Tuesday, March 17, 2015

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.
He amended his original statement from ““Tidak ada surat apa semua. Satu lagi yang disebut mengenai letter of support itu sebenarnya tidak ada” to “Tidak ada surat jaminan lain apa semua. Satu lagi yang disebut mengenai letter of support yang memberi jaminan lain itu sebenarnya tidak ada.”

However, in the Ministry of Finance written reply to my oral question on Thursday last week, Dato’ Seri Najib Razak officially admitted for the first time in Parliament that in the event that 1MDB Global Investment Limited fail to repay its loans after utlising all its internal funds and assets, “then the letter of support from the Government becomes effective.”

Just as a rose by any other names smell just as sweet; a Government loan guarantee by any other innocuous names like a “letter of support” remains tantamount to a guarantee.

Hence while all Ministers had to date insisted that the Federal Government guaranteed loans for 1MDB amounted to only RM5.8 billion, the true figure should be more than RM16 billion of total 1MDB outstanding debt of RM42 billion as at 31 March 2015.

The more pertinent question is, where has these US$3 billion disappeared to?  While the media and its critics have often focused on the mysterious US$2.32 billion of ‘investment’ in the Cayman Islands, the 1MDB Global Investment Limited funds have often escaped scrutiny.

The money was raised by 1MDB Global Investments in March 2013 to jointly fund Abu Dhabi Malaysia Investment Company Limited (ADMIC), a 50:50 joint venture between the 1MDB Global Investments and Aabar Investments, an investment arm of the Emirate of Abu Dhabi.

As reported by The Star on 13 March 2013, the Prime Minister had proudly announced the proposed joint venture during a signing ceremony between 1MDB and Aabar Investments.

The oil-rich United Arab Emirates (UAE) has committed RM39bil to two projects that will create hundreds of thousands of well-paying jobs for Malaysians. The projects involve the setting up of a RM21bil strategic petroleum reserve in Tanjung Piai, Johor, and a RM18bil strategic partnership in the Tun Razak Exchange (TRX).

In his speech, Najib described the projects as a vote of confidence and trust in the strength and long-term stability of Malaysia and its economy. “With projects such as these, we can be assured that Malaysia is well on the way to becoming a developed nation by 2020,” added the Prime Minister.

However, none of these projects have materialised and the joint venture remains in limbo. Despite that, 1MDB had revealed in its March 2014 financial statements that nearly half the money it had raised in the prior year has already been utilised.  The report stated that US$1.44 billion has already been used up by 1MDB “for working capital and debt repayment purposes”.

It was also reported that “a portion of the proceeds from the private debt securities [bonds] amounting to USD1.56 billion have been placed in various investment portfolios under custody of a licensed financial institution with good credit ratings…”

Just as we were left clueless about the seggregated portfolio investment company in the Cayman Islands, we are also now left scratching our head as to where exactly is this US$1.56 billion located or invested.

Why is 1MDB so cash-strapped and desperate for a massive bailout from the Government, when it has billions of ringgit of unutilised funds or liquid investments sitting in some “licensed financial institution with good credit ratings” somewhere on this planet?

Again, just like the mysterious money that is now sitting in BSI Singapore which cannot be repatriated, 1MDB and the Government must explain how these government guaranteed funds have been utilised, abused or misappropriated.

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