1MDB–Questions that need ANSWERS


May 3, 2015

Phnom Penh by The Mekong

MY COMMENT: I do not know when our Auditor-General Tan Sri Ambrin Buang is going to complete his report on Ambrin1MDB. It must be a difficult exercise since 1MDB is full of tricks because some pretty smart executives are managing it. Or. Is it? In my opinion is not a major task. Neither is it a complicated exercise.It is a question of professional will.

If the Tan Sri cannot do it, just adopt the approach taken by Tan Sri Gani Patail, our infamous Attorney-General. Remember, Gani Patail engaged Tan Sri Shafee Abdullah to act as DPP to deal with the Federal Court Sodomy 2 Anwar Ibrahim case, and appointed Tan Sri Cecil Abraham, the pro-Najib Lawyer to defend the MACC Chief Commissioner  and himself in the Rosli Dahlan Defamation case. Outsource the task after all he is not paying for it. Malaysian taxpayers will underwrite it.

The Sarawak Report, Guna’s article (below), and other sources on the Internet should provide enough information to guide Ambrin Buang in his work. Then why the silence from him. Are we as taxpayers not entitled to receive some form of progress report?

Din Merican NewIf the Auditor-General is serious about bringing closure to this case so that follow-up action can be initiated to bring those responsible for any wrongdoing to bear he full brunt of the law. He should also know that in the public interest he must give his audit of 1MDB top priority. I would like to believe that the Auditor-General’s report (at least in draft in form) is ready but it is being “vetted” by the Prime Minister’s Department and hence the silence and the delay.–Din Merican

1MDB–Questions that need ANSWERS

by P Gunasegaram@www.malaysiakini.com

If 1MDB can provide full and satisfactory explanations to all of these, then they should do so immediately to allay the sizeable public concern and speculation, which has affected the value of the ringgit and our sovereign rating. At the same time it will relieve the considerable pressure on the Prime Minister to step down.

1MDB-The ScandalQUESTION TIME Perhaps, just perhaps, 1Malaysia Development Bhd or 1MDB does not understand what it needs to do to convince the public all is well with it. To help it along, here are 10 things that we feel our national self-styled strategic development company can do to soothe frazzled nerves and convince us Malaysians our money is safe.

CIMB Group chairperson and the Prime Minister’s brother Nazir Razak is not the only one who has been urging 1MDB towards greater disclosure, but he does make some pertinent points.

“I have no solution to it (IMDB) but I think we probably should know – disclose what needs to be disclosed in order for people to have a full picture and allay their worst fears. I just said it’s something that’s there, everyone is concerned about it, so you need to allay concerns. Put concerns to rest, that is all,” he told a press conference recently.

Considering that 1MDB continues to assert that everything is okay it really should not take too much for it to allay public concerns over how it started, raised money, invested, its links to various businessmen, etc. But in case it is stuck for what to disclose, we give below a checklist of 10 things, which will be good place to start. And like Maria said in ‘The Sound of Music’, “Let’s start from the very beginning, a very good place to start.”

Some background first. Let’s extract 1MDB’s mission and vision statement from its website. Mission: A strategic enabler for new ideas and sources of growth. Vision: To drive sustainable economic growth by forging strategic global partnerships and promoting foreign direct investment. It’s a self-styled strategic development company, as described by its latest CEO, its third.

Now let’s look at its business. Property development at two prime sites acquired cheaply from the government – the Tun Razak Exchange (TRX) and Bandar Malaysia. And Energy; buying over established Malaysian power companies, Tanjong Energy, Genting Sanyen and Jimah Energy. And, that’s it.

Next a quick look at its financials from its annual reports: assets of some RM51 billion, liabilities of RM48 billion, borrowings of RM42 billion (RM46 billion if we include some forms of payables which look like debt) as at March 31, 2014. If not for revaluation of properties – acquired cheaply from the government – by some RM4 billion over the years, it would not have made profits at all.

Onwards to Jho Low, the whiz-kid (who may no longer be much of a kid any more) billionaire who has so much influence over 1MDB decisions, according to e-mail revelations by Sarawak Report which have not been denied by 1MDB yet and whose companies reportedly received at least US$1 billion from 1MDB.

