Zeti gets glowing tribute from Barrons’Pesek


May 3, 2016

Zeti gets glowing tribute from Barrons’Pesek

 by FMT Reporters
 www.freemalaysiatoday.com

It says smart, strong and charming Zeti Akhtar Aziz was “the glue that held Malaysia’s economy together amid failed reforms”.

None of these Task Force Professionals could stand up the Force behind Najib

Former Bank Negara Governor Zeti Akhtar Aziz has received a glowing tribute from American financial magazine barrons.com, in which she was called “the glue that held Malaysia’s economy together amid failed reforms and scandals”.

The magazine’s executive editor, William Pesek, wrote: “Globally respected Zeti was a vocal thorn in the Prime Minister’s (Najib Razak) side, calling for investigations into a state-owned fund he oversaw.” This was in reference to Najib’s link to 1MDB, as well as the billions in donations found in the premier’s personal accounts.

“Najib didn’t fire Zeti; he waited out the end of her term (last Friday). It comforted many that Najib didn’t replace her with a crony or a cousin, but with one of her deputy governors.Still, Najib dragged the decision out until the very last moment – two days before Zeti left the building. But let’s pause for a different snapshot: how Malaysia just lost its most globally respected public official and the implications of her departure,” the article said.

Pesek, a self-professed “unabashed Zeti fan”, said the “smart, strong and charming” Zeti was the reassuring face of “an economy with a knack for bizarre international headlines”. He listed instances where Zeti was apparently there to “calm nerves”, held things together and pushed back when the administration tried to “pull the wool over (the eyes of) 30 million people”.

“It was nothing short of breathtaking to watch her make uncharacteristically blunt statements about funding irregularities Najib tried to sell as a foreign conspiracy to destablise Malaysia.When Zeti said the scandal (1MDB) was denting confidence, she was fighting for Malaysians, not the ruling party – a rarity in Kuala Lumpur.As many foreign central bank peers and investors told me over the years, it made the outside world feel better to know Zeti was at the top of the power pyramid,” Pesek wrote.

He raised the question whether Zeti’s replacement, the “Harvard-educated Muhammad Ibrahim”, would follow in her reformist footsteps.

“Perhaps he too will have the mettle to speak truth to powers, both internationally and domestically. All we can do is hope.”

Pesek then called Malaysia’s affirmative action policies benefiting the majority Malay population as “apartheid economy which kills innovation and productivity, and drives many of Malaysia’s best and brightest to Singapore and Hong Kong”.

“It turns off foreign executives, investing in Indonesia, the Philippines and Vietnam instead.”

Zeti was also commended for taking a technocratic, rather than a blusterous approach, when the ringgit was falling and she was thrust to the limelight.

Pesek queried how anyone else but Zeti, especially someone beholden to Najib and his inner circle, would have fared in the last 10 months, as questions swirled around 1MDB.

Muhammad may be as “liberated and feisty” as Zeti during his stint, but there’s ample reason to worry as his every word, deed and gesture will be scrutinised for any signs of sympathy for Najib’s government, Pesek wrote.

Zeti’s departure isn’t a pretty picture for investors hoping for a more transparent and vibrant Malaysia, Pesek concluded.

 

Malaysia’s Reputation Takes Another Hit as 1MDB Defaults


April 27, 2016

Malaysia’s Reputation Takes Another Hit as 1MDB Defaults

by Shamim Adam@shamimadam
Y-Sing Liau and David Yong@dyong126

http://www.bloomberg.com/news/articles/2016-04-26/1mdb-says-it-s-in-default-after-missing-interest-payment

Malaysia–A Land of Broken Dreams ruled by a cabal of Malay rogues

The Malaysian government’s reputation took another hit on Tuesday after state-owned 1Malaysia Development Bhd. defaulted on a $1.75 billion bond. The ringgit fell and 1MDB’s dollar debt slumped.

The development fund withheld a $50 million coupon payment amid a wider dispute with Abu Dhabi’s International Petroleum Investment Co., the co-guarantor of the bonds. The missed payment triggered cross defaults on 7.4 billion ringgit ($1.9 billion) of 1MDB debt, including borrowings that are guaranteed by the Malaysian government, the fund said in a statement on Tuesday.

Prime Minister Najib Razak and his Accomplices

The default is the latest episode in financial scandals that have rocked 1MDB, whose advisory board is headed by Malaysian Prime Minister cum Finance Minister Najib Razak. The fund is at the heart of investigations at home and abroad, including in Switzerland, the U.S. and Singapore, over allegations it was used to funnel money to politically-connected individuals. 1MDB has consistently denied wrongdoing.

“It’s never good news” when there’s a default, said Tim Condon, Head of Asia Research in Singapore at ING Groep NV. “Investors view it as a complication with corporate governance implications for Malaysia, but not a threat to the sovereign’s balance sheet.”

