Tabung Haji recovery plan addressed RM12.6b losses but further reforms needed, says RCI

 

KUALA LUMPUR, Aug 8 — Lembaga Tabung Haji’s (TH) restructuring and recovery plan successfully restored the institution’s financial position after addressing RM12.6 billion in investment losses, while further reforms are needed to ensure its long-term sustainability, according to the findings of the Royal Commission of Inquiry (RCI).

The fully declassified report said RM10 billion of the losses was addressed under the 2018 Recovery Plan, while the remaining RM2.6 billion was resolved progressively through the end of 2025.

It also noted that 75 per cent of its recommendations had been implemented, with the government committed to expediting the remaining 25 per cent as part of ongoing efforts to strengthen governance, investment discipline and risk management.

The effectiveness of the recovery measures was reflected in TH’s improved financial performance, with investment income reaching RM4.64 billion last year, its highest since 2018.

The commission nevertheless stressed that despite the progress achieved, several structural issues must still be addressed to safeguard TH’s long-term sustainability.

A key component of the recovery plan was the transfer of TH’s underperforming assets to Urusharta Jamaah Sdn Bhd (UJSB), a government-owned special purpose vehicle (SPV), enabling the institution to refocus on its core mandate, particularly the management of haj operations.

The assets were transferred at RM19.9 billion, compared with their market value of RM9.7 billion at the time, representing a premium of RM10.2 billion.

The commission concluded that the transfer preserved TH’s financial position and described the restructuring and recovery plan as instrumental in resolving the institution’s financial crisis.

However, it cautioned that the plan should not be regarded as a long-term solution, identifying several critical issues that remain unresolved.

These include strengthening corporate governance, reviewing the Tabung Haji Act 1995 (Act 535), enhancing risk management and cost controls, and introducing a regulatory framework to ensure TH remains resilient.

Among the commission’s principal concerns was the government’s ability to redeem UJSB sukuk and continue providing the annual cash allocations previously promised by the Cabinet.

It warned that failure to do so could result in continued profit distributions to depositors without adequate cash backing.

Separately, TH had previously explained that the transfer of its underperforming assets to UJSB was financed through two sukuk issuances backed by government letters of support, carrying annual profit rates of 4.05 per cent and 4.10 per cent.

The institution also said UJSB had made several offers over the years to sell assets back to TH, although none met the institution’s investment criteria at the time.

Following a fresh review this year, however, TH repurchased land at Tun Razak Exchange (TRX) for RM270 million, compared with the original transfer price of RM400 million.

TH also repurchased the UJ Estates (Holdings) Sdn Bhd oil palm plantation for RM695 million, below its original transfer price of RM800 million.

The institution’s recovery has also been reflected in its annual profit distribution, which rose from 1.25 per cent in 2018 to 3.25 per cent in 2024 and 3.5 per cent in 2025.

TH said the distributions were declared after taking into account RM2.6 billion in impaired assets that could not be transferred to UJSB at the end of 2018 for specific reasons.

It added that its financial position was now significantly stronger and that it had begun rebuilding reserves to support its long-term financial sustainability.

The RCI concluded that while the restructuring and recovery plan had successfully stabilised TH’s financial position, sustained reforms in governance, regulation and risk management remain essential to safeguard the institution’s future resilience. — Bernama