The other development from Sarawak Report is that some US$1.1 billion in 1MDB’s funds from Cayman Islands, said to be kept in Singapore, may not be there because the records for those are said to be falsified. That should be enough background. On to what 1MDB should be disclosing

Disclosures

  • Explain why there was a need to borrow RM42 billion at least when the energy assets only cost some RM13 billion and TRX and Bandar Malaysia are merely in the development stage
  • Reveal exactly where and at what rates of return are the rest of the money of RM29 billion at least being kept, including the Singapore/Cayman funds. Tell us what is the amount recoverable from this and how you propose to recover them. Also explain why 1MDB was scrambling for cash to repay a loan of RM2 billion recently to local banks. Tell us too what was tycoon T Ananda Krishnan’s role in all of these.
  • Explain why such high fees of several hundred million US dollars was paid to Goldman Sachs for bonds floated and what was the nature of their role in such deals. While normal rates for arranging such financing is closer to 1 percent, why the need to pay 10 percent for these?
  • Explain how keeping RM29 billion in deposits and for-sale assets overseas is strategic and helps in bringing foreign direct investments or FDI into Malaysia.
  • Was there hanky panky in the fundraising process whereby bonds were mispriced, allowing those who got the bonds to cash out in the secondary market to gain billions of ringgit? Was this the reason why the debts were ramped up repeatedly? If not explain why the bonds were mispriced and who were the beneficiaries, in other words who got first bite at the bonds.
  • With RM42 billion of borrowings and an average interest rate of 6 percent, annual interest payments before repayments amounts to over RM2.5 billion. Considering that 1MDB has been making cash losses since inception, explain how 1MDB proposes to obtain the interest payments and repayments in future especially since energy assets are now worth below cost.
  • Explain the business model for 1MDB. How does it propose to get decent returns when its cost of borrowing may be 6 percent or higher, especially for huge borrowings of at least RM42 billion and as high as RM46 billion.
  • Explain how the property developments are “strategic” and why we need foreign partners to develop these when Malaysia has considerable expertise in property development. What about causing a glut of office space in Kuala Lumpur and squeezing out private developers? Explain how that is strategic.

  • Explain to us what is the oversight of the board and senior management over all these issues, especially in the light of Sarawak Report disclosures – which have not been firmly denied – that outside parties played crucial roles in decision-making.
  • Tell what exactly was Jho Low’s role in 1MDB, when it started, how big was it and at whose behest did he have such a powerful pull over decisions made at 1MDB.

If 1MDB can provide full and satisfactory explanations to all of these, then they should do so immediately to allay the sizeable public concern and speculation, which has affected the value of the ringgit and our sovereign rating. At the same time it will relieve the considerable pressure on the Prime Minister to step down.

If 1MDB can’t answer satisfactorily even one aspect of these 10 disclosures, then it is incumbent upon the board of 1MDB and the government to immediately commission a forensic audit, put the organisation under a completely new caretaker management comprising people of impeccable character and get to the bottom of the entire issue.

The forensic audit will have a mandate to not only recover fully all assets but to hold to account all those responsible for wrong-doings inside and outside the company and bring them to book. It will also look into taking action against all financial advisers and claim damages from them for anything that they may have done to injure 1MDB.

P GUNASEGARAM is founding editor of business news and views portal KiniBiz.

What did ASEAN Summit 2015 achieve?


April 29, 2015

What did ASEAN Summit 2015 achieve?

by Prashanth Parameswaran

With the conclusion of the 26th ASEAN Summit chaired by Malaysia, what did this series of meetings achieve?

Leaders at ASEAN Sunnit 2015When evaluating ASEAN summits, it is useful to consider not only measures actually adopted – whether in the form of documents, housekeeping items, or proposals being forwarded on to other bodies – but also established ideas put off until future meetings and newer ones tabled for discussion in order to get the full picture. Since the ten-member grouping operates by consensus and rotating chairmanships, there are usually different speeds at which it moves depending on the issue in question and the extent of agreement or disagreement therein.

