KUALA LUMPUR, Aug 5 – The Pakatan Rakyat (PR) questioned today Sime Darby’s corporate governance and investment practices after it was reported today that the conglomerate will post their biggest ever loss topping RM2 billion.

The Malaysian Insider reported today that Sime Darby is set to announce next month full-year net losses that could be as high as RM2.5 billion. Most of the losses are down to ill-advised investments in the energy and utilities sector in Qatar as well as tardy business practices in the development of the Bakun dam in Sarawak.

“This reflects very badly on the management and corporate governance of Sime Darby,” DAP Socialist Youth chief Anthony Loke told The Malaysian Insider today.

“Their other losses are also due to cost over-runs, and cost over-runs basically means poor management,” said Loke, adding that an independent panel should investigate if Sime Darby’s losses were caused by leakages and a lack of open tenders in procurement.

The last time Sime Darby saw red on its balance sheets came after the 1997 Asian Financial Crisis, when a plunge in the stock market and a sharp depreciation of the ringgit led its financial arm, Sime Bank, to post a RM1.6 billion loss — the largest in Malaysian banking history — for the six months to December 1997.

The conglomerate went on to post a six-month loss of RM676.2 million and closed the 1998 financial year with a net loss of RM540.9 million.

It is also learnt that property division managing director Datuk Tunku Badlishah Tunku Annuar has been removed from some units within his division while other top officials are being put on notice after Sime Darby instructed former chief executive Datuk Seri Ahmad Zubir Murshid to take a leave of absence last May 13 in relation to the losses.

But hefty losses and disciplined officials aside, the group could also face crippling billion-ringgit law suits as it moves to abruptly end some of its joint ventures across the globe.

PKR secretary-general Saifuddin Nasution Ismail questioned Sime Darby’s ventures into the oil and gas industry, pointing out that the GLC should return to its roots and focus on plantation as it is the largest plantation company in the country.

“Does Sime Darby have the capability to venture into oil and gas? They should focus on plantation,” said Saifuddin.

The Machang MP also questioned how plantation-based Sime Darby could post such huge losses when it enjoyed financial and political support from the government as a GLC.

“Something must be very wrong. Sime Darby enjoys government support compared to private plantation companies. If Sime Darby can’t compete with plantation-based companies in our country, how can Sime Darby compete internationally?” asked Saifuddin.

DAP national publicity secretary Tony Pua also highlighted faulty corporate governance and risky investments as factors behind Sime Darby’s historic losses.

“This is a concern that some of our cash-rich companies are going beyond their realm of expertise and taking unnecessary risks with the funds of the company,” said Pua, noting that plantation giant Felda had invested in property in the United States that was completely unrelated to their core business.

The Najib administration recently admitted Felda’s reserves plunged from RM4.08 billion in 2004 to RM1.35 billion in 2009, a decline of 67 per cent, although Najib has defended the federal agency’s financial health and investment practices, pointing out that Felda had RM1.3 billion in cash.

“There should be a risk management system put in place to ensure that investments are not made on the whims and fancies of the management of the day,” said the Petaling Jaya Utara MP, adding that it was time for the government to review the role of GLCs.

“Are they (GLCs) playing the role of crowding out all the private investments?” asked Pua, pointing out that the government was still awarding projects to GLCs without open tender like the new Sungai Buloh hub.

“The government should not be involved in businesses which the private sector is truly able to manage, (except) interests that cannot be served by the private sector like low-cost housing,” said Pua.

Kuala Selangor MP Dr Dzulkefly Ahmad on the other hand questioned the lack of financially-savvy professionals in Sime Darby’s board of directors.

“They are not experienced enough in the financial area. I do not mind having one or two government retirees on the board, but it is important to have people to know what they’re doing,” said Dr Dzulkefly.

“I am also not sure how savvy Tun Musa Hitam is in business. I don’t see him as a businessman,” added the PAS central committee member, referring to the Sime Darby chairman who used to serve as deputy prime minister under Tun Dr Mahathir Mohamad.