Friday, January 01, 2016

1MDB "survived" only because it was bailed out - and its ordeal is far from over

Datuk Seri Najib Razak today said 1Malaysia Development Bhd (1MDB) had overcome its major challenges this year, just as he had promised it would in June.

"It is therefore clear that 1MDB’s major challenges are now behind it, as I promised they would be last summer, and all that remains is for the deals it has entered into to be completed and the final steps of 1MDB’s rationalisation programme to complete," said Najib on his website.

I beg to disagree with the Prime Minister’s New Year Message claiming that he fulfilled his promise made in June.

Firstly, 1MDB remains “alive” today not because it survived through its own business acumen and realised profits. 1MDB remains alive today because the tax-payers and government related funds bailed out the excesses of the company.

The latest transaction where 1MDB sold a 60% stake in Bandar Malaysia to a consortium of companies led by China Railway Engineering Corporation (CREC) for RM7.41 billion is unquestionably profitable. It will certainly go a long way toward reducing some of 1MDB’s remaining RM32 billion of debt after the earlier Edra Global disposal.

However, the sale is funded by the tax-payers because the Federal Government gave away the prime piece of property to 1MDB at the bargain basement price of RM1.6 billion in 2012.
All 1MDB did was resell this piece of land to a third party for a profit to pay down its debts.  As anyone can tell, 1MDB has generated zero value to the Sungai Besi airbase as not a single stone has been laid on the piece of land.

In fact, the above proved that 1MDB had borrowed billions of ringgit, lost the money and had to rely almost entirely on prime government assets to pay down the debts.

Similarly, 1MDB's boast that the rationalisation exercise is complete is an outright lie.

1MDB President, Arul Kanda, had said the first step in the rationalisation plan was achieved through the debt-for-assets swap with International Petroleum Investment Company (IPIC), which reduced 1MDB’s debt by RM16 billion.

Unfortunately, he consciously failed to highlight the fact that the debt will only be reduced if 1MDB can produce RM16 billion of assets to swap with IPIC come June 2016. In fact, if 1MDB fails to deliver the necessary assets to IPIC by then, the Ministry of Finance is legally obliged to compensate IPIC.

Clearly, Dato’ Seri Najib Razak and the 1MDB executives are hoping to fool Malaysians into thinking that the monstrous 1MDB scandal has been fully resolved and the dust has ben meticulously swept under the carpet.

However, the facts speak for themselves – 1MDB remains deeply in debt, to the tune of RM20 billion despite the multi-billion-ringgit indirect bailout by the Federal Government.  Malaysians will enter the New Year knowing that come June next year, we will likely be rocked with another multi-billion-ringgit bailout which Malaysian tax-payers can ill-afford.

Worse, the bailout proved mismanagement and grave wrong-doings in the wholly-owned Finance Ministry subsidiary. Despite the tonnes of evidence-backed allegations against the company, 1MDB has shown no hard evidence to prove its innocence over matters such as billions of dollars siphoned to companies controlled by Jho Low.

Unlike some people, the majority of Malaysians will certainly not easily forgive and forget such outrageous shenanigans by the BN Government. My 2016 resolutions will be to ensure that all those responsible for the tens of billions of ringgit losses are exposed for their misdeeds.

No comments: