Wednesday, January 11, 2017

1MDB Foundation RM690 million spend: “corporate social responsibility” or reckless and irresponsible vote-buying for the BN administration?

1MDB has proudly announced that since 2010, its foundation has spent RM690 million into "worthy causes" which had benefited 2.8 million Malaysians through 60 projects in education, healthcare, youth development and community services.

"Examples of such activities can be found on the 1MDB website, ranging from Dana PIBG grants and academic grants to SPM and STPM students to academic grants for Sri Murugan Centre and Unified Examination Certificate holders, as well as Dana Belia 1Malaysia and 1Malaysia Mobile Clinics,” the company elaborated in its statement.

1MDB also emphasized that the funds were generated from “its legitimate business operations, formerly in energy production and more recently, in real estate development”.

1MDB’s generous spending in corporate social responsibility (CSR) appears to set the ultimate benchmark for all other companies to emulate.  1MDB’s statement and outsized CSR spend were clearly designed to enhance the perception of the state-owned firm as a benign and benevelont corporation, a stark contrast against its much maligned global reputation.

The only problem, and the crucial one, is that 1MDB never generated these cash from its businesses past and present.

For its “profitable” energy business, 1MDB borrowed extensively to acquire them for an overpriced RM12.1 billion.  The borrowings were so big that the profits from the energy companies were insufficient to even service the interest of the relevant loans in the group, what more the principal.

As a result, 1MDB was “forced” to sell its energy business for RM9.83 billion, suffering a huge loss of RM2.27 billion.

However, at least 1MDB’s energy business was generating productive revenue.  1MDB’s real estate business never took off for the years in question.  The land 1MDB acquired was alienated to 1MDB by the Federal Government at bargain basement prices.  The company was sold undeveloped land to Tabung Haji and the Armed Forces Pension Fund (LTAT) group, who were cajoled into buying at astronomical prices.  For example, LTAT subsidiary, Affin Bank paid RM4,500 per square feet for a piece of land in Tun Razak Exchange, when 1MDB acquired it from the Government at only RM64 per square feet.

What is vital to note is the fact that despite the sale of land at astronomical prices, 1MDB still cannot settle its outstanding debts that remains in excess of RM35 billion today.

As we have discovered via the Swiss Attorney-General Office and the United States Department of Justice, at least US$5 billion have been misappropriated from the 1MDB funds while more than US$730 million of the amount have found its way into the Prime Minister, Dato’ Seri Najib Razak’s personal bank account in Malaysia.

Hence effectively, 1MDB wasn’t executing its CSR programmes from its cash pile arising from the company’s profits.  Instead, 1MDB was pretending to be a big profitable company, spending big on CSR via its mega-borrowings which it is now unable to service.

Worse, the burden of these loans are now dumped squarely on the shoulders of ordinary Malaysians who are forced to bailout 1MDB via the Federal Government.  In short, we Malaysians are footing the bill, with interest, the money that 1MDB has so “generously” spent on us via its CSR programmes.

This leads to the conclusion that 1MDB is not the benign and benevolent entity it sought to portray but a recklessly irresponsible one causing greater hardship on the rakyat.  And it did so with the clear intent to influence and “buy” votes for the general elections to prop up the corrupt Najib administration.

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