Mayday! Mayday! Mayday!

Mayday is an emergency procedure internationally used as a distress signal. 

In Malaysia, we have at least four institutions/entities with mayday scenarios – Malaysia Aviation Group (“MAG”), MRT Corporation Sdn Bhd (“MRT”), Prasarana Malaysia Berhad (“Prasarana”) and PTPTN.

MAG is the parent company of Malaysia Airlines. It has to restructure over RM4 billion in debt (One report suggested liabilities were over RM16 billion). Its only shareholder is Khazanah Nasional Berhad. There has been several injections and that totals over RM28 billion. Immediate prospects for passenger traffic is poor. Malaysian Aviation Commission (MAVCOM) expects 77% - 80% contraction of passenger traffic for 2021 compared to 2020. Passenger traffic may resume to pre-pandemic levels only in 2024. With that, MAS had an injection of RM3.6 billion to last up to 2025. In November 2020, the Finance Minister was quoted as saying a total of RM28 billion has been injected into Malaysia Airlines.

MRT reported a loss of RM8.9 billion in 2020. It has accumulated losses of RM53 billion and is funded wholly by Government of Malaysia (“GoM”). Administrative expenses alone were RM59.9 million in 2020.

Prasarana the transport owner and operator of LRTs, buses, monorail and MRT lines in urban centres has liabilities in excess of RM42 billion (based on news reports). This is expected to balloon further in the years to come. All funding is by way of injections by Mnistry of Finance. For financial year 2019, Prasarana had a loss of RM3.61 billion. Accumulated losses stands at RM42.4 billion in 2019 with total liabilities of RM35.4 billion.

National Higher Education Corporation (“PTPTN”) has disbursed more than RM56 billion (circa 2019). The current loan repayment ratio is 49:51, with 49% paying back and 51% not doing so. Of the non-payers, 19% have not made a single payment. Of total disbursed so far, only 32.5% have repaid in full or one-third have settled their liabilities. PTPTN is reportedly sitting on RM40 billion (or more) of Government-guaranteed debt. This will double to RM76 billion in 20 years. So, 1MDB is not so bad!

What is the upshot of this mayday article? A couple of points:

1. The Government has not been transparent with information (the above data is from news reports and published accounts that was limited);
2. MoF has to publish a “white” paper on the above “sisters”; and
3. We need new strategies, initiatives to work out each of the above problems. The total liabilities of the above four “sisters” exceed RM150 billion, or about 11% of Malaysia’s GDP. Shouldn’t there be any concern? Or, are we leaving it to our children/grandchildren to sort it out?

Source: https://www.theedgemarkets.com

 

References:

1. Why Khazanah Nasional just bailed out Malaysia Airlines, James Guild, 2 March, 2021 (https://thediplomat.com)

2.  Financial Statement (https://www.mymrt.com.my/financial-statement/)

3. Malaysia’s passenger traffic to decline 77-80% in 2021: MAVCOM, Cirium, 30 August 2021 (https://www.flightglobal.com)

4. Special report: PTPTN in search of a sustainable model, Syahirah Syed Jaafar, The Edge Malaysia, 7 December 2019