Saturday, January 09, 2016

With the sale of Bandar Malaysia land parcels, 1MDB must refund the Malaysian Government the RM2.7 billion cost of the airbase relocation

1Malaysia Development Bhd (1MDB) had made “further clarifications” with regards to the different values – RM7.41 billion and RM5.28 – billion announced by 1MDB and China Railway Engineering Corporation on 6 January 2015.  The clarifications disclosed a key fact: that 1MDB intends to recover the cost of the existing military airbase (PUKL) relocation projects.

1MDB stated “the main relocation contract and development agreement was executed between 1MDB and the Government of Malaysia for a contract value of approximately RM2.7 billion. This cost includes, amongst others, new land acquisition costs, construction costs, fit out/equipment costs and relocation costs”.

1MDB also stated that “it is the intention of 1MDB and the Consortium to transfer the remainder PUKL Relocation construction costs… to the new special purpose vehicle”, of which 60% is to be acquired by the Iskandar Waterfront – China Railway Engineering consortium (IWH-CREC).

The share sale and purchase agreement will be subjected to, among other things, receiving the necessary consent from the Government of Malaysia.

We call upon the Government to withhold all approvals for the transaction to be completed unless 1MDB agrees that any relocation costs recouped and received by 1MDB will be returned to the Malaysian Government.

This is very simply because the Federal Government has already paid 1MDB the RM2.7 billion relocation cost in full when 1MDB acquired the land in 2012.

In fact, 1MDB not only received payment for the relocation cost from the Federal Government, they took an additional RM2.4 billion sukuk bond, of which RM1.63 billion has been accrued (drawn down), to fund the same exercise!

However, despite 1MDB receiving billions of ringgit from the Government and the loan, only RM800 million of the PUKL relocation contract has been paid, with another RM1.9 billion still outstanding.  The question that 1MDB must answer is, where did all the billions of ringgit paid by the Federal Government and borrowed from financial institutions go?

Hence, if 1MDB were to receive payments from IWH-CREC for the relocation cost, such receipts must be returned to the federal government and not retained as undeserved income for 1MDB.

It will be a major travesty to the Malaysian tax-payers to foot the bill for the massive RM2.7 billion relocation cost, while 1MDB profits from the tax-payers’ burden.

As it stands, the Federal Government has already indirectly bailed out 1MDB by selling the Bandar Malaysia land super-cheap to 1MDB at RM1.6 billion for 1MDB to resell 60% of it at RM7.41 billion to pay down its monstrous debts.  Now if the relocation costs, when recovered from IWH-CREC, aren't refunded to the Federal Government, the Malaysian tax-payers would be cheated by a multi-billion-ringgit double-whammy as a result of the 1MDB catastrophe.

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