Our Cabinet has some of the best back-flip acrobats in the world with the unbelievable twists and turns over high-end property development freeze

Second Finance Minister Datuk Seri Johari Abdul Ghani announced on November 17 that the government had sent a directive to halt all approvals for high-end residences, shopping complexes and office buildings priced over RM1 million.

The freeze came after Bank Negara’s report on the substantial supply and demand imbalance within the country’s property market. The report found that new property launches were skewed towards the high-end sector of the market.

The Second Finance Minister subsequently reaffirmed the blanket ban after his fellow Cabinet colleague, Works Minister Datuk Fadillah Yusof said that developments would be reviewed on a case by case basis.

The ‘blanket ban’ had smacked of being a ‘hare-brained’ policy prescription as the Government started granting exemptions to projects which the Government had a vested interested.  In particular, the Minister of Federal Territories, Dato’ Seri Tengku Adnan Tengku Mansor said the 1MDB-linked projects – Tun Razak Exchange and Bandar Malaysia were “pre-approved”, and are hence exempted.

The fact that Bandar Malaysia has not even found a developer with a plan appears immaterial to the ban exemption.

The biased exemption of such projects by Government-linked companies (GLCs) created an uproar among the private sector, who then lobbied hard to ease the ban.

Yesterday, the Government did another double-twist somersault on its ‘blanket ban’. Two statements by Urban Wellbeing and Local Government Minister Tan Sri Noh Omar and Datuk Seri Johari, suggested that the Government will now allow developers to appeal the ban on a case by case basis.

For luxury residential properties, Tan Sri Noh Omar announced that a four-minister committee to review the project applications comprising of Datuk Seri Johari, Datuk Fadillah, Minister in the Prime Minister’s Department Datuk Abdul Rahman Dahlan and himself. The committee would apparently subject its approvals to criteria including the existing housing condition, the number of houses in that location and those priced above RM1 million, as well as the number of unsold houses.

Separately, Datuk Johari said that developers of office spaces and shopping malls could appeal to the relevant ministers if they find locations that lack those properties and can justify their developments. He even went on to say that “anyone can build an office provided you know how to market it”.

Does the Minister actually think that developers are going to build an office block or a mall that they are not confident in selling?

I was among the first who had criticised that the blanket ban would not do much to remedy the property market imbalance.  However, now the Ministers have granted themselves full discretionary powers to grant approval to any developers who can sweet talk way to win the hearts of the Ministers.

Have we now become a communist regime where the Government dictates how many left shoes to manufacture?  Two big mistakes here certainly don’t make a right.

The multiple twists and turns worthy of a world-class acrobatic act only goes to prove that the Najib administration is completely clueless in policy-making.  How does the above, for example, even address the main issue of the lack of affordable housing in the country and the largest oversupply of residential properties were reported at the RM500 000 to RM1 million segment?

The worst type of Government for any investor, foreign or domestic, is the absolutely lack of predictability and consistency in its policies.  The current fiasco will certainly have major short to long term negative implications for Malaysia’s economy.  The Cabinet must remedy its knee-jerk policy-making mechanism and instead, conduct a thorough study with all stakeholders, Bank Negara and think-tanks to design a consistent, constructive and incentivised policies to ensure continued growth and sustainability for the property sector and our economy.

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The biggest culprits to the supply-demand imbalances in the property market in Malaysia are none other than Government-linked Companies

The Cabinet has imposed a “temporary ban” approvals for shopping complexes, offices, serviced apartments and luxury condominiums priced over RM1 million effective November 1.

The freeze came after Bank Negara’s report on the substantial supply and demand imbalance within the country’s property market. Bank Negara stated that the oversupply of properties in the country has been persistent over the past few years. Bank Negara themselves had raised the issue in their 2015 annual report.

In the Klang Valley, the report found that office vacancy rates had increased from 20.9% in Q1 2015 to 23.6% in Q1 2017. The situation is only set to get worse as there is an incoming supply of 38 million square feet of office space.

However, what Bank Negara and the Cabinet did not say was that among the biggest culprits causing the supply-demand imbalances in the property market are the Government-linked Companies (GLCs) and Government-linked Investment Companies (GLICs).

A report by The Star on April 6 this year highlighted the increasing involvement of GLICs in the property both directly and indirectly. EPF has been directly involved developing the new Kwasa Damansara township, which has a massive size of 2,300 acres and RM50 billion in gross development value (GDV).

Pemodalan Nasional Bhd (PNB) on the other hand, is developing the 118-storey Menara Warisan project next to the historic Stadium Merdeka. It will offer 4.3 million square feet of residential, hotel and commercial space.

PNB is also the single biggest shareholder of S P Setia, one of the largest, if not the largest property developer in Malaysia.  S P Setia is renown for some of the biggest luxury developments in the Klang Valley, including a 25-acres KL Eco-City, Setia Sky Seputeh and many others.

In addition, EPF and PNB jointly owns 63% of Sime Darby Bhd, whose property arm is another one of the largest property developers in the country.  The company has only recently launched its RM8 billion GDV AYLA Kuala Lumpur project which covers an area of 360 acres.

There is also the Bukit Bintang City Centre (BBCC) which sprawls over 19.4 acres with a GDV of RM8.7 billion. The project is spearheaded by UDA, a wholly-owned subsidiary of the Ministry of Finance.

