier way is printing more currency to pay off the debt. In effect, it means taxpayers are paying indirectly with unwarranted inflation at risk.

(ii)       To pay for future education, Professor Williams suggested a graduate tax (for those earning above RM4,000 per month) to recover cost and reduce loss due to non-payment. Better still, is to tax the “super-rich” to pay for education of the B40. That sounds more equitable in the broader scheme of things.

(iii)      A more radical alternative is to reform PTPTN. According to Professor Williams, have a higher education investment fund which owns shares in universities. It (PTPTN) becomes an investor. But we are changing the “goal post” of why PTPTN was created in the first place!

The “quick-fix” from my perspective is to take-over the loans that are deemed “bad” by an agency (ala’ “Danaharta”) and PTPTN receives a sum for the sale. The new agency pursues the “bad” debts or reschedules the loans on a longer-term basis. The sum received by PTPTN is then “new” money for fresh loans but this time with higher credit standards. BNM plays the role of purveyor for the process. So in “one fell swoop” we have solved the problem!

Reference

PTPTN may be unsolvable – time for a new system? By Geoffrey Williams, The Edge Financial Daily, 1 October 2018.