Aside from the chairman’s statement usually adopted – with the obvious exception of Cambodia in 2012 – a few other documents were adopted at the 26th ASEAN Summit. One was the Langkawi Declaration on the Global Movement of Moderates, an initiative championed by Malaysia over the past few years to promote moderation as a tool for bridging differences. The Declaration was viewed as one of ASEAN’s contributions to global peace and security. Another was the Declaration on Institutionalizing the Resilience of ASEAN and its Communities and People to Disasters and Climate Change. This builds on the ASEAN Joint Statement on Climate Change 2014 adopted at least year’s summit in Myanmar. The region is also extremely susceptible to natural disasters, and Malaysia was on the receiving end of this last year with the worst flooding in decades affecting hundreds of thousands of people.

Malaysia also continues to use its ASEAN chairmanship year to strengthen regional cooperation against the Islamic state threat, which it has been busy countering at home including during the run-up to the summit itself. As I have written earlier, Malaysia was already set to convene a Special ASEAN Ministerial Meeting on Radicalization and Extremism in October. But there were also discussions over the past few days about potentially holding an informal ministerial meeting with Brunei, Indonesia, the Philippines, Thailand, Australia and New Zealand next month as well.

Some measures that some had hoped would move forward were put off until future meetings. One of these was the proposal for a common ASEAN time zone. ASEAN currently has four different time zones, and the idea would be to get other ASEAN members to adjust their time to a single agreed one, most likely the current time zone in Brunei, Malaysia, the Philippines and Singapore, which is GMT + 8 and similar to the one in China. The alignment would facilitate business dealings and would help forge a more cohesive ASEAN Community expected by the end of 2015. The idea was originally proposed by Singapore back in 1995, but differences still remain within the grouping on the matter.

IMT - GTOther ideas were also floated that were significant. According to Malaysian Foreign Minister Anifah Aman, several proposals in the form of “non-papers” were discussed. Among these was an idea to streamline ASEAN meetings – including reducing the number of ASEAN summits from two to just one per year – which is reportedly still under discussion. Another was on strengthening the East Asia Summit (EAS), which I touched on briefly here. This year is the 10th anniversary of the EAS, and several countries have been suggesting ways to make it a more effective institution, which they hope will take place under Malaysia’s chairmanship.

As expected, the South China Sea question received significant attention but saw little progress. The media did release parts of a draft ASEAN statement where the group did share concerns expressed by some states on China’s extensive land reclamation activities in the South China Sea, which it said threatened peace, security and stability. And Najib also repeated the call for an “expeditious resolution” of a code of conduct while stressing that ASEAN would engage China in a “constructive way. But beyond these steps, little progress looks likely at this stage, which is not surprising considering ASEAN’s lowest common denominator position on the issue, China’s continued stonewalling on a code of conduct, and the balance Malaysia tends to strike in its own policy, all of which I have addressed before in separate pieces (see here, here and here).

More on 1MDB–Sarawak Report


April 26, 2015

More on 1MDB–Sarawak Report

READ:

http://www.sarawakreport.org/2015/04/further-usd330-million-went-straight-to-jho-lows-good-star-from-1mdb-new-exclusive/

Jho Low AddA US$330 million (RM1.18 billion) loan 1Malaysia Development Berhad (1MDB) had issued to PetroSaudi International in 2011 was actually deposited into the account of Good Star Limited, a firm controlled by businessman Low Taek Jho, whistleblower site Sarawak Report claims.

The money was transferred in four separate tranches into Good Star Limited’s RBS Coutts, Zurich account, said Sarawak Report, citing documents from official investigators.

However, approval had only been granted by the regulators for 1MDB to lend the money to its former joint venture partner, PetroSaudi, on the basis that it was to “finance on-going overseas investment in the oil and gas sector”, said Sarawak Report.

It said the rational for the loan approval was “to pursue a strategic and global partnership in the energy sector and promoting foreign direct investment into Malaysia”.

There was no mention made of the company Good Star Limited in the loan application and neither was approval granted for the money to be sent to it, said Sarawak Report.

The investigation also revealed that the USD$330 million, which was sent to Good Star Limited, was officially reported to Bank Negara as having been paid to the PetroSaudi company 1MDB PetroSaudi, it said.

