Financial Management 101

Talam Corporation has accumulated a huge debt of almost MYR400million to Kumpulan Darul Ehsan Bhd, Permodalan Negeri Selangor Bhd and Yayasan Pendidikan Selangor in connection with several joint property development projects carried out in the last 10 years. To resolve this bad debt issue, in November 2009, the Selangor state assembly agreed to approve an additional budget of RM392 million to Menteri Besar Incorporated (MBI) to buy the debts of Kumpulan Talam with the state government. Prior to this, the total amount owed was never acknowledged in full or recorded with details in the accounts of the state companies.

MB Khalid said, "The previous state government has never made any efforts to collect the debts and if immediate action is not taken, the debts could be written off." He said the state government will help Talam with its development projects to enable it to pay its debts to the state government but if it fails to do so, it can no longer be able to carry out development in the state.

This move was however criticised by the now ex PKR Secretary General Salehudin Hashim, who described the move as an old trick used by crooks in the corporate sector, and wanted the state PKR to seek an answer from Khalid. Charles Hector called it a bail out of Talam. Of course the biggest critic was dentist turned MB Khir Toyo. I don’t have a high regard for this man, so when he talks business and finance it is like me talking about root canals …

By mid-April 2010, Talam has fully settled its debts to MBI. The three state subsidiaries got their money back (from the state government) and the state government got their money back from Talam. It is a win-win situation for all parties, the lenders (Selangor) get their money back and the borrowers (Talam) get to reduce their gearing ratio.

The challenge now for the PR led state government is how to use the money wisely.

I bet this fact was never reported in Utusan Malaysia. Rumour has it that the PAS led Kelantan government has been gradually reducing the state debts (debts accumulated from the previous administration) over the past 20 years. Again, this kind of positive news will never get to fill the pages of Utusan Malaysia.