Markets Rattled

The default rattled markets, with the ringgit headed for the longest stretch of losses since November, and 1MDB bonds maturing in March 2023 halting a five-day gain. The cost to protect Malaysia’s sovereign notes with credit-default swaps increased.

IPIC guaranteed two separate dollar-denominated bonds for 1MDB in 2012 in deals arranged by Goldman Sachs Group Inc. The default concerns the debt with a 5.75 percent coupon sold in a private placement in October that year. A $1.75 billion offering with a coupon of 5.99 percent sold by Goldman in May 2012 hasn’t had any missed payments.

1MDB’s non-payment is another blow to Najib’s efforts to halt months of political attacks and draw a line under allegations of irregularities surrounding the fund. A Malaysian parliamentary committee this month identified at least $4.2 billion of unauthorized or unverified transactions by 1MDB, including some that involved Abu Dhabi companies.

 Turnaround Plan

1MDB President Arul Kanda has spent the past year trying to turn the fund around and sort out a debt burden he inherited when he took over in January 2015. 1MDB has 11 times the amount needed to cover the $50 million coupon, he said in an interview last week. He said IPIC agreed to pay interest on the bonds and should make the payment. IPIC said on Monday it will pay bondholders should 1MDB default.

Opposition lawmakers were quick to point the blame for the latest glitch in the government fund. Najib “must provide a full and satisfactory explanation on the financial disaster taking place before our eyes and outline the steps which will be taken to remedy the situation,” said Tony Pua, an opposition lawmaker with the Democratic Action Party and a member of the parliamentary committee that probed 1MDB.

‘Ample Liquidity’

The Soon to Retire Bank Negara Governor

Najib’s office didn’t immediately provide a comment on the implications of the default on the country. 1MDB said it will meet all of its other existing financial obligations and has “ample liquidity” to do so.

Malaysia warned investors during a bond sale this month that it faces as much as $4.5 billion in potential liabilities should 1MDB default. The fund amassed more than 50 billion ringgit of debt over six years, using some of it to buy energy assets, including joint ventures with companies in Saudi Arabia and Abu Dhabi.

Authorities around the world are trying to determine if some of the billions of dollars that 1MDB raised were siphoned out inappropriately. Swiss prosecutors asked Luxembourg and Singapore for help this month with a criminal probe into allegations of bribery and corruption at 1MDB.

Questionable Transactions

Transcripts from a Malaysian parliamentary hearing into the troubled fund highlight Najib’s involvement in decisions on questionable transactions that bypassed the board of directors and finance ministry, the sole shareholder of 1MDB.

While the Prime Minister has faced calls to step down over mismanagement at 1MDB and after he received a $681 million personal donation from the Saudi royal family in 2013, he retains the support of the bulk of senior officials in the ruling coalition. He has denied wrongdoing and the attorney-general cleared him of any graft in January.

“Most investors feared more of the political impact of the 1MDB saga than anything,” said Edwin Gutierrez, head of emerging-market sovereign debt at Aberdeen Asset Management in London. “But with Najib having survived the threat, I think most investors are focused much more on the economic fundamentals.”

1MDB’s $3 billion 4.4 percent notes dropped 3.7 cents to 86.55 cents on the dollar to yield 6.89 percent as of 3:25 p.m. in Hong Kong, according to prices compiled by Bloomberg.

Sovereign Protection

The ringgit fell 0.8 percent in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. The cost to protect Malaysia’s sovereign notes with credit-default swaps jumped 1 basis point to 165 basis points, prices from Nomura Holdings Inc. show. It earlier rose 4 basis points. That leaves the measure set for its highest close since March 9, according to data provider CMA.

1MDB has been locked in a dispute over debt obligations to IPIC under an agreement reached in May 2015. As part of the pact, IPIC said it would assume obligations to pay interest due for $3.5 billion of 1MDB bonds that it guaranteed. The Abu Dhabi fund said this month that 1MDB was in default of the agreement after the Malaysian entity failed to pay it more than $1 billion in connection with a loan.

Moody’s Investors Service said its view on 1MDB is “relatively intact” because of the IPIC guarantee, while Standard & Poor’s says it doesn’t see an impact on Malaysia’s rating for now. 1MDB’s default may prompt other bondholders to demand payment earlier than scheduled, said YeeFarn Phua, an S&P analyst in Singapore. He said he expects the Malaysian government to make good on the debt it has guaranteed or supported.

