Tuesday, June 02, 2015

IPIC $1 Billion "Business Transaction" Questions Cabinet Authority

If the US$1 billion is not a “loan” from the Abu Dhabi investment arm, then what is it and how did the Cabinet Members give its endorsement to the plan?

Last Friday, Second Finance Minister, Dato’ Seri Ahmad Husni Hanadzlah stated that “1MDB has entered into a binding agreement with the International Petroleum Investment Company (IPIC) and its subsidiary Aabar Investments (Aabar)” where IPIC will make a “payment” of US$1 billion, on or before 4 June 2015.

“This US$1 billion payment will be used to repay a US$975 million (RM3.5 billion) loan, in advance of its due date, to a syndicate of international bank lenders,” according to the Second Finance Minister’s statement.

I had then asked what is the cost of this payment to the Malaysian government, and whether this is a loan or an advance to 1MDB.

Following that, the 1MDB President and Group Executive Director, Arul Kanda Kandasamy, denied that the US$1 billion is “a loan, debt or bailout”. He said,

"Further to the Ministry of Finance’s statement on 29 May, we have noted with concern claims from certain quarters suggesting that the USD1 billion payment from the International Petroleum Investment Company of Abu Dhabi is a loan, or involves 1MDB assuming further debt."

"That is absolutely not the case. This is a business transaction; not a loan, not any kind of debt and not a bailout."

So now we know, assuming Arul Kanda’s statement can still be trusted, that the US$1 billion payment to 1MDB is not a loan. However, we are still completely clueless why IPIC would be willing to make a payment of US$1 billion for an clearly indeterminate transaction.

All Malaysians have is Dato’ Seri Ahmad Husni’s earlier statement that “the agreement will also include further measures to comprehensively address the various financial asset and liability transactions between the parties, further details of which will be announced in due course.”

Dato’ Seri Ahmad Husni had earlier informed Malaysians that he will be tabling a restructuring report to the Cabinet. However, all the Ministers received was some vague proposal without providing the complete picture about IPIC paying US$1 billion upfront while waiting for some form of agreement to be arrived “in due couse” over what it will cost Malaysians. The above certainly doesn’t stand up to being a “complete report” which the Second Finance Minister promised.

The question must then be asked – how did the Cabinet unanimously and blindly agree to and support the decision to accept a very mysterious US$1 billion payment from a foreign government investment for transactions which were unknown or not finalised?

Why was there absolutely no question asked by any Cabinet member as disclosed by Tourism Minister, Dato’ Seri Nazri Aziz. Was it because they understood perfectly the proposed “restructuring plan” which was tabled and hence there was no necessity to question?

Or was it because they were intimidated by Dato’ Seri Najib Razak’s less than subtle threat asking ‘…if somehow, some of you feel uncomfortable with this, please hand in or write (your resignation), and I will understand.”

This was despite all the hoo-haa expressed by various Ministers prior to the Cabinet meeting that there need to be proper accountability, transparency and clear explanations. If they themselves don’t know or understand the proposal or issues, how can they expect the ordinary Malaysians to understand?

It is clear that these self-serving Cabinet Members were more interested to protect their ministerial positions than to protect the interest of billions of ringgit of Malaysian tax-payers funds and liabilities in 1MDB.

Tony Pua

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