At HRD Corp, lavish events, trips and high-risk investments, PAC finds

At HRD Corp, lavish events, trips and high-risk investments, PAC finds

Published: Jul 6, 2024 2:11 PM


The Public Accounts Committee’s (PAC) probe into Human Resources Development Corp (HRD Corp) revealed instances of posh events, overseas trips and high-risk investments - fuelled by interests from accumulated levies paid by employers.

This includes events at five-star hotels, which even some management members deemed “promotional” or “ceremonial” in nature, testimonies by its current and former board and management members reveal.

Accumulated contributions now sit at about RM3.2 billion, and 60 percent is invested in fixed deposits, while the rest are in bonds and equities, including in the stock market.

Some of the investments are considered high risk, with several former and current board and management members concerned over the firm’s seemingly “weak” Investment Panel.

Former CEO Elanjelian Venugopal, who served from July 2018 to April 2020, said HRD Corp lost RM80 million through investing in stock options after it started venturing into “riskier assets”, without a Chartered Financial Analyst on deck.

He said the fund started investing in riskier options only recently, and that previously most of the funds were held in fixed deposits or bonds.

“The question then becomes, are they capable of doing this kind of investment? Or who is capable there to advise the board to invest in - or go to more risky ventures?” he asked.

Some 9.6 percent of HRD Corp’s investments are in equities and derivatives.


CEO takes responsibility for high-risk exposure

Board member Rosli Yaakub, who represents the Finance Ministry, agreed that investing in stock options is “very high risk” and “diverts” from the Act, which is silent on investments in stock options.

He added that, unlike other funds like the Retirement Fund (Incorporated) (Kwap), minister approval is not required for HRD Corp to make such investments.

Former board member Chia Hui Yen, who was head of investments at HSBC Bank, also agreed with PAC member Sim Tze Tzin (PKR-Bayan Baru) that investing in option derivatives could “jeopardise the whole investment”.

However, chief financial officer Mohamad Farizul Yahaya said its investments into such equities are relatively small and are “always ring-fenced and capital protected with a guaranteed return”.

HRD Corp chief financial officer Mohamad Farizul Yahaya

He also defended the investment into private equity counter Widad Bhd, whose value had nosedived from 57 sen to 19 sen within a year. HRD Corp bought the share at 62 sen per share in 2020.

Farizul said Widad did have difficulty paying the eight percent interest, due to cash flow issues on their end, but eventually settled the payment and HRD Corp made RM5 million on the investment of RM60 million.

HRD Corp CEO Shahul Hamid Shaik Dawood added that the decision to invest in private equity and derivatives was after consultation with managers at larger funds like the Social Security Organisation (Socso).

“When I have opened up the kind of exposure to the organisation, where I invest in something where my principal is at risk, I take the responsibility…

“But being from the corporate (point of view) when their principal is protected, yet you are getting reasonable returns back, I personally feel the treasury team of HRD Corp and myself have done a good job in terms of getting the right returns back with the minimal risk,” Shahul told PAC.

HRD Corp CEO Shahul Hamid Shaik Dawood

Posh events

HRD Corp chief operations officer Ariff Farhan Doss told PAC that interests from investments from accumulated contributions heavily subsidise events like conferences and award ceremonies at posh venues.

However, he believes this goes against the purpose of the fund.


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“This (HRD Fund) was meant to benefit blue-collar workers, you know. But for conferences like this, the management would tend to send their upper management for these conferences.

“So, in the spirit, for me, I would disagree with the need for so many programmes, events of such nature because it doesn’t benefit the original intent of the Act, where skills development…skills training is transferred from the trainer to employees.

“So, I’m not sure how much skill transference takes place during such conferences held in a five-star hotel. A lot of the other programmes are all just product launches, event launches.

“It is an opportunity for a minister to have a programme once a month, you know,” he said.

Ariff was among 22 individuals who testified before the PAC in the proceedings which took place from Oct 23, 2023, to March 12, 2024.

He was removed as COO of HRD Corp on May 15 this year.

HRD Corp chief operations officer Ariff Farhan Doss

Ariff added HRD Corp also uses these multimillion ringgit conferences to generate income for itself because it will encourage employers to pay the conference fees using levies.

HRD Corp is not allowed by law to use the levies paid by employers for its own operations, including unutilised levies, which can only be used for approved training programmes for underserved communities or smaller companies that do not pay HRD Fund levies.

However, HRD Corp can access the levies by charging employers to attend HRD Corp-organised events. These make the events “self-sustainable”, CFO Farizul said.

PAC also heard that a large conference may cost up to RM8 million, and the chief executive, who has the final say on programme selection, can approve spending of up to RM500,000 without board oversight.

One programme approved was a visit by international school students from India, but it is unclear if HRD Corp paid for the entire trip.

Minister not protected

Ariff noted that the way budgets are approved also raises concern, for example when then-minister V Sivakumar was taken aside for a board meeting on the sidelines of a Deepavali celebration in Nov 2023, to review the budget, without the presence of ministry advisers.

“So, my concern was that you know, the minister doesn’t seem to have the protection of the ministry. These are the things that I think going forward, you know, need to be improved,” he said.

Former human resources minister V Sivakumar

Budget items which caught PAC members’ eyes include a trip to the United Arab Emirates involving the minister and HRD Corp employees, flagged by Vivian Wong (DAP-Sandakan) as among the “posh and luxurious” programmes organised by HRD Corp.

In response, Shahul said the outcome of any overseas trip is reported back to the board of directors.

In 2022, RM2.8 million was spent on travel, RM4.89 million in 2023, even though RM5.5 million was budgeted for last year.

Some half a million was for international travel last year while RM600,000 is budgeted for this year, PAC was told.