No listing of high-end property projects in Kuala Lumpur will be complete without also mentioning the 76-acres RM20 billion GDV KL Metropolis project.  While on paper, it is developed by a private company, Naza TTDI, the project is in effect a controversial land-for-building deal with the Ministry of International Trade and Industry (MITI).

Elsewhere, Khazanah-owned UEM Sunrise also specialises in the high-end residential market in prestige locations such as Mont Kiara. In Johor, which was highlighted as having the largest share or 27% of all unsold properties in the country, UEM Land is developing 14 new projects which are all listed as high-end developments.

All of the above do not yet include the two mega-property developments linked to the scandalised 1Malaysia Development Bhd (1MDB) – the 70-acre Tun Razak Exchange (TRX) and the 486-acre Bandar Malaysia.

The issue here is two-fold. First, it is clear that GLCs contribute overwhelmingly to the glut which is threatening our property space in the country today.  No policy prescription without recognising and reviewing the role of the government, GLCs and GLICs has played in our “imbalanced” property development sector will be effective or successful.

The second more important economic question is, will the Government also be granting ‘ban’ exemptions to all these GLCs’ projects as it has done for TRX and Bandar Malaysia?  What then, will be the implication for the private sector in Malaysia?  Should they all just pack they bags and take their money to other countries to invest?

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Another ‘top secret’ 1MDB bailout by 1MDB via TRX land buyback by the Ministry of Finance

During the last parliamentary session, I had asked the Minister of Finance what is the cost and size of the land in Tun Razak Exchange (TRX) which its wholly-owned subsidiary, Aroma Teraju Sdn Bhd acquired from 1MDB in 2015.

The reply which I had received from the Dato’ Seri Najib Razak on 31 July, was that the information was protected by a confidentiality clause between the buyer and the seller.

The answer is ridiculous because both entities are wholly-owned by the Ministry of Finance, which in turn is accountable to both the Parliament and the public at large, and hence such information should never be a secret. This is especially since the price of a piece of land is in no way a threat to national security, and the information is certainly not protected by the Official Secrets Act.

Therefore, for the current sitting, I had asked why the land size and price for the purchase of Tun Razak Exchange (TRX) land by MOF-owned Aroma Teraju from 1MDB cannot be disclosed even though both companies were wholly-owned subsidiaries of MOF.

Tony Pua minta Menteri Kewangan menyatakan apa sebabnya keluasan dan harga pembelian tanah Tun Razak Exchange (TRX) oleh syarikat Aroma Teraju daripada 1MDB tidak boleh diumumkan walaupun kedua-dua syarikat tersebut merupakan anak syarikat milik penuh Kementerian Kewangan

Once again, in the reply dated 6 November 2017, I received utter nonsense from the Finance Minister which justified his being awarded “Asia’s Worst Finance Minister 2016” by FinanceAsia.

Dato’ Seri Najib Razak responded by saying this was because of the agreement’s confidentiality clause to protect the commercial considerations of both parties. He goes on to say that these terms are consistent with the key terms used in the market among other similar transactions.

The Minister chose to ignore is that both Aroma Teraju and 1MDB are wholly-owned by MOF. What is the purpose of this secrecy when both parties in the agreement are owned by the Government?

There is only one reason for invoking this confidentiality clause, and it has nothing to with the purported “commercial considerations”. It is to cover up the fact that MoF paid over-the-top to buy back a fraction of the prime land it had sold at bargain basement prices to 1MDB in 2010.

Based on the 2011 1MDB Financial Statements, the 70 acre TRX land was acquired from the Government at the value RM194 million, or approximately RM64 per square feet in 2010.

However, in the same year that Aroma Teraju acquired the above-mentioned piece of land from 1MDB, the latter also sold other parcels of TRX land to other government related institutions.  Lembaga Tabung Haji acquired 1.6 acres for RM188.5 million or more than RM2,800psf.  Affin Bank, a subsidiary of Lembaga Tabung Angkatan Tentera (LTAT), acquired 1.25 acres for RM255 million or nearly an eye-popping RM4,700psf.

If Aroma Teraju paid any where near the prices paid by Tabung Haji or Affin Bank, it would mean that Malaysian tax-payers would be been ripped off beyond their wildest imagination.  Very simply, 1MDB purchased land from the Government at RM64psf and sold a fraction of the piece of undeveloped land back to the Government five years later at an exhorbitant thousands of ringgit per square feet.

I challenge the 1MDB, Arul Kanda or the Finance Minister to deny my allegations with facts and figures. Otherwise, it would merely confirm that the secrecy over a simple sales and purchase agreement between two government entities is really to cover up another one of the daylight robberies against the Malaysian tax-payers to bail out the debt-stricken 1MDB.

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Malaysians are stunned that failed 1MDB CEO, Arul Kanda is even better placed today to take over Khazanah’s Managing Director role in the near future.

According to the recent Singapore Straits Times’ report on 2 November 2017, the prospects of a Khazanah outsider such as Arul Kanda to come into the position is more likely following the resignation of Tan Sri Nor Mohamed Yakcop from Khazanah's board.

The Khazanah panel overseeing the leadership succession was until recently headed by its former deputy chairman, Tan Sri Nor Mohamed Yackop, who recently resigned from the fund following the completion of a Royal Commission of Inquiry into multi-billion dollar losses at Malaysia's central bank stemming from foreign exchange trading in the 1990s.

