Under Pembangunan Sumber Manusia Berhad Act 2001 (“Act 612”), every employer from key industries has a duty to pay a human resources development levy at the rate of 1% of his employees’ monthly wages to the Human Resource Development Corporation (HRD Corp).[1]
HRD Corp is a government agency incorporated for the promotion and development of skilled labour in Malaysia through training and initiatives funded by the Human Resources Development Fund (“Fund”),[2] which consists of, among others, the levies paid by employers. In return, HRD Corp is responsible to disburse training grants to the employers from the Fund.[3]
Recently, the Public Accounts Committee (PAC) inquired into the affairs of HRD Corp and found that it has been investing the levies collected, including in high-risk investments, which potentially exposes HRD Corp to significant losses.[4] This has sparked a ferocious debate about the governance structure of HRD Corp, particularly whether it has the power to invest the Fund.
Section 27(1) of Act 612 provides that HRD Corp’s Investment Panel may from time to time invest the Fund, provided that the monies are not immediately required for meeting the Fund’s obligations and expenses. Notably, it does not prohibit high-risk investment. In fact, the Investment Panel is granted discretion to explore investment opportunities,[5] unless a particular investment is prohibited by the Minister of Human Resources.[
However, there is another issue plaguing HRD Corp. The PAC had highlighted that there was a lack of reporting to the Board of Directors on the investments made.[7] This may have violated section 27(4) of Act 612, which requires the Investment Panel to report on the status of its investments whenever requested by the Board. This is not withstanding the fact that the Chairman of the Board, also chairs the Investment Panel.
Furthermore, it is also required under section 26 of Act 612 that a Bank Negara Malaysia representative must be appointed as a member of the Investment Panel. From online news reports, it appears that this requirement has not been complied with since 2017.[8]
As HRD Corp navigates its investment activities, the challenge lies in balancing the potential for financial growth with the inherent risk of high-return investments. Nonetheless, any investment activities should be conducted transparently and within the bounds of strict governance to maintain public trust and HRD Corp’s primary mission of workforce development in Malaysia.
With the PAC inquiry underway, the HRD Corp would certainly have some explaining to do, and rightfully so given that it manages millions belonging to companies that had made the levy contributions.
[1] Act 612, Section 14(1).
[2] Act 612, Sections 3 and 4.
[3] Act 612, Section 5.
[4] https://www.thestar.com.my/news/nation/2024/07/04/a-gs-report-hrd-corp-invested-levies-on-high-risk-investments
[5] Act 612, Section 27(1)(c).
[6] Act 612, Section 27(3).
[7] https://www.thestar.com.my/news/nation/2024/07/04/pac-hrd-corp-engaged-in-dubious-real-estate-deals-high-risk-investments
[8] https://www.freemalaysiatoday.com/category/nation/2024/07/04/hrd-corp-investment-panel-didnt-report-activities-to-board-says-pac/
About the Author
Lee Jia Vin is a Legal Associate at XK Law, bringing a wealth of experience across a diverse spectrum of legal matters. Her expertise spans corporate disputes, industrial relations litigation, adjudication claims, and criminal cases. Jia Vin is committed to maintaining a balanced lifestyle, engaging in activities such as yoga, hiking, swimming, and playing ultimate frisbee to support her well-being.
