By Durratul Ain Ahmad Fuad
KUALA LUMPUR, Aug 17 2026 (Bernama) – The investment management of Lembaga Tabung Haji (TH) will now require at least five layers of control to strengthen the institution’s risk management, including investment due diligence, said an economist.
Universiti Sains dan Teknologi Malaysia Emeritus Professor Dr Barjoyai Bardai said in addition to stricter investment due diligence controls before investments, TH also needs to set exposure limits according to assets, sectors, countries, and counterparties, and ensure that independent risk management has the power to challenge investment decisions.
In addition, he said TH needs to have an early-warning system when investment performance declines, as well as exit discipline when the economic fundamentals of an investment are affected.
“These five layers of control are standard practice in professional asset management disciplines. Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) are among the government-linked investment companies (GLIC) that practise these five layers of investment control,” he told Bernama.
Taking a lesson from the previous weaknesses in TH’s investment management, which saw 14 problematic investments, with seven of them losing up to 100 per cent, Barjoyai said this serves as an important lesson to strengthen the risk management of the institution.
“The problem is not just that TH suffered losses in investments. Losses are part of the investment risk.
“The more important question is why the risk management system allows some investments to lose up to 100 per cent of their value,” he said.
TH recorded nearly RM13 billion in losses from 14 problematic investments, with seven of them recording 100 per cent losses.
TH’s investment with the Saudi Arabia-based real estate developer and project management company, Al-Rawda Real Estates Development & Project Management Co Ltd worth 1.4 billion Saudi riyals, or approximately RM1.5 billion, recorded the largest loss in the investment list.
The loss of nearly RM13 billion includes RM10.2 billion borne by the government through a rescue operation via Urusharta Jamaah Sdn Bhd (UJSB) in 2018, as well as RM2.6 billion in depreciation borne by TH between 2018 and 2025 for investments that are still being managed.
According to Barjoyai, TH also needs to clearly distinguish between investment decisions and investment risk oversight.
“Those who make investment decisions should not be the ones to determine whether the decision remains safe,” he said.
Echoing Barjoyai, Bank Muamalat Malaysia Bhd chief economist, Dr Mohd Afzanizam Abdul Rashid, said the placement of professionals with high integrity in TH’s leadership is very important.
He said this is because investment decisions require complex considerations as well as extensive knowledge and experience to conduct any form of due diligence.
“This includes the Board of Directors, Investment Panel and management staff. This has already been rectified, with no more board members who are active politicians,” he said.
Separation of powers between the Minister of Religious Affairs and the Minister of Finance
Commenting on the RCI’s suggestion to separate the powers between the Minister of Religious Affairs and the Minister of Finance (MoF), Barjoyai agreed with the principle of separation to create a more robust system of checks and balances.
He said TH has a unique characteristic because it is not just an investment company or a government agency, but rather manages public funds with a specific purpose, which is savings for performing the Hajj.
“Therefore, we need to avoid situations where an individual or an institution has too much influence over the entire chain of policy, appointments, investments, oversight, and financial decisions,” he said.
Barjoyai opined that the Minister of Religious Affairs can focus on the interests of depositors and the Hajj mandate, while the MoF plays a role from the perspective of the country’s fiscal and financial matters.
“However, more important than who the minister is, is the independence of the board, professional investment governance, risk committee, and audit oversight,” he said.
Meanwhile, Mohd Afzanizam said the proposal for the separation of powers is appropriate because a clear division of responsibilities can streamline TH’s administration.
“At the operational level, it is no less complex as it involves TH’s relationship with the Saudi Arabian government to obtain quotas as well as transportation and accommodation for the pilgrims in Mecca and Medina.
“The MoF, on the other hand, has expertise and experience in the field of investment. Therefore, this combination will make TH’s administration more robust,” he said.
Appointment of professionals to manage TH, no political ties
Regarding the recommendation to prohibit active politicians from joining the TH Board, Fellow of the National Professors Council (MPN) Prof Dr Azmi Hassan said the government needs to demonstrate that TH’s management is now free from political pressure to restore depositors’ confidence.
He said that the political sensitivity towards TH cannot be denied, including the use of grants and subsidies for political interests, but the management of the institution must remain professional.
“It cannot be denied that politicians use TH for political purposes, such as giving high grants or high subsidies, and that cannot be avoided.
“The key takeaway from this crisis is that TH is a sensitive institution. Most importantly, the government wants to make TH an institution that can assist prospective pilgrims while also being able to generate profits that can be returned to TH,” he said.
Taking a lesson from past experiences when the institution appointed active politicians to lead TH, Azmi said the government should also appoint professionals with no ties to any political party in the top management of TH to avoid political pressure in the future.
“For an organisation as important as TH, it requires non-political appointments or professional appointments that have no political ties. If the person is a professional but has political connections, we will face the same problem in this matter,” he said.
On July 29, a 211-page RCI report was made public, containing various findings related to the management and operational weaknesses of the institution in question for the period from 2014 to 2020.
The report also provided 25 recommendations for improvement. Among the main recommendations of the RCI on TH are to prohibit active politicians from joining the TH Board; separate the powers between the Minister of Religious Affairs and the MoF, and establish an independent body for Board appointments.
The government announced the establishment of the RCI in 2021, followed by the appointment of RCI members on Jan 20, 2022, and the RCI report was subsequently presented to the Yang di-Pertuan Agong on Aug 30, 2022.
The Dewan Rakyat convened on Aug 11 to discuss the RCI report regarding the management and operations of the TH Board for the period 2014 to 2020.
— BERNAMA
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