The Straits Times reported that senior Khazanah sources said that Mr Nor Mohamed was a strong advocate for Mr Azman's replacement to come from within Khazanah, and his departure could strengthen the push by vested interest groups to get an outside candidate.

Apparently senior politicians and well-connected business people close to Arul are lobbying Prime Minister Dato’ Seri Najib Razak who, as Khazanah's chairman, would have the final say on who replaces Mr Azman.  It is not hard to imagine Najib giving the job to the man who has willfully bent over backwards to defend his image and paint 1MDB as a success.

However, appointing Arul Kanda to lead Khazanah would only be an absolute disaster for the sovereign wealth fund.

Arul Kanda has had an utterly shameful record helming 1MDB. The debt stricken fund is supposed to be saved with the “rationalisation plan” he masterminded. However, to date, 1MDB has only found itself in a deeper hole with no sight of the end of the tunnel.

1MDB’s attempt to sell 60% of Bandar Malaysia was an abject failure. The Ministry of Finance had to terminate the contract because of the failure of the purchaser to make payments according to schedule despite repeated extensions.  To rub salt onto would, it was the Minsitry of Finance which refunded the RM741 million ‘deposit’ despite it being 1MDB which received the monies.  The fact that Arul Kanda was sacked by the Ministry of Finance from Bandar Malaysia Sdn Bhd practically says it all.

Just two weeks ago, I had reminded the Prime Minister that 1MDB’s sale of power assets to China General Nuclear Corporation incurred RM2.3 billion in losses. 1MDB’s reply, drafted by Arul Kanda himself, had tried to ‘erase’ the losses with an alleged RM2.13 billion in dividends received by the company.

However, the 1MDB President and CEO conveniently forgot to also include the interest cost which 1MDB had incurred to finance the acquisition of the power assets.  As I said before, only a half-baked CEO would say that it’s made money off dividends without accounting for the interest bill.

While being exceedingly creative with the accounts on its own should have disqualified Arul Kanda from even being considered, what is worse is his brazen lies told to the Public Accounts Committee (PAC) with regards to mysterious assets owned purportedly owned by 1MDB in its overseas subsidiaries.

For example, he has continued to insist on the monetisation of US$1.3 billion worth of investment ‘units’ in Singapore even though its subsidiary that holds the units has already been uncovered as a complete scam.

Today we know that the entire redemption exercise was a Ponzi-like round-tripping exercise using part of the proceeds from a Deutsche Bank loan to pretend that it’s the receipt from the ‘units’ redemption exercise.

Malaysians must protest the fact that a man who has proven incompetent and devoid of integrity is even considered for the post of Managing Director at Khazanah.  If 1MDB, with debts up to RM50 billion at its peak could be brought to ruins, what more could happen at the RM145 billion Khazanah Nasional.

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Did Dato’ Seri Najib Razak make empty and meaningless promises to the President of the United States just to curry favour and show off?

In the viral 6-minute meeting between Dato’ Seri Najib Razak and President Trump, accompanied by their respective delegations, the Malaysian Prime Minister pulled out all stops to impress the American President.

Dato’ Seri Najib did not waste time with pleasantries and started his speech with how much Malaysian firms and funds will purchase from, and invest with US companies.  He said “Number one, we want to help you in terms of strengthening the US economy.”

Among the most controversial promise by Dato’ Seri Najib was for the Malaysian Employees Provident Fund (EPF) to investment an additional “three to four billion dollars” to “support... infrastructure redevelopment in the United States.”

Ordinary Malaysians, and in particular, contributors to the EPF are up in arms over the Prime Minister’s callous promise to the American president. How is it that we are now spending billions of our saving to support “infrastructure redevelopment in the United States” when we are in desperate need for the same in Malaysia?

The irony cannot be greater when only recently Dato’ Seri Najib Razak secured a RM55 billion loan from China’s Export-Import Bank in order to award a contract to China Communications and Construction Company (CCCC) to build the controversially priced East Coast Rail Link.  We don’t have money to build our own infrastructure and our Prime Minister wants to help make America great again?

However, perhaps after realising the political damage which his ‘promises’ to President Trump have caused, the Prime Minister is now telling Malaysians something different.

In his Malaysia Day speech given in Kota Kinabalu, he said “when I said that the EPF wanted to invest in the US, they (opposition) said it was no use and it was better to invest in our own country.”

The prime minister explained that the EPF had funds totalling RM760 billion which could be invested not only in the US, but in 39 other countries.  “The decision was not made by politicians, it was made by its investment committee,” he added.

Dato’ Seri Najib Razak even taunted the critics as “shallow, not that smart”.

The Prime Minister is obviously trying to be disingenuous here, promising President Trump one thing, but justifying something completely different to Malaysians.

Since Dato’ Seri Najib claimed that “the decision was not made by politicians”, we would like to ask him if the EPF investment committee has already made the decision to invest “three to four billion dollars” to “support infrastructure redevelopment in the United States”?

We are not questioning the right for EPF to invest overseas.  It is EPF’s prerogative to invest a certain amount of funds overseas after the necessary analysis and due diligence have been carried out by the investment committee.  However, as far as Malaysians are aware, there has been no such definitive resolution or commitment by the EPF to make the “three to four billion dollars” to “support infrastructure redevelopment in the United States”.

Hence, if indeed investment decisions at the EPF are “not made by politicians” as justified by Dato’ Seri Najib Razak, and that EPF has also not made any decision to invest “three to four billion dollars” to “support infrastructure redevelopment in the United States”, then we can only conclude that our Prime Minister boasted empty promises to the American President.

