PRESS STATEMENT, 6 November 2014, Kuala Lumpur – Transparency International – Malaysia (TI-M) notes the Government’s issuance of an event of default notice to the National Feedlot Corporation (NFCorp) for failing to repay its 2014 instalment of a soft loan and for which the Government intends to take legal action. However TI-M strongly urges the Government to go all the way to seek redress for this serious breach by the NFCorp and all related wrongdoers.
TI-M understands that NFCorp is a private company owned by Agroscience Industries Sdn Bhd, with participation from the Government of Malaysia. Its commercial interest is the development of a planned, integrated and sustainable Malaysian beef industry through the development of the fully integrated livestock farming and beef production facility that manages the importation of livestock, feedlotting, slaughtering, processing, packing and marketing of beef in Malaysia.
The Government had loaned RM250mil to NFCorp for its National Feedlot Centre cattle rearing project. The project was awarded to NFCorp and as reported in the press the company was controlled and operated by the family of a former Minister, whose husband chaired the company’s board of directors, which included their three children.
The NFCorp – which was meant to be the centre of production for beef and beef products in Malaysia – hit the limelight following the publication of the Auditor-General’s Report (AG’s report) in 2010, which reported alleged misuse of funds involving the purchase of two luxury condominiums in Bangsar, luxury cars, office rentals and overseas holidays for the directors’ family members.
The A-G’s report said that the NFCorp was in a mess and it had failed to meet its target. NFCorp was to repay the loan to the Government from 2012 to 2028. To date, the government has only recovered RM79.9 million from the RM250 million it loaned to NFC and the balance of RM170 million has yet to be received. Repayments for this year, which matured in January 6, had yet to start. As a result, Putrajaya has issued a notice to NFCorp in May, giving it a 90-day extension to repay the loan.
But the company failed to adhere to the new deadline, prompting Putrajaya to issue an event of default notice on September 4 to the company to terminate the loan agreement and initiate legal action to recover the whole balance of the loan amount.
TI-M strongly supports the efforts by the Government to recover the monies owed including all interest, loss and damages from NFCorp. The Government should also freeze the company’s accounts and assets using all relevant laws including where appropriate the Anti-Money Laundering and Anti-Terrorist Financing Act 2001. Claims should also be made against all parties and individuals including its officers and directors who benefitted from any wrongdoing of the company.
The Government must also seal all NFCorp’s assets amounting to RM23 million relating to alleged criminal breach of trust laws. The Government must also rigorously pursue legal proceedings against the Chairman of NFCorp, who pleaded not guilty in March last year to two counts of criminal breach of trust involving some RM49.7 million, with regards to the purchase of two condominium units and two other charges under the Companies Act.
Besides NFCorp, the Government should also launch an offensive against other loan defaulters and to change perception that the government tend to be soft towards large borrowers.
TI-M urges the Government should publish a list of borrowers online on their status, amount borrowed, progress, loan repayment so the public are aware and also it would boost transparency and accountability.
Going forward, TI-M recommends that the Finance Ministry draws a standardized, clear and transparent guidelines in relation to disbursement of soft loans for government projects to avoid negative perception and suspicion. Clear criteria should be given on the amount of soft loans granted to companies for government projects. The directors of the companies receiving such loans must be made personally liable for the repayment of the loans, which might not be the case with the NFCorp scandal. Sad to say, the Government did not impose personal guarantees on the directors of NFCorp.
In future, before approval of any loan, the authority should proactively conduct a thorough integrity due diligence and risk analysis when selecting the competence of companies to handle the project including in the financial, technical aspect and experience. The companies must have a strong internal control policies which will ensure compliance with internal code of ethics, applicable laws, policies and procedures.
TI-M also proposes that all political and civil servants declare interest if any immediate family members have been granted any government soft loans. To prevent further loss, section 23 of MACC Act 2009 must be amended. Failure to take such steps mentioned is a great travesty to the Malaysian tax payers.
The time is now opportune for the Government to show its mettle and to be more transparent on the process of giving soft loans to cut down the possibility of misappropriation, corrupt practices, to prevent nepotism and ensure proper protection of public fund.