Cover image via themalaysianinsider.comThe Malaysian Ringgit is currently at a six-year low as the external debt tripled to a whopping RM740 billion
All fingers are pointing at government-owned 1MDB that had amassed a debt of RM42 billion. Putrajaya had admitted to injecting RM950 million into 1MDB as standby credit to service its debt.
Now, another obscure company owned by the Ministry of Finance called Pembinaan PFI is also gaining fears that it is another troubled 1MDB in the making
Pembinaan PFI racked up RM27.9 billion in liabilities in 2012. The 2013 Auditor-General's Report revealed that Pembinaan PFI Sdn Bhd had the third largest liabilities among all government-owned entities.
DAP's Ong Kian Ming estimates that the debt could have doubled to over RM47.4 billion by now
However, the Serdang MP cannot confirm the numbers for sure. Pembinaan PFI's spending is not filed in any of the federal government budget accounts.
What exactly is Pembinaan PFI and what does it do?
Pembinaan PFI Sdn Bhd was established in 2006 as a special purpose vehicle for the government to contract private contractors to build public infrastructures
Pembinaan PFI's lease agreement between the government, Federal Lands Commissioners (FLC), and EPF, from which it received a RM20 billion loan, is raising eyebrows. This is how it works:
Image via KiniBiz
Firstly, The Federal Lands Commissions (FLC) is a registered proprietor of land owned by the Federal Government; Pembinaan PFI is owned by the Ministry of Finance; EPF is a government agency under the Ministry of Finance.
FLC leases 186 parcels of government land to Pembinaan PFI on behalf of the government. The land parcels are registered under FLC's name.
In return, Pembinaan PFI would pay RM20 billion to the government for the lease of the land parcels. This RM20 billion came from EPF as seed funding.
The government then gets Pembinaan PFI to sublease the 186 land parcels back to the FLC. FLC would need to pay a rental amounting to RM29.18 billion over 15 years, with payment scheduled twice a year from 2013 to 2027.
This rental payment would be used to repay the loan from EPF on a twice-yearly basis.
According to [Kinibiz](http://www.kinibiz.com/story/issues/122407/why-does-the-govt-pay-rm29-bil-rent-for-its-own-land.html), this Principle Agreement was signed in 2007.
Essentially, this means the government has taken the RM20 billion loan from EPF and repaying it in a roundabout manner through Pembinaan PFI and FLC
Why is Pembinaan PFI courting controversy?
1. This business transaction where the government rents land it already owns to itself has been described as "mind-boggling"
2. The 186 land parcels that the FLC is now paying Pembinaan PFI RM29 billion in rent for was initially used for free. Why is FLC paying for rent now, and to whom?
Schedule of payments from the Federal Land Commission to Pembinaan PFI Sdn Bhd
Image via Ong Kian Ming