The question then is, why did Dato’ Seri Najib Razak have to go out of his way to impress the Trump administration?  The answer appears to be obvious, from his stay the the Trump Hotel to his boasts at the White House, the Prime Minister pulled out all stops to curry favour the American President in order to hope that the United States government will go easy on the single largest anti-kleptocracy money laundering seizure in the country.

We call upon the EPF and Khazanah Nasional to maintain independent financial discipline, free from political pressures and interference, in carrying out their investment mandates.  This is to ensure that the life-savings of Malaysian workers and the assets of the Malaysian people will remain safe and secure, protected for generations to come.

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Dato’ Seri Najib Razak offered President Trump our crown jewels worth billions of dollars and got nothing in return

The Prime Minister, Dato’ Seri Najib Razak’s 6-minute meeting in the Oval Office has become the laughing stock for tens, perhaps hundreds of millions of people around the world.

The historic meeting with President Trump should have been a triumph for Dato’ Seri Najib, a testimony that Malaysia has arrived under his leadership to be treated as an equal partner to the United States.

Instead, the video of the meeting which has gone viral around the world showcased a desperate Prime Minister paying tribute to his imperial masters.

Dato’ Seri Najib Razak boasted of a US$10 billion (RM42 billion) deal by Malaysia Airlines to acquire Boeing jetliners and even publicly offered to “persuade” AirAsia to purchase GE engines.  That’s like giving not only your daughter’s hand in marriage to the emperor, but trying to offer the cousin’s as well!

As a matter of fact, Malaysians have no idea how the deeply loss-making Malaysia Airlines which needed a RM6 billion bailout from Khazanah in 2014 can afford potential US$10 billion acquisition of aircrafts from Boeing.

The Prime Minister then further offered another “three to four billion dollars” from Malaysians’ Employee Provident Fund (EPF) to “support... infrastructure redevelopment in the United States.”
The icing on the cake was that Khazanah, our sovereign wealth fund, would also invest more money in United States companies, having already invested more than US$400 million to date.

And all we got in return was a “Thank you very much. Appreciate it.”  You could almost imagine Trump quietly saying “You can go now” in his head.

Malaysians have never felt more shocked and shamed at the international stage.  The Prime Minister offered our crown jewels worth some RM60 billion in a vain attempt to please President Trump’s “Make America Great Again” campaign, and we got absolutely nothing in return.

President Trump didn’t even try to pretend that Malaysia got anything in return – for example, the promise of ‘potential’ investments or increased imports of made-in-Malaysia products or visa-free travel for Malaysians to the United States.

We are outraged at Dato’ Seri Najib Razak pawning our assets “to strengthen the United States economy” for his own personal agenda, when the precious funds could be used to rescue our own floundering economy.

We call upon the Prime Minister to call for a special 2-day Parliamentary sitting upon his return from the United States to discuss and debate his 6-minute debacle with President Trump.  Dato’ Seri Najib Razak must justify to the 30 million Malaysians why he behaved like the leader of a vassal state to the US ‘imperialists’ within days after we celebrated 60 years of independence.


Issued by,

Pakatan Harapan 1MDB Action Committee

Tony Pua, DAP MP Petaling Jaya Utara
Sim Tze Tsin, PKR MP Bayan Baru
Dr Dzulkefly Ahmad, Amanah Strategic Director
Dr Rais Hussin, PPBM Strategic Director

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Ministry of Finance plans to wind down 1MDB by taking over 1MDB’s assets, but how much, Dato’ Seri Johari Abdul Ghani?

In a series of announcement since the middle of 2016, the Ministry of Finance has announced that it is slowing taking over all the real estate projects from debt-stricken and scandal-ridden 1MDB.

The Wall Street Journal has already reported in June last year that the Ministry of Finance (MoF) has signed a shareholder agreement that will see the ministry take over 1MDB's stake in the Bandar Malaysia development project.

The agreement will see MoF hold a 40% stake in Bandar Malaysia Sdn Bhd, the joint-venture company that will develop the 486-acre site of the former Sungai Besi Royal Malaysian Air Force base.  The remainder of the 60% stake has been sold to a joint venture between Iskandar Waterfront Holdings Bhd and China Railway Engineering Corp.

Last month, the Second Finance Minister, Dato’ Seri Johari Abdul Ghari told The Malaysian Reserve that "Tun Razak Exchange (TRX) is now taken over by the MoF and we are going to complete the entire project. We will complete it.  We will have to finish it. Otherwise, we will have to leave it to 1MDB and they will never be able to do it."

Yesterday, the Minister confirmed to Malaysiakini that 1MDB is winding down with the disposal or transfer of its assets to MoF.  "It is not winding up but it is in run-off operation. We don't conduct any new business.  We can't wind up the company until all the debts are settled and amounts due from disposal of assets are collected," Dato’ Seri Johari said.

At the surface, all appears well and good.  However, the big question to ask is, how much of 1MDB’s liabilities is the MoF taking over?  The Government must not quietly mask a multi-billion ringgit bailout of 1MDB with the innocuous announcements that the MoF is taking over 1MDB’s key assets in Bandar Malaysia and TRX.

Has the Government taken over Bandar Malaysia’s RM2.4 billion of sukuk bonds, of which only less than RM800 million was used for the purposes of the project while the balance of the bond proceeds was used for purposes unrelated to Bandar Malaysia?