“The question now is who was responsible for providing this misleading information that Good Star Limited was a subsidiary company of PetroSaudi International,” Sarawak Report said.

“Also, why did none of the banks involved in any of these transactions ever see fit to file a suspicious transaction report?”

According to the website’s calculations, USD$1.19 billion of the USD$1.93 billion that 1MDB lent to PetroSaudi ultimately went to Good Star Limited.This included the USD$700 million Good Star allegedly siphoned from 1MDB’s now-ended joint venture with PetroSaudi, which was orchestrated by Low, who is better known as Jho Low.

Good Star Limited had also received an additional US$160 million from a Murabaha Loan agreement signed between PetroSaudi and 1MDB, which was also masterminded by Low, Sarawak Report said.

On Thursday, Sarawak Report said Good Star Limited, found to have transferred over US$500 million to one of the businessman’s bank accounts at BSI Bank Limited in Singapore in 2011 and 2012.

1MDB has come under fire for its financial mismanagement, debts, questionable investments and borrowings.

Since its inception in 2009, the strategic development fund, which is owned by the Finance Ministry, has amassed a whopping RM42 billion in debts.

Prime Minister Datuk Seri Najib Razak, who chairs 1MDB’s advisory board, has come under attack from various quarters over the firm’s massive losses and dubious dealings, especially from Tun Dr Mahathir Mohamad.

The former Prime Minister has repeatedly asked Najib to step down, and had said in a blog posting that unaccounted funds from 1MDB spending showed money has “disappeared”, while noting Najib’s inability to explain the matter disqualifies him from leading the country.

Dr Mahathir also hinted at corruption and theft of 1MDB’s funds, saying that money disappearing was “different from just losing”.

“Governments can lose money through bad investments. We would know where the money is lost. But when huge sums of money disappear, then those entrusted with its management must answer for the disappearance. Disappearance is about money lost which cannot be traced. This can be because of corruption or theft.” .

http://www.themalaysianinsider.com

Daunting times for Malaysia


April 24, 2015

Daunting times for Malaysia

By Leslie Lopez / Kuala Lumpur of The Edge Review

Najib Vs MahathirMalaysia’s risk profile is rising fast as controversy over the government’s debt-freighted sovereign wealth fund continues to snowball. Stability fears are growing amid concerns over Prime Minister Najib Razak’s hold on power, fragility in the economy and tensions among Malaysia’s multi-racial population over religious issues.

The problems combine to make the country Southeast Asia’s biggest trouble spot after post-coup Thailand, struggling under draconian military rule.  But the main focus remains the months-old controversy swirling around 1Malaysia Development Bhd (1MDB), a brainchild of Najib that is saddled with a debt of more than RM42 billion (US$11.62 billion).

The fund is struggling to service this huge debt load and analysts say any default on its borrowings, raised through international bond issues over the last six years, could undermine the country’s international ratings.

Most ratings agency have so far resisted openly voicing concerns, although Fitch warned in March that Malaysia had a more than 50 per cent chance of a downgrade from A- status, which would mean an added burden on government finances from an increased cost of borrowing.

The crisis surrounding 1MDB deepened this week with news that Malaysians may face hikes in their electricity bills of up to 20 per cent to raise funds to bail out the fund. Calls for an inquiry were also prompted on Wednesday amid media reports alleging that bank documents given by a 1MDB subsidiary, showing it had US$1.1 billion in assets, may have been faked.

1MDB has become a lightning rod in the campaign to remove Najib from office. Most notably, in recent weeks, former Prime inister Mahathir Mohamad has harangued Najib for the growing mess in the sovereign fund and describing Najib as unfit to lead the country.

Dr Mahathir has also piled on the pressure by reopening public debate into a number of personal scandals directly involving the Premier, including the unexplained murder of a Mongolian woman by two members of his private security detail and the lavish lifestyles of members of his family.

Najib has responded to criticism by saying he is judged by the country, not by his predecessor, and so far appears secure. But the political crisis is starting to spotlight deeper structural problems besetting the country.

“Malaysia’s troubles go beyond the personalities. The economy, its political system and its institutions need urgent reform, and, without all of this, Malaysia will continue to under-perform,” says Manu Bhaskaran, Chief Regional Strategist at Centennial Partners in Singapore.

