THE hefty subsidies that the Pilgrims’ Fund Board or Lembaga Tabung Haji pays out each year to send thousands of Muslims to perform the pilgrimage has become the latest hot-button issue to dog Pakatan Harapan.

When the new government and TH’s new bosses took over the scandal-tainted fund, they discovered that its operations were riddled with improper and illegal decisions which caused it to lose billions under the previous Barisan Nasional administration.

The losses have put a severe strain on its ability to continue to subsidise part of the cost for the haj, which this year amounts to more than RM22,000.

Below is an explainer of the fund’s problems.

Why is the subsidy an issue?

TH wants to reduce the subsidy it pays for each depositor’s haj pilgrimage as the fund is currently being restructured due to its financial troubles. Its former top management and a handful of former senior officials are also being investigated by the authorities.

An audit has shown that the fund illegally paid out high dividends.

According to the Tabung Haji Act 1995, the fund does not have to pay dividends if its liabilities exceed assets. The management breached this law by continuing to pay dividends between 2014 and 2017 even when it was in the red to the tune of more than RM4 billion.

TH’s rehabilitation and restructuring plan announced on December 11 showed that a small number of depositors, 1.3%, held 50% of all savings. One had RM190 million in the fund.

As of December 2017, the fund had 9.3 million depositors and its total funds amounted to RM70.78 billion.

In the same period, TH had RM74.4 billion in liabilities compared with RM70.3 billion in assets. This amounts to a deficit of RM4.1 billion.

As part of its rehabilitation plan, TH is transferring loss-making assets worth RM19.9 billion to a special purpose vehicle (SPV), Urusharta Jemaah Sdn Bhd, which is under the Finance Ministry.

Lower subsidy this year?

According to a statement on February 28, the fund said it will continue to subsidise part of the cost of the haj.

The statement put to rest a viral post on TH’s official Facebook page, which claimed the fund will only pay out subsidies to pilgrims picked to perform the haj for the first time according to the annual quota. This upset would-be pilgrims who had appealed for their turns be expedited.

De facto religious affairs minister Dr Mujahid Yusof Rawa later said TH’s statement is not final and that the idea is still being studied. The explanation, however, did little to soothe worried depositors and the opposition has exploited this matter.

In a parliamentary reply on March 20, Mujahid also said TH could not continue to bear the pilgrimage subsidy as the cost increases every year.

TH, he said, needed to explain to pilgrims that the ritual itself, according to Islamic principles, is “wajib” or compulsory only for those who can afford it.

How much is the subsidy?

The cost of every haj is determined by the Saudi government. This year, it is the equivalent of RM22,900 per person compared with RM22,450 last year.

But depositors chosen this year will only pay RM9,980. The remaining RM12,920 is borne as a “subsidy” by TH.

The subsidy started in 2001 and TH viewed it as its corporate social responsibility. This is so that each year, pilgrims can perform the haj at a constant price of RM9,980 despite the fact that the actual cost of the trip goes up each year.

The cost of accommodation, air travel, transport within Saudi Arabia and food goes up each year.

In 2013, the subsidy borne by TH was RM5,575 per pilgrim for a total of RM93 million. In 2018, it more than doubled to RM12,470, and this amounted to a total of RM400 million paid out by TH.

These costs do not include indirect expenses, such as support services for pilgrims, including courses and medical supplies. – April 4, 2019.