At the same time, has the Government agreed to take over 1MDB’s RM800 million sukuk bonds borrowed from the Pension Fund (KWAP) which were meant for 1MDB’s real estate development but was instead used for other purposes?

The Government should assume any of the borrowings taken by 1MDB which have not been spent on the development of the 2 real estate projects.  Any amounts beyond that would tantamount to a backdoor multi-billion ringgit bailout of 1MDB which have lost billions from corruption and misappropriation.

What’s more, 1MDB has benefited from the sale of these 2 pieces of land after selling various parcels to third parties.  For example, despite acquiring the TRX land from the Federal Government for only RM64 per square feet, 1MDB sold TRX land to Tabung Haji and Affin Bank for more than RM2,700 and RM4,000 per square feet.   Similarly, 1MDB has sold 60% of Bandar Malaysia for a purported RM7.41 billion but acquired 100% of the land from the Federal Government for only RM1.6 billion.

Effectively, 1MDB gets to keep all of the multi-billion ringgit of astronomical profits from the sale of land it bought at bargain basement prices, while the Government is forced to absorb all the loans and liabilities incurred by 1MDB.

It becomes a triple-whammy for the people of Malaysia where (i) tax-payers funded GLCs were forced to pay sky-high prices to acquire the 1MDB land, (ii) 1MDB gets to keep all the ridiculous profits to cover up its stolen billions with none returned to MoF, while (iii) the Rakyat has to foot the bill of the billions of ringgit of loans assumed by the Ministry.

Dato’ Seri Johari Abdul Ghani must not hide the above matter from the public but instead provide full disclosure of the terms of the “take over” of the 1MDB assets and justify why and how much Malaysians will be forced to pay for the shenanigans which have taken place in 1MDB.

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The Economic Report 2016/7 exposes Dato’ Seri Najib Razak’s hidden budget time-bomb

Since the last general elections, Dato’ Seri Najib Razak has successfully managed the investment community’s perception of the “prudence” of the budget with declining budget deficits, albeit at a snail’s pace.

In 2013, the budget deficit was 3.8%.  The figure declined to 3.4% and 3.2% in 2014 and 2015.  For this year, the Government estimates it to be 3.1% and is forecasting 3.0% for 2017.

Despite the fact that Dato’ Seri Najib will never achieve his zero deficit target in 2020 at the current snail’s pace, credit should be given to the Finance and Prime Minister for the moderating deficit in the light of difficult economic conditions – that is if the deficit figures truly reflect government spending.

Even for a non-economist, you might raise an eyebrow as to whether deficit decline looked too “uniformly smooth” in a choppy global economy.  If you think that the numbers look too good to be true and have been manipulated, you are absolutely right.

In practically every budget in recent years, Dato’ Seri Najib Razak had announced multiple multi-billion ringgit projects such as the LRT Extension Project, the MRT I and II Projects and soon, the proposed High-Speed Rail and the RM55 billion East Coast Railway Link.

However, these spending were never reflected in the Government budget expenditure which showcased the “prudent” budget deficits.  Where did these massive spending disappear to?

You will find part of the answer in the Non-Financial Public Corporations (NFPC) Financial Position (Table 6.13 p161 Economic Report 2016/7 – see below).

NFPCs includes 29 key government-linked companies including Indah Water Konsortium, KTM Bhd, Telekom Malaysia, Malaysia Airlines Bhd, Malaysia Airport Holdings, Petronas, Prasarana, Syarikat Perumahan Negara, Tenaga Nasional, MRT Co and the UEM Group.

What is most alarming from the table is the NFPCs’ spending deficit.  In 2013, the NFPC deficit was a modest RM10.6 billion.  However, since then, the NFPC deficit leaped astronomically to RM52.3 billion in 2014 and further increased to RM56.9 billion in 2015.  The estimated deficit for 2016 is currently RM50.5 billion.

To lend context and perspective to the scale of these NFPC deficits, the Federal Government budget deficits for 2015 was RM37.2 billion.  In 2016, it is estimated to hit RM38.7 billion while the Government forecast RM40.3 billion for 2017.

In lay man’s terms, the Government has hidden the bulk of its excessive spending under the NFPCs to maintain a semblance of “moderate” budget deficit.  However, so much spending has now been shifted to these NFPCs, that the NFPC deficit has grown by leaps and bounds to now become even bigger than the Federal Government deficit!

To make matter worse, the 29 GLCs accounted in the NFPC does not include debt stricken 1Malaysia Development Bhd which is mired in more than RM20 billion of debt.

There is no question that the NFPC deficit is the biggest time-bomb to the Malaysian public finances.  We can already feel its ticking with the rapidly rising “Debt Service Charges” which the Government is forced to bear annually.  This is caused in no small part, to the Government being obligated to pay for interest and loans which the NFPCs are unable to fulfil.

The Federal Government Debt Service Charges have increased from RM20.3 billion in 2013 to a projected RM28.9 billion in 2017.  The increase will only accelerate and snowball as NFPC financial obligations arising from the massive deficits are realised in the years to come.

By the time the time-bomb explodes, the 2017 Budget which is already depressing, will feel like a Hawaiian vacation on hindsight.