The malaise is a product of more than three decades of policy missteps that began during Dr Mahathir’s 22 years in office. In that time, he pursued his own brand of command capitalism, with the government pouring billions of dollars into heavy industries and costly infrastructure projects that largely benefited cronies of the ruling United Malays National Organisation (UMNO).

He also put a check on dissent by cowing important institutions – such as the Judiciary and other regulatory agencies and the civil service – that largely became subservient to the National Front coalition government headed by UMNO.

That ambitious economic agenda is today in tatters. Over the years, the government has had to bail out many of the companies entrusted to carry out the big-ticket projects, while the push into heavy industries has been a major failure, with the collapse of the state-owned steel company, cement plants and ship-building facilities.

The limping national car project, Proton, is the sole vestige of Dr Mahathir’s ambitious economic blueprint and that too is struggling to stay afloat.

Economists and bankers say that the crisis unfolding at 1MDB is symptomatic of many economic fiascos that tarred the Mahathir administration: poorly conceived state-led ventures, often with questionable commercial merits, pushed through in a system bereft of proper checks and balances.

All of this has put the country’s US$303 billion economy on shaky ground. Even as it struggles with mounting household and government debt, Malaysia is one of the region’s biggest oil exporters and a recent downturn in prices has stripped the economy of a key growth driver. This is placing further strains on government finances, adding to fears of potential downgrades by international rating agencies.

The ringgit has also been battered to six-year lows against the US dollar and prospects of a further depreciation looms large as foreigners own nearly 40 per cent of the country’s ringgit-denominated debt.

The economic troubles have bred widespread public discontent towards UMNO, which dominates the coalition government that has held uninterrupted power since independence in 1957.

Independent polling outfit Merdeka Center recently reported that more than 60 per cent of Malaysians feel that Najib’s government is on the wrong track, compared with an approval rating of just 32 per cent.

This slump is the lowest since Najib took over the premiership six years ago and is largely due to sharp spikes in the cost of living, made worse with this month’s introduction of a goods and services tax – and by the attacks by his former mentor.

“The unrelenting Mahathir bashing of Najib is seriously damaging the National Front brand,” says Merdeka Center’s Ibrahim Suffian.

Dr Mahathir insists that his distaste for the Najib administration stems from the financial wrongdoings at 1MDB. But several politicians close to the premier argue that the animosity has more to do with Najib refusing to back several pet projects of Dr Mahathir, who is still revered within UMNO.

They include Najib’s refusal to build a new bridge to replace the causeway linking Malaysia and Singapore and the government’s refusal to provide Proton with a RM1.4 billion grant.There is also a strong political dimension to Dr Mahathir’s anger towards Najib. Close associates say that he believes the National Front, which suffered serious electoral setbacks in the 2008 and 2013 general elections, could be kicked out of power in the next elections, which must be held before mid-2018.

Dr Mahathir has genuine reasons to worry. The National Front’s stranglehold over Malaysian politics has sharply diminished. The coalition lost its long-held two-thirds parliamentary majority in 2008. Then at the 2013 election it lost the popular vote, securing only 47 per cent compared with the opposition’s 51 per cent.<

To restore its political clout, particularly among the country’s dominant Muslim Malay community, Najib has been pandering to rightist elements within UMNO, who have been pushing for greater cooperation with Islamic opposition Parti Islam SeMalaysia (PAS), which is determined to establish shariah law.

But Dr Mahathir believes UMNO’s dalliance with PAS could trigger a backlash from its coalition partners, particularly those in the Borneo states of Sabah and Sarawak, which together hold a crucial block of votes in parliament that could make or break the National Front at the next election.

The majority-Christian states are rich in resources and remain the country’s biggest producers of oil and gas. Now voters’ sentiments there are changing, with growing demands for more autonomy and a bigger share of natural resource revenues for the respective state governments.

MIER to Putrajaya: Listen to the People


April 22, 2015

MIER to Putrajaya: Listen to the People

By Zurairi AR@www.themalaymailonline.com

The Malaysian Institute of Economic Research (MIER) urged Putrajaya today to pay attention to the public when formulating national policies instead of resorting to knee-jerk reactions, as Malaysians fret over a decline in living standards and quality of life.