 

1MDB confirms that cross defaults have been triggered


April 26, 2016

1MDB confirms that cross defaults have been triggered

 1MDB Statement

 www.freemalaysiatoday.com

1mdb-ipic

PETALING JAYA: 1Malaysia Development Berhad (1MDB) states that the International Petroleum Investment Company (IPIC) has not made payment of USD50.3 million in interest as required under the terms of a binding term sheet executed on May 28, 2015 (Binding Term Sheet), under which IPIC assumed the obligation to pay the interest and ultimately the principal for, amongst others, the USD1.75 billion fixed rate 5.75% notes due 2022, issued by 1MDB Energy (Langat) Limited (Langat Notes).

Accordingly, due to a dispute between the parties, neither 1MDB, nor its subsidiary, 1MDB Energy (Langat) Limited, have made payment either, and are now in default per the terms of the Langat Notes.

Notwithstanding the dispute with IPIC, 1MDB reiterates that it will meet all of its other existing financial obligations and has ample liquidity to do so. 1MDB withheld the interest payment following claims by IPIC that certain payments and other obligations were still owed it.

1MDB has been surprised by IPIC’s comments and unequivocally asserts that it has attempted to meet all its obligations to IPIC, whereas IPIC has publicly denied receipt or knowledge of various financial transactions and/or guarantees entered into between the parties. Accordingly, whilst 1MDB has the funds to have made the interest payment, it is 1MDB’s position, as a matter of principle, that it was IPIC’s obligation to do so. Until IPIC accepts that all obligations have been met, 1MDB is obliged to withhold payments and will seek legal recourse and resolution.

Limited cross defaults

As a result of the default on the Langat Notes, 1MDB confirms that cross defaults have been triggered on the 1MDB RM5 billion Sukuk due 2039 (1MDB Sukuk) and the RM2.4 billion Bandar Malaysia Sdn Bhd Sukuk due between 2021 and 2024 (BMSB Sukuk).

There is no 1MDB cross default on an RM800 million loan from the Social Security Organisation (Socso Loan). However, there is a possibility that the “material adverse effect” clause may be triggered due to the developments highlighted above.

The 1MDB Sukuk and the Socso Loan both benefit from guarantees issued by the Government of Malaysia.1MDB confirms that there is no cross default on its other remaining debt, i.e. the USD1.75 billion fixed rate 5.99% 1MDB Energy Limited notes (Energy Notes) and the USD3.00 billion fixed rate 4.4% 1MDB Global Investments Limited notes (GIL Notes). 1MDB has no other debt.

Over the past week, 1MDB has proactively met with and explained the consequences of the IPIC dispute to the Trustees and investors of the 1MDB Sukuk and the BMSB Sukuk. 1MDB has also engaged with Socso. 1MDB trusts that the respective parties and the financial markets in general, will understand this unfortunate default as being very specific to its dispute with IPIC and is not due to an inability to make payment when due.

Engaging with all bondholders

1MDB has and will continue to undertake discussions with all bond and Sukuk holders to explain the background of the dispute; clarify why it has taken the position to not make the interest payment on the Langat Notes; and reiterate that it has a successful rationalisation plan in place that enables it to meet all its existing debt obligations.

1MDB wishes to underline that it is committed to working openly with IPIC to resolve the dispute in order to minimise the impact on all stakeholders and to avoid the need for accelerating bond or Sukuk payments in a way that would pose significant risks to its rationalisation plan.

1MDB welcomes dialogue with all its bond/Sukuk holders and urges them to make contact at investor.relations@1mdb.com.my

Notes:

On June 4, 2015, the International Petroleum Investment Company (IPIC) publicly announced it was assuming the Issuer’s obligation to pay the interest due under the Langat Notes in exchange for certain undertakings to transfer assets and cash to IPIC.

Interest was payable on the semi-annual interest payment date of April 18, 2016 in respect of the USD1.75 billion 5.75% Notes due 2022 issued by the Issuer.

Rationalisation plan

1MDB’s rationalisation plan is centred on three main pillars: first, the sale of the Edra Global Energy power assets; second, the sale of land at Bandar Malaysia; and third the debt-for-asset swap that was agreed with IPIC. Through these pillars, all 1MDB debt would be repaid, transferred or matched, as per current assumptions.

To date, the rationalisation plan has delivered on the sale of Edra Global Energy and the 60% equity stake sale in Bandar Malaysia. Proceeds from the sales have been utilised to repay all bank and short term debt of 1MDB. 1MDB now retains a cash surplus of approximately RM2.3 billion for infrastructure and other debt service requirements.

Future debt obligations are fully matched by the sale of Bandar Malaysia land, the development and sale of TRX lands as well as the eventual monetisation of the Pulau Indah and Air Itam land.

Statement issued by 1MDB.

Governor Zeti Aziz –Where is Integrity?


