On 29 July, the government declassified the Tabung Haji Royal Commission of Inquiry’s report, which was established in 2022 to investigate the financial difficulties of Lembaga Tabung Haji (the Pilgrims Fund Board) between 2014 and 2020.
In doing so, the royal commission identified major governance failures and dubious accounting practices within the management of the pilgrimage fund.
Among the royal commission’s recommendations was the demand that the Tabung Haji Act 1995 be amended to include “a specific provision prohibiting active politicians from being appointed to or holding the position of Chairperson or member of the Board and its subsidiaries”.
The Center to Combat Corruption and Cronyism (C4 Center) is deeply disturbed by these findings and demands that the royal commission’s recommendation on political appointments be extended to all federal statutory bodies, government-linked investment companies, and government-linked companies.
Financial mismanagement caused by political considerations
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The royal commission found that LTH had been concealing its true financial state, with its 2017 accounts reporting a RM3.4bn profit, while actually netting a RM1.4bn loss.
Despite facing substantial losses between 2014 to 2017, LTH proceeded with hibah payments or profit distributions to depositors by dipping into their already shrinking reserves.
The royal commission contended that this decision was the “primary cause of LTH’s financial crisis”, noting that “political pressure in the lead-up to the election” was the main driver.
In the spotlight of all this is former Baling MP and current Umno supreme council member Abdul Azeez Abdul Rahim, who served as LTH chairperson from 2013 to 2018. Reporting by Malaysiakini cited leaked letters from then Bank Negara Malaysia governor, Zeti Aziz, dated August 2014 and December 2015, in which Azeez had been warned of the fund’s serious liabilities.
Yet, these warnings appear to have gone unheeded by Azeez, seeing as LTH’s financial position further deteriorated in subsequent years.
In 2018, Azeez became the subject of controversy after the then LTH board lodged two police reports against Azeez and three others for allegedly misusing RM22m of Yayasan Tabung Haji’s funds for “political activities”.
While initial investigations into the matter had been conducted, these allegations further tarnished the reputation of an institution already reeling from a serious financial crisis.
That a fund entrusted by millions of ordinary people with their savings for religious purposes could be pushed to the brink by political expediency is nothing short of a disgrace.
The royal commission’s findings lay bare the devastating consequences of political interference and weak governance; where political calculus was allowed to take precedence over public benefit.
Political appointments must end
This saga has reinforced C4 Center’s longstanding contention that the practice of appointing politicians to federal statutory bodies, government-linked investment companies, and government-linked companies must end.
Political appointments have long been criticised as a mechanism for rewarding political allegiance, consolidating patronage, and maintaining political loyalty.
Such appointments carry inherent corruption risks by entrenching crony networks and creating conflicts between political interests and the public good.
It is well documented how politically connected appointees have used their positions to advance the interests of the political parties or leaders responsible for their appointment, fostering relationships of patronage.
In these circumstances, political considerations too often supersede the duty to uphold sound governance and prudent financial management owed to institutions entrusted with billions in public assets.
In this instance, the royal commission has directly identified how “political considerations” contributed to severe financial mismanagement within LTH, placing the savings of millions of people at risk.
So long as political appointments remain embedded in these institutions, the conditions that enable abuse, mismanagement and corruption will persist.
To reiterate, public institutions exist to serve the people, not politicians or political parties. Ending political appointments is essential to safeguard against corruption and a prerequisite for restoring public trust in institutions entrusted with the nation’s wealth.
Therefore, to rectify these deeply concerning revelations and to safeguard all statutory bodies, government-linked investment companies and government-linked firms from future scandals, C4 Center strongly demands that:
- The government take heed of the royal commission’s recommendation to amend the Tabung Haji Act, prohibiting politicians from being appointed as chairperson or to the board of LTH
- The government put an end to the practice of appointing politicians in all statutory bodies, government-linked investment companies and government-linked firms by introducing new legislation or amendments
- The legislation of a Political Financing Act, which includes mandatory public reporting of all political funds and the total prohibition of corporate and anonymous donors to prevent the misuse of public funds for political purposes – C4 Center
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