Ahead of the 11th Malaysian Plan, MIER said Malaysia urgently needs to adopt an approach that focuses more on enhancing the well-being of the public when managing economic and social development.

“Behavioural approach to policy, listening attentively to the voices of the rakyat, should be the new direction,” MIER said in its Malaysian Economic Outlook for the first quarter of 2015 presentation.

“Doing so will help avoid policies and measures that will result in deadweight losses and the society ending up worse-off than before,” said the report released in its 20th Corporate Economic Briefing.

“Welfare of the rakyat should be the key priority and this calls for greater social capital and strong collective action,” it added.

ED MierCountries that have adopted such an approach includes Australia, Canada, New Zealand and Nordic countries, MIER said. Pointing to the implementation of the goods and services tax (GST), MIER Executive Director Dr Zakariah Abdul Rashid said that Putrajaya must not be “too harsh” towards the public, apart from considering their feedback on the consumption tax.

MIER also warned against a lack of openness and transparency, gap in policy credibility, weak institutions, poor governance and low ethical and moral values, saying these attributes will affect the public perception and that of investors.

“There must be good signalling for market participants to react adequately, while ‘gradual approach’ and extensive consultations will surely help to avoid uncertainty and negative perceptions of stakeholders and rakyat as a whole,” said MIER.

MIER predicted that Malaysia will reach 5.0 per cent gross domestic product (GDP) growth this year, slightly above World Bank’s forecast of 4.7 per cent.

– See more at: http://www.themalaymailonline.com/malaysia/article/listen-to-the-people-economic-think-tank-urges-putrajaya#sthash.NOYWFy1m.dpuf

Kuala Lumpur Golf & Country Club Membership Transfer Fee: A Rip Off


April 17, 2015

Kuala Lumpur Golf & Country Club Membership Transfer Fee: A Rip Off

KlgccA few of my friends have been trying to sell their KLGCC membership since they wish to relocate overseas for reasons that have to do with the politics of our country. To their horror, they have to come to know that the club membership transfer is now RM70,000 and will be able to do so only if they are prepared to absorb this fee or share it with a prospective buyer. It would appear that in KLGCC, you can get in but cannot get out easily.

One member received this response from private agency and I quote:

There are quite a few buyers but their offer price is around RM200k to RM230k inclusive of transfer fee (TF). Unfortunately the buyers are not willing to fork out the high transfer fee RM70k which the club increased last year from RM25k.

Last year (before TF increase) there were transactions at about RM195k to RM200k incl TF, ie. sellers received RM170k to RM175k. With the increase of TF since August last year, there have been no transactions…because while buyers are willing to share part of the TF they are not willing to absorb completely the TF price increase.

Although KLGCC declares the “market price” of the membership at RM350k, we have not seen any buyers willing to pay this amount yet. If they buy at RM350k, they would need to sell at RM420k(RM350k + TF) just to break even. Perhaps they don’t expect the price to continue to increase in the near future. This is the current situation.

I am told that this  increase in transfer fee was initiated and approved by Sime Darby Berhad, the multinational company which has a big say in the management of this so-called prestigious club  ostensibly with the support of the membership body. This is a substantial increase from RM 25,000 previously. No reason is given for this change. Even rm25,000 is already a huge sum. I wonder how much work is involved by the Club, and which hot shot legal firm is being used,  to formalise the ownership transfer. How complicated can this transaction  to warrant such a cost. So isn’t any wonder that the transfer market is dead?

One would have thought that Sime Darby would understand that the objective should be to facilitate membership change and allow those who have invested in the club membership over many years to exit and realise a reasonable return on their investment. Obviously, this is not the case. It is just nothing but a ripoff.

Will  the Sime Darby  management, the Club President and the Club Captain, Dato Mustafa Ali, look into this matter and the benefits of being a member of this Club. For example, members and non-members are charged the same rates of use of banqueting facilities for events like weddings, parties and other social functions. Surely, there are other ways for Sime Darby to make money.–Din Merican