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Felda Global Venture must end its value-destroying acquisition spree which smacks of utter recklessness and sheer incompetence

Felda Global Venture Holdings Bhd (FGVH) has been the undisputed worst plantation stock performer  ever  since  its  initial  public  offering  (IPO) in  July  2012. The  share  price  decline was so bad that the company was removed from the Bursa Malaysia KLSE Index stocks last year.

Since its hyped-up listing at RM4.45 per share, the battered government-linked stock closed at RM1.51  yesterday  representing  a  whopping  66%  decline  in  share  prices. Despite  its acquisition spree  since  then,  FGVH  net  profits  have  tanked from  RM1.33  billion  in  the financial year ending 31 December 2011 to a pitiful RM117 million in 2015.

Among  its  major  acquisitions  included  Pontian  United Plantations  Bhd  at  RM1.2  billion  in October 2013, Asian Plantations Ltd at RM568 million in October 2014 and Felda Iffco South China Ltd at approximately RM181 million. The undisputed turkey of the year however will go to FGVH’s proposed US$680 million 37% acquisition  of  Eagle  High  Plantations  (EHP)  at  the  outrageous price  of  Rp775  per  share in June 2015 whose stock price closed at Rp270 yesterday.  That means FGVH will pay nearly 3 times the market price of EHP, an absurd acquisition by any measure!

The EHP deal has yet to be completed but FGVH is in a limbo because the company paid a exorbitant 25% non-refundable deposit of US$174.5 million for the shares of EHP already!

The spate of acquisitions by FGVH should by right be earnings accretive, meaning they will add profits to the group.  However, despite having used up all of its cash raised during the initial public offering in 2012, the more acquisitions it conducts, the less profits it makes.
In another stunning announcement last week, before the dust over EHP has settled, FGVH is now proposing  to  acquire  55%  of  Zhong  Ling  Nutri-Oil  Holdings  Ltd  for  RM976  million. Zhong Ling is a company registered in Cayman Islands with interests in the Chinese market refining and distributing peanut and other edible vegetable oils.

There  are  many  questions  arising  from  this  particular  transaction  including  the  reason  for FGVH  to  acquire  a  peanut  oil  company  and  variances  arising  from  a  complicated  profit guarantee by Zhong Ling’s vendors.

However, the biggest question which FGVH must answer to its shareholders, which include not only state-owned  funds  like  EPF  and  Tabung  Haji,  but  also  more  than  90,000  Felda settlers  is, why is  FGVH  acquiring  a  company  which  has  failed  to  complete  its  audited accounts since December 2013!

The failure to complete and table Zhong Ling’s financial audit for December 2014 or 2015 in a timely manner by a reputable international auditor is the clearest warning sign that all is not well within Zhong Ling.  It gives the signal that Zhong Ling’s shareholders are seeking a profitable exit by disposing  of  the  troubled  assets  to  a company  desperate  to  boost  its earnings.

If Zhong Ling is indeed financially sound, why shouldn’t FGVH just request for the company to complete its missing audit first before negotiating the acquisition.  Why must FGVH rush in headlong into the acquisition, bear the risk of an unaudited company backed by a highly questionable guarantee arrangement by Zhong Ling’s main shareholder?

We  call  upon  the  Board  of  Directors  of  FGVH  to  protect  the interest  of  the  company’s shareholders  by  immediately  terminating  the  acquisition.    The  deal  should  only  ever  be considered after Zhong Ling has regularized its audit short-comings, and even so, only if the latter allows a separate independent audit be carried out to verify the financial statements.

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Riza Aziz Should TRX Land From Tabung Haji

According to Bernama yesterday, the Prime Minister, Dato’ Seri Najib Razak pointed out that Lembaga Tabung Haji’s (LTH) plan to turn over the land it bought from 1MDB to the private sector was a sound commercial decision as it would see the fund earn a few million ringgit overnight.

The Prime Minister, who is also the Finance Minister must be joking.  If it is so easy for LTH to “earn a few million ringgit”, then why did 1MDB, who is so desperate for funds, not sell it to those parties who are allegedly willing to purchase it for more money than what LTH was willing to pay?

Instead, LTH is forced to pay cash upfront for the land and undertake the entire risk of holding the land on behalf of 1MDB to look for a buyer.  Why couldn’t 1MDB have found the alleged willing-buyers who were not only so readily available, they are allegedly willing to pay RM5 million more than what LTH has paid?

There’s absolutely no credibility in the claims by the Chairman of LTH, Datuk Abdul Azeez Abdul Rahim that the land would be sold in a week.  He even committed that the land will be sold to a buyer at a profit of at least RM5 million and will be concluded within the next few weeks.

Hence we call upon Dato’ Seri Najib Razak to lead by example and immediately advise his own stepson, Riza Aziz to dispose of his luxury properties in the United States and purchase the above land from LTH.

It was reported in January this year by the New York Times, that Riza Aziz has purchased his New York Park Laurel luxury condominium and Los Angeles Beverly Hills bungalow for US$33.5 million (RM121 mil) and US$17.5 million (RM63.2 mil) respectively.  What was more amazing was that these properties worth US$51 million (RM184 mil) were acquired in cash from none other than Jho Low!

We now know of course, one of the reasons why 1MDB is in such dire straits with RM42 billion of debt was because Jho Low’s companies siphoned billions of ringgit from 1MDB.  And now, 1MDB is forced to dispose of all its assets which it acquired on the cheap from the Government to raise funds to service its debts.  In this case, 1MDB sold the 1.56 acre of land to LTH for RM2,773 per square feet (psf) despite acquiring the land for less than RM64 psf.

