Government breach of agreement causing NFCorp difficulty to repay loan

KUALA LUMPUR, March 11 – Government of Malaysia breached their Implementation Agreement with the NFCorp (National Feedlot Corporation) by not building Export Quality Abattoir (EQA), causing operational difficulty which made it difficult for the company to repay its RM250 million loan; the High Court of Kuala Lumpur learnt yesterday.

Government witness, retired former Secretary General at Ministry of Agriculture (MOA) Datuk Mohd Mokhtar Ismail agreed with NFCorp’s legal counsel Datuk Seri Rajan Navaratnam’s suggestion that the government was supposed to build abattoirs or slaughterhouse as part of the Implementation Agreement with NFCorp.

Mokhtar agreed that the abattoirs play a crucial role for the success of the project, as without it NFCorp would face difficulty to slaughter cows. He also agreed that such problem would cause difficulty to the company to repay its loan to the government.

Why government did not build abattoir?

Earlier in court, Rajan’s co-counsel Datuk K Kirubakaran had cross-examined Mokhtar on why the government did not build the abattoirs.

Mokhtar explained to court that the government wanted to do a viability study before building the abattoirs.

He added that the government planned to build a “Class A” slaughterhouse in Gemas that was capable of slaughtering 350 cows a shift (700 a day).

According to him, the government had rejected this because the NFC project was only supposed to fulfill a portion of the local market at the time.

The court was told there were two other abattoirs in Tampin and Senawang NFCorp could have used, which could fulfill their then daily slaughter capacity.

“Once they had fulfilled their capacity of both the existing abattoirs, then we would have built the Gemas abattoir,” Mokhtar told Judicial Commissioner Anand Ponnudurai.

Existing abattoirs not sufficient

When asked for the capacity of the said 2 abattoirs, Mokhtar testified that one was capable of slaughtering 100 cows and the other only 30 cows a day, which falls well short of the Class A requirement of 350 cows a shift (700 a day).

It was later ascertained that although the government agreed and committed to building the abattoirs, no time-frame was set in the agreement as to when it would be built.

Rajan: Do you agree with me that although there was no date set in the agreement, the government should have built the abattoirs within a reasonable time-frame?

Mokhtar: I agree

Rajan: Do you agree with me that until today, no abattoirs had been built by the government?

Mokhtar: I agree

Mokhtar later explained that there was an effort to build the abattoirs via a tender to build. However, he agreed with Rajan that eventually the tender was not executed because the government stopped the project completely.

Building abattoir crucial to NFCorp project viability

Rajan proceeded to establish the importance of the abattoir to the project.

Rajan: Do you agree with me that the abattoir play a crucial role in the implementation of the NFCorp project?

Mokhtar: I agree

Rajan: Do you agree with me that a huge part of this project involves the slaughtering of cows?

Mokhtar: I agree

Rajan: So without sufficient abattoir, the defendants faced difficulty to slaughter the cows, do you agree?

Mokhtar: I agree

Rajan: Now since the defendants faced difficulty to slaughter the cows, they would have difficulty to make repayments to their loan; do you agree?

Mokhtar: Agreed

Government witness, former Secretary General at Ministry of Agriculture (MOA) Datuk Mohd Mokhtar Ismail
Loan and grant massively reduced

The High Court had earlier learnt yesterday that NFCorp was initially given approval in principal of RM1.1 billion loan and RM361 million in grants in May 2007. However, the loan was later reduced to RM250 million and the grant to only RM13 million.

When asked why was the reduction in loan, Mokhtar could not explain more than it was a MOA’s suggestion to the Ministry of Finance.

As to the grant of RM13 million, the court learnt that only RM6.5 million was given to NFCorp and no explanation was provided as to why the balance was not released.

Despite massive reduction of the loan and grant amount as well as the grant not been paid in full, the capacity requirement of the project remained the same.

Background to the case

In June last year, the government had sued NFCorp, Datuk Seri Mohamad Salleh Ismail and three of his children for a total repayment of RM253.6 million in loan including interest.

Salleh is the husband of former Wanita Umno chief Tan Sri Shahrizat Abdul Jalil.

In 2006, the Agriculture and Agro-based Industry Ministry contracted Agroscience Industries Sdn Bhd (AISB) to develop an integrated livestock farming and beef production facility.

AISB incorporated NFCorp in December that year, and in January 2008, they received the loan from the government.

In 2011, the Auditor-General’s Report highlighted that National Feedlot Centre (not NFCorp) was poorly managed.

The report was turned political, aimed at Tan Sri Shahrizat and Barisan Nasional by opposition politicians.

The Auditor-General said that the audit it conducted was on the National Feedlot Centre project, and not the company National Feedlot Corporation Sdn Bhd (NFCorp).

He also clarified that the audit analysis found that the objectives of the NFC were not fully realised due to several factors which have been explained in the Auditor-General’s Report 2010.

Among them, based on a implementation agreement signed in March 2010, the production target for NFC of 38,600 cattle for 2010 could not be achieved as the Entrepreneur Development Programme  (EDP) which involves 130 satellite farm operators were yet to  be implemented.

Among the political allegations against the company was that the monies were used for other purposes, including acquiring of properties.

Salleh had defended the company and was acquitted of all CBT charges in 2015. The conditions of the loan agreement do not prevent them from investing in properties.

NFCorp also won their lawsuit against opposition politician Rafizi Ramli in October 2016, which was overturned via appeal only after the opposition parties became the government in 2018.

The case continues hearing today.