An industry expert has questioned the auditor-general’s (A-G) classification of Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) as lacking in financial stability, saying the finding does not reflect the true nature and purpose of the company’s existence.
Wan Agyl Wan Hassan said MRT Corp was established by the government as a special purpose vehicle to develop and own all assets involved in the provision of MRT services in the Klang Valley.
“The ‘losses’ referred to in the A-G’s report reflect the cost incurred in constructing the MRT1 and MRT2 lines, which is substantial,” the transport consultant told FMT.
He said the capital for the construction of MRT1 and MRT2 was provided by the government to MRT Corp, and it was always envisaged that Putrajaya would bear full financial responsibility for the development of the entire rail infrastructure.
“MRT Corp’s responsibilities lie in the prudent management of allocated government funds. The company has in fact passed all governance checks and achieved its objectives with both MRT1 and MRT2 fully completed and operationalised.”
Wan Agyl also said that under standard accounting practices, all sums injected by the government are recorded in MRT Corp’s books as expenses.
On the flip side, the government never imposed on MRT Corp any requirement that it should earn substantial income so as to be able to pay off or finance the hefty construction costs of the rail system, let alone generate a profit, he said.
“The actual rail service is operated by Prasarana Malaysia Berhad, and MRT Corp only receives nominal annual rental payment which is insignificant compared to the construction costs.
“These are merely symbolic fees, and are not designed to recoup investment to cover the substantial costs incurred in construction,” Wan Agyl explained.
“That is why it is wrong to judge the company as a failure or hurl accusations of mismanagement of funds, simply because it records a book loss, as that loss is due to the technicalities of accounting principles applied by the A-G’s office.”
The A-G’s report, released last week, revealed that MRT Corp had suffered a RM181.5 million loss before tax in 2023.
The report also said the company has suffered accumulated losses of RM57.624 billion since it was established in 2011.
It also noted that MRT Corp has received over RM59.2 billion in government funding as of last year.
Wan Agyl said MRT Corp’s financial structure mirrors that of similar public infrastructure projects around the world.
“Globally, rail infrastructure projects often require substantial investment of public funds with limited direct revenue generation from either fare or non-fare sources, such as advertising,” he said.
“The value lies in the long-term economic and social benefits, not immediate financial returns.”
Wan Agyl said a significant reason why MRT Corp’s books show substantial operating and accumulated losses is due to the fact that the company is subjected to standard accounting practices applicable to all businesses.
“MRT Corp’s financial statements must adhere to the Malaysian Financial Reporting Standards (MFRS).
“This includes MFRS 136, which mandates the annual assignment of an impairment value to assets such as the MRT1 and MRT2 projects,” he said, pointing out that “the impairment value is not an actual cash outflow”.
“The rules of accounting require MRT Corp to book its assets at fair market price minus disposal costs or the present value of future cash flows from the company’s assets, whichever is the higher,” said Wan Agyl.
“All losses are purely on paper and do not reflect actual financial deficits.
“They do not represent a loss of money in the traditional sense but are a consequence of the strict accounting framework MRT Corp is obliged to adhere to,” he said. - FMT
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