Under such circumstances, since the Prime Minister believes that paying more than RM2,773 psf for the piece of land is still such a good deal, he should immediately advise Riza Aziz to dispose of his RM184 million of properties in the United States and bring back the cash to buy this piece of land from LTH.

If Dato’ Seri Najib insists that Malaysians have to bailout 1MDB for its monstrous financial problems, then it is only right that he set the example by asking his family members of unexplained immense wealth to repatriate their money to bailout 1MDB first.

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Malaysians will pay more for electricity to help bailout 1MDB

During my speech at the DAP Petaling Jaya Fund-Raising Dinner in November 2014, I had told the audience that Malaysians will have to pay higher electricity prices in order to bailout 1MDB.  It was the same speech which the Prime Minister, Dato’ Seri Najib Razak has subsequently sued me for defamation.

I had then asserted that Malaysians have pay higher electricity prices because 1MDB was awarded several lucrative independent power producer (IPP) concessions without any open tender. Such direct awards went directly against the publicly stated principles of the Energy Commission to adopt open tender practices in order to promote competition in the industry.

The contracts awarded included a 2,400MW combined-cycle gas-turbine power plant in August 2014 and a 50MW solar farm in March 2014.  In addition, 1MDB was also awarded a 2,000MW coal-fired power plant in February, after the lowest tariff bid by YTL Power was controversially disqualified on a technicality.

I had argued that the tariff wil be higher for Malaysians in the future because the Government will award 1MDB will more lucrative tariffs in order to create more profits for the distressed firm to pay of its RM42 billion of monstrous debt.  Otherwise, why would the Government eschew the open tender process if 1MDB would offer the lowest possible tariff in the first place?

However, the situation is even worse than I have anticipated, because the Government has agreed to raise the tariff rates for 1MDB power plants even before their construction have even commence.

It was reported on Monday in The Edge Financial Daily that the Energy Commission has already approved an increase in tariff for the solar power plant from 41 sen per kWh to 50 sen per kWh.  That represents a whopping 22% hike in electricity tariffs within a year after the project has been awarded via direct negotiations.  The power supply will be sold to Tenaga Nasional, which will in turn transfer the cost burden to consumers.

As highlighted by my colleague, the Member of Parliament for Serdang, Dr Ong Kian Ming on Monday itself, the 50 sen tariff rate is higher the 49 sen recently awarded to smaller solar plants sized between 10MW to 30MW via competitive bidding.  As he rightly pointed out, the substantially larger 50MW solar farm will naturally enjoy higher economies of scale to offer cheaper prices.  In addition, with the rapidly plummeting global solar photovoltaic panel prices, tariffs should be declining over time, and not be increased by a whopping 22%.

Worse, The Financial Daily also reported that 1MDB is in the process of “disposing” its winning bid for the 2,000MW coal-fired power plant which it won via the controversial open tender.  This is because the debt-laden and cash-stricken 1MDB has no money to fund the project.  Furthermore no bank is willing to lend any more money to the company.

However, instead of cancelling the award due to breach of concession terms, the Energy Commission is allowing 1MDB to profit from the license award by on-selling its rights to Tenaga Nasional Bhd (TNB). To sweeten the deal for TNB to acquire the concession from 1MDB, it is understood that TNB will be allowed to renegotiate the tariff which was set earlier during the bid.  Once again, it means higher profits for 1MDB for doing absolutely nothing other than to on-sell the concession, while the rakyat will have to pay for higher electricity rates to TNB.

If the Government is truly concerned with the interest of the ordinary man, then surely the right thing to do will be to cancel all of the above recently awarded power plant concessions to 1MDB, simply because the latter has failed to produce the necessary funds to commence on their construction.  The power plants should instead be tendered out in an open and transparent fashion so that the most financial strong and experienced companies which bid at the lowest tariff rates should be awarded the contracts.

However, the Government chose to artificially improve the profitability of 1MDB in order to cover up the billions of ringgit of losses suffered by the company.  The losers are Malaysians who are forced to bear higher electricity prices on top of the recently implemented Goods and Services Tax. The above proves that I am right many times over that the men-on-the-street are being robbed with higher electricity prices in order to bailout 1MDB.

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Treasury-General: 1MDB RM42 Billion Scandal Only A "Small Issue Involving One Firm"

Malaysians can only react in horror when the Treasury-General can claim that the RM42 billion 1MDB scandal is only a “small issue involving one firm”.

 

Bernama reported yesterday that 1Malaysia Development Bhd (1MDB) is a “small issue involving one company, which is current undergoing a restructuring process,” according Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah.

 

Malaysians are stunned by the blasé reaction from Malaysia’s top finance civil servant.

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Dato' Seri Najib And Jho Low's Identical Responses To Questions: Mere Coincidence?

Why are Dato’ Seri Najib Razak and Jho Low giving the same standard reply which doesn’t answer the question of the latter’s role in 1Malaysia Development Bhd?

When Member of Parliament for Wangsa Maju, Dr Tan Kee Kwong asked the question on 12 March 2015 on whether there was any business transactions or dealings between 1Malaysia Development Bhd (1MDB) and Jho Low, Dato’ Seri Najib Razak provided a short and curt answer.He said “Mr Low Taek Jho never worked in 1MDB and all 1MDB decisions and transactions are made by the management and the Board of Director of 1MDB”.Why are the responses from the Finance Minister and Jho Low so strikingly similar in not directly answering the questions posed?

