RM5b + RM5b = RM10b worth of questions

The first 5 billion ringgit question is of course related to state investment company Valuecap. That’s the RM5 billion taken from our EPF money to be used by Valuecap to “invest” in the stock market.

But Malaysian Insider raises a new question. It claims that Valuecap owes its three shareholders RM5.1 billion, which is due to be repaid in February 2009.

This debt, in the form of interest-bearing unsecured bonds, raises questions over plans for the Employees Provident Fund to lend RM5 billion to Valuecap to invest in the stock market.

In March 2003, Valuecap borrowed RM5.1 billion from shareholders Khazanah, Kumpulan Wang Amanah Pencen and Permodalan Nasional Bhd to invest in the stock market. At the time, world stock markets were bracing for a looming war in Iraq which followed on the September 2001 attacks on the US.

Valuecap’s bonds were due to be repaid in February 2006, but the company was given another three years to this coming February. At the end of 2006, the three shareholders each held RM1.7 billion in these bonds, according to documents obtained by The Malaysian Insider.

Since these debt instruments were not listed and are not tradeable, the three shareholders are probably still holding these bonds today.

Recently, the government proposed that EPF lend Valuecap RM5 billion to invest in the stock market. In view of its impending obligation to repay its shareholders, however, questions arise over whether the loaned funds will be used to redeem the bonds.

As at the end of 2006, Valuecap’s investments were valued at RM4.8 billion. Since then, the stock market has lost 21 per cent of its value. If Valuecap’s investments have tracked the stock market, these could be worth RM3.8 billion currently.

Then there is Petaling Jaya Utara MP Tony Pua’s call on the Finance Ministry and Khazanah to explain their involvement in Silterra Malaysia Sdn Bhd, which lost RM1 billion last year. This is compounded by the alleged loss of RM5.17 billion that Khazanah Nasional is said to have invested in the semiconductor wafer manufacturer since 1994, reports Malaysiakini.

Tony is concerned that Silterra is now seeking an additional RM8.5 billion for its expansion efforts.

I think the Finance Ministry has some serious explaining to do. It should come clean and make public the accounts of these two entities - Valuecap and Silterra - and tell us exactly how much, if any, has been lost. The Ministry should also explain to the public exactly what it intends to do with the RM5 billion from EPF.