The Sabah government has rejected allegations by Opposition leader Datuk Seri Mohd Shafie Apdal that its decision to convert RM200 million in fixed deposits held with Sabah Development Bank Berhad (SDBank) into Redeemable Preference Shares (RPS) amounts to a financial bailout.
Assistant Finance Minister II Datuk Mohd Ishak Ayub said the government was not injecting new funds into the state-owned bank, stressing that the RM200 million had already been deposited with SDBank.
“The RM200 million was already placed in the bank. Converting the deposit into Redeemable Preference Shares will strengthen SDBank’s capital base while generating an annual dividend return of 3.15%, or about RM6.3 million, for the state government,” he said in a statement on Wednesday.
Mohd Ishak explained that the move was necessary because the collapse of SDBank could expose the Sabah government to around RM3 billion in outstanding bonds and other financial liabilities.
“As SDBank is wholly owned by the Sabah government, the choice was clear — strengthen the bank using funds that are already there, or risk facing a much larger financial burden in the future.
“This is not a bailout. It is a prudent and responsible financial risk management measure,” he said.
He added that since the second half of 2023, SDBank’s new board of directors and management team have been addressing long-standing governance weaknesses, recognising legacy impairments and implementing a comprehensive transformation programme.
Although the reforms resulted in short-term losses, he said they have improved transparency, accountability and provided a clearer picture of the bank’s actual financial position.
Mohd Ishak also noted that SDBank’s debt instruments continue to hold a AA1/Stable/P1 rating from RAM Ratings, reflecting confidence in the bank’s strategic importance, state government support and its ability to meet financial obligations during its recovery.
Responding to criticism of the bank’s performance, he said that during Mohd Shafie’s two-year tenure as Chief Minister, only RM260 million was recovered from non-performing loans (NPLs).
In comparison, he said the current board and management have recovered about RM3.3 billion in cash since July 2023, despite inheriting a large portfolio of legacy bad loans.
Mohd Ishak also dismissed claims that Sabah International Petroleum Sdn Bhd (SIP) had received a government bailout.
He said SIP successfully underwent a financial restructuring through the issuance of RM900 million in Sukuk Wakalah and the transfer of a 10% equity stake in the LNG9 project to SMJ Energy.
As a result, he said SIP is now debt-free, financially stronger and has secured another 10 years of revenue following the extension of its Indonesian assets.
“This is not a bailout. It is a successful restructuring that has preserved Sabah’s strategic assets, restored financial sustainability and created long-term value for the state,” he said.
Mohd Ishak also rejected accusations that the Sabah government prioritises government-linked companies (GLCs) over public services.
He said the Supplementary Supply Bill includes substantial allocations for water treatment plants, pump houses, roads, bridges, rural water supply, housing, education and welfare programmes.
He stressed that SDBank, SIP and SMJ Energy are all wholly owned by the Sabah government, meaning no private parties stand to benefit from the restructuring.
While acknowledging Mohd Shafie’s right to question government decisions, Mohd Ishak said public debate should be based on facts rather than repeatedly labelling responsible financial restructuring as a “bailout.”
He added that the Sabah government will continue making responsible decisions to protect the state’s finances, safeguard its strategic assets and secure the long-term interests of the people of Sabah.