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Where Is 1MDB Global Investment Limited's US$3 Billion?

Where is our Government-guaranteed 1MDB Global Investment Limited’s US$3 billion?

Deputy Finance Minister, Datuk Ahmad Maslan had repeatedly denied that the Government had issued a “letter of support” for 1Malaysia Development Bhd (1MDB) via its subsidiary 1MDB Global Investment Limited to raise a US$3 billion bond on the 6 November 2014. He was subsequently forced to apologise embarrassingly to the August House on 18 November 2014 by conceding that there was such a letter.

However, he had insisted in his apology and revision of his Hansard speech that the letter does not tantamount to a guarantee.

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Second Finance Minister Must Be Joking That 1MDB's Cashflow Problems Can Be Solved This Year

Dato’ Seri Ahmad Husni Hanadzlah must be joking to claim that 1Malaysia Development Bhd (1MDB) is facing only cashflow problems which will be resolved by the end of this year.

During the last parliamentary sitting, Deputy Finance Minister Datuk Ahmad Maslan assured Malaysians that 1Malaysia Development Bhd’s losses were temporary and “it will return to profitability” for the financial year ending March 2015.

The Deputy Finance Minister spoke to reporters during a press conference on 21 November 2015 after 1MDB reported its first annual losses of RM665 million for its March 2014 accounts.

As we approached the end of March 2015 financial year, the Datuk Ahmad Maslan prophecy of 1MDB making profits looks as remote as any attempt to grow money on trees.  It showed clearly that we had a Deputy Finance Minister who had no grasp of the subject matter.

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Sarawak Report Chief Investigate Journalist To Join "1MDB: The Ultimate Low Down" Forum

Sarawak Report’s Clare Rewcastle will join the “1MDB: The Ultimate Low Down” Forum via video conference.

This press release is to announce that Sarawak Report’s chief investigative journalist, Clare Rewcastle will be joining the forum “1MDB: The Ultimate Low Down” via video conference.

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Minister Of Finance II Completely Deluded To Think IPO Can Solve 1MDB's Cashflow Problems

Minister of Finance II must be completely deluded to believe that an Initial Public Offering (IPO) of 1MDB’s energy subsidiary will solve 1MDB’s cashflow problems.

The Second Minister of Finance, Dato’ Seri Ahmad Husni Hanadzlah told the Dewan Rakyat that the government is hoping that the initial public offering (IPO) from 1MDB's energy arm would be able to pay for the company's growing debts.

"1MDB's stumbling block is it's cash flow. But once the IPO is up, this would be settled," he said.

Dato’ Seri Husni must be completely deluding himself, or has been deluded by 1MDB to actually believe that the IPO of 1MDB’s energy arm will rescue the RM42 billion indebted Ministry of Finance subsidiary.

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SRC International Investment In Gobi Coal: Yet Another 1MDB-like Scandal?

Is SRC International’s 50:50 joint venture with Mongolian company, Gobi Coal & Energy Ltd another multi-billion ringgit PetroSaudi-like scam waiting to be exposed?

SRC International Sdn Bhd is an anonymous-sounding company owned by the Ministry of Finance.  However, a peek into the company’s short history and balance sheet raises plenty of suspicion-arousing question marks.

I have asked for my oral question yesterday on whether SRC International Sdn Bhd had invested in a Mongolian energy company and what are the details of the investment and its current status.  I received the shortest of written response from the Minsitry of Finance late yesterday afternoon.

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Bank Negara Malaysia To Investigate Jho Low For Potential Money Laundering

Low Taek Jho and his associates must be investigated for possible money laundering in the acquisition of UBG Bhd via PetroSaudi International (Seycelles) Ltd using illicitly obtained funds from 1Malaysia Development Bhd (1MDB)

Over the past few days, both the Sarawak Report and The Edge Malaysia exposed how a 28 year old Low Taek Jho (Jho Low) had engineered the acquisition of Utama Banking Group Bhd (UBG) via PetroSaudi International (Seychelles) Limited (PSI Seychelles) in 2010.  UBG was a company owned by the former Chief Minister of Sarawak, Tun Taib Mahmud.

PSI Seycelles via its wholly owned subsidiary, Javace Sdn Bhd made a general offer to acquire all UBG shares for a total of RM1.4 billion on 29 September 2010.  AmInvestment Bank Bhd had provided RM700 million to finance this acquisition.

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Messaging Conversation Between PSI CEO And Jho Low Exposed

As the Finance Minister, Dato’ Seri Najib Razak must confirm if he has given the go-ahead for 1Malaysia Development Bhd to extend additional US$500 million loans to PetroSaudi International Limited’s wholly-owned subsidiary?

For the very first time, emails exposed by the Sarawak Report on the monster 1Malaysia Development Bhd (1MDB) scandal have implicated the Prime Minister, Dato’ Seri Najib Razak and his possible involvement in the PetroSaudi International (PSI) collaboration fiasco.

In a messaging conversation where Patrick Mahony, CEO of PSI was expressing grave concern over the need for approval by Bank Negara Malaysia (BNM) for a fund transfer from 1MDB to the PSI subsidiary, Jho Low (JL) had insisted that only the Ministry of Finance approval for the loan is required, and the loan had already been signed by the Prime Minister, who is also the Finance Minister.

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