MALAYSIAN SHARED PROSPERITY VISION

2030: NEW ROLES FOR HAJJ FUNDS*

ByDr. Jamal Othman

Senior Fellow

Malaysian Institute of Economic Research (MIER)Jamal@mier.org

*Deliberated at the Indonesia Sharia Economic Festival (ISEF), Jakarta Convention Center, Nov 14, 2019

Wealth & Income disparity – same old policy

issue in Malaysia

Malaysian Shared Prosperity

Vision 2030 (SPV2030)

A continuation of the Malaysian Vision 2020

Addressing wealth and income disparities for a

united, prosperous and dignified nation

Underlying principle - equitability of outcome

(kesaksamaan keberhasilan)

Needs-based economic approach – policy focus

on precise target demographics

Background of Tabung Haji (TH)

Launched in 1963 as “A Bank” for savings in a more efficient, profitable and syariah way for Hajj

To Royal Profesor Ungku Aziz who pioneered the idea – TH would serve as a vehicle for poverty alleviation and to address income disparity

Pilgrims Fund Board Act 1969 (Revised 1973) amended in 1995 for TH to be more productive and innovative in its investments strategies.

2010

• Hajj Cost =RM13,040

• Hajj Payment =RM9,980

• Subsidy = RM3,060 (23.5%)

2015

• Hajj Cost = RM17,720

• Hajj Payment = RM9,980

• Subsidy = RM7,290 (42.2%)

2019

• Hajj Cost =RM22,900

• Hajj Payment =RM9,980

• Subsidy = RM12,470 (56.4%)

Subsidization of Hajj Costs • Cost of hajj increases by 8.4% each year from 2010-2019

• Number of hajj quotas = 30,200• Cost of subsidies to cap hajj payment at RM9,980 increases by 34% annually

Policy issue – capping hajj payment serves the needs for low cost hajj but entails substantial foregone benefits to Muslims in terms of socio-

economic empowerment!

DEPOSITORS

(Hajj prospects)

Regulator of pilgrims

Administrator of Hajj Funds

Welfare of pilgrims

HAJJ FUNDS

PROFITS

INVESTMENT AREAS

Taxes/Zakat Hajj Expenses

Wakalah,

Wakalah,

Aqad Izin

Hibah/Dividends

1,281 (1963)

9.3 mill (2018)

RM46,610 (1963)

RM75 bill (2018)

TABUNG HAJI

1. PLANTATION

2. FINANCIAL

3. PROPERTIES

4. CONSTRUCTION

5. TELECOMMUNICATION

6. UTILITIES

7. ENERGY

8. EQUITY FINANCE

MAJOR ISSUE: Socio economic

empowerment roles –

entrepreneurship development,

poverty alleviation and income

distribution?

MODUS OPERANDI OF TABUNG HAJI (TH)

Net profit

ranges from

RM1.6 bill –

RM3.5 bill

(2014-2018)Ranges from RM900

mill – RM3.3 bill

(2014-2018)

Ammendments to Tabung Haji Act 1995. Functions to uplift socio-economic profile

of poor Muslims, including via creation of Waqf assets from TH’s surplusesLegal Basis

Tabung Haji or its Subsidiary/SPVWaqf Administrator

Sources of Mawquf

Sustainable Waqf

Assets

Profits, Real Estates, Equity Investments/Shares,

UMRAH “Embedded Waqf”

Shares/Financial

InstrumentsProperties Strategic Assets Plantation

Poverty alleviation

Entrepreneurship

Equity financing

Rental/lease at costs to establishments

Community development

Health and TVET

Kifayah projects

State Religious DepartmentWaqf Trustee

Benefactors

UNLEASHING WAQF FOR INCOME-

WEALTH DISPARITY UPLIFTMENT--

NEW ROLES

FOR HAJJ FUNDS IN MALAYSIA

Why Unleash Waqf for TH?

Strategic instrument – targeted for wealth creation for the ummah at large

Assets created for permanence

Sustained generation of benefits from Waqf assets

Contribute to cost efficiency of establishments

Economically resilient, insulated from changing market conditions – do away with contemporary asset valuation framework – to consider bequest, altruism, and option value motives