April 26, 2016

Bank Negara Malaysia: Questions for Zeti Aziz –Where is Integrity?

by Dr. Lim Teck Ghee

If I can anyway contribute to the diversion or improvement of the country in which I live, I shall leave it, when I am summoned out of it, with the satisfaction of thinking that I have not lived in vain.Stephen Grellet

Did the much quoted line attributed to Grellet (he escaped from execution during the French Revolution and went on to a new life as a Quaker reformer in the United States) run through Governor Zeti Aziz’s mind when her staff in Bank Negara Malaysia (BNM), monitoring the suspicious movement of unusual sums of money making their way through the nation’s banking system, drew her attention to the enormous funds making its way surreptitiously into the country through the Prime Minister’s personal account?

Leaving Bank Negara (Central Bank) Malaysia with a severely battered reputation

Perhaps she had been alerted by the Prime Minister himself earlier. So it may not have come as a surprise. It is possible that she told her staff : “Don’t worry; I am taking care of the matter myself”.

What is the explanation for the internationally lauded BNM’s top official’s inaction or inability to respond to what in any other part of the world would have triggered off alarm bells on the possibility of money laundering, and other concerns of illegal money transfer and corrupt practices arising from a massive and unprecedented deposit from abroad into the nation’s banking system?

It could not have been because of ignorance, negligence, oversight or incompetence. Then what? Only Governor Zeti can answer that. Zeti, and BNM, have on numerous occasions stressed the importance of ensuring the integrity of the country’s financial system.

In its latest press statement on cyber security BNM said that “it continuously reviews and enhances the resiliency of its control measures, governance and adopts best practices which involves robust defence mechanisms with timely transactions monitoring”.

In Accord with International Best Practice?

According to foreign reports, between opening his account at AmBank on January 13, 2011 and April 10, 2013, Mr. Najib received a total of more than $US1 billion — or, more precisely, $US1,050,795,451.58 — including a series of individual deposits that ranged between $US9 million and $US70 million. So much money was flowing into the account that it is supposed to have triggered money laundering alarm bells in AmBank which is part-owned by Australia’s ANZ Bank

(see http://www.abc.net.au/news/2016-03-29/najib-razak-bank-accounts-triggered-money-laundering-alert/7280244).

The initial money transfers would probably have been made known to Zeti perhaps even before their actual movement was effected. And discreet approval may have been granted well in advance. Nobody in his or her right mind would attempt to receive such hefty sums without making sure that the banking authorities will approve. Besides, the country’s gossip mill is notoriously tireless on money matters so that it would have been crucial that the transaction should remain a secret.

Najib Razak–A Leader of Unimpeachable Integrity?

Perhaps Zeti decided to close one or both eyes to the transfer because she was convinced that the Prime Minister is a leader of unimpeachable integrity doing the best for his country. And following the wisdom of Grellet, since she is passing through the world but once, her act of kindness towards Najib would be recognized for its goodness.

The Prime Minister may have confided to Zeti that the enormous sum deposited in his account was a personal donation from a member or members of the Saudi Royal Family. He may also have explained why the donation was made and what it was to be used for.

Zeti may have agreed that it was in the national interest that the deposit be permitted without the need for investigation, clearance or publicity; and that it was best to keep it as hush-hush as possible in view of the misgivings and misconceptions that would arise if the news was ever leaked.

Various versions of the use of the money and its intentions have now emerged. They include:

  • helping the Prime Minister win the 2013 elections by paying off politicians and projects

  • enlisting Malaysia’s help in the fight against ISIS

  • influencing the direction of the country’s Islamic development by keeping it firmly anchored with the Saudi-led Wahhabi camp

We can only speculate which is the correct one that persuaded Zeti to jettison the independence from political influence and other values and ethics that Bank Negara and other central bank authorities are supposed to swear allegiance to.

Was it to ensure victory for the Prime Minister beleagured by forces of bad intention and chaos from within? Or was it to help Najib preserve Malaysia’s standing as a moderate Islamic nation and to defeat the forces of evil and darkness from outside?

Zeti has not directly responded to the many questions asked of the personal donation as well as of the 1MDB scandal. She has left it to her mainly UMNO defenders who have brushed off accusations that she failed in her duty as the chief regulator of Malaysia’s financial system and financial adviser to the Government. Also the accusations that she is guilty of partisanship in the country’s politics, complicity in money laundering, and perhaps also looking after her own interests by striking a deal with a tainted regime in view of her husband’s alleged involvement in a corruption scandal and other alleged shady family businesses.

Because questions and accusations remain unanswered, Zeti will be leaving office with her reputation, and that of Bank Negara, damaged and tarnished.

But we may not need to wait long for some light to emerge. The links between 1MDB, where the official story line is unraveling rapidly and the personal donation are like a hydra. Official stonewalling and whitewashing may temporarily decapitate one of the heads but another soon re-emerges.

And hopefully, soon, Zeti Aziz’s part in the personal ” donation” scandal, and possibly also the 1