Why is our government paying rental of RM29.2 billion on land which it already owns?

Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 18th of November 2014

The most recent Auditor General’s 2013 Report highlighted the fact that a little known Ministry of Finance owned company, Pembinaan PFI Sdn Bhd, had racked up debts of RM27.9 billion making it the third most indebted government owned company after Petronas and Khazanah.

Pembinaan PFI’s funding comes from loans from the Employees Provident Fund (EPF). To pay back the EPF for the first RM20b of worth of loans, the government structured a complicated and mind-boggling deal. The Federal Lands Commission (FLC) signed an agreement where it would lease PFI 186 plots of land all over Malaysia. FLC would then sub-lease this land from PFI by paying rental for land which the FLC already owns! (See Appendix 1 for first two pages of the rental agreement)

In other words, the government is sub-leasing land which it itself owns by paying rental! It’s like me leasing an apartment which I already own to my wife and then sub-leasing it from her by paying her rental!

The rental from the FLC to PFI are spread out into 30 payments over 15 years starting from the 15th of February 2013 all the way up to the 13th of August 2027. The total rental payments add up to RM29.2 billion. (See Appendix 2)

I call upon the Ministry of Finance to explain why it structured this deal where the government has to pay itself rental on land which it already owns. Is the purpose of this agreement to hide government expenditure from the budget so that our deficit would seem as if it is decreasing?

Appendix 1: Sub-Lease Agreement between Pembinaan PFI Sdn Bhd and the Federal Lands Commissioner

Appendix 2: Schedule of Rental Payments by the Federal Lands Commission (FLC) to Pembinaan PFI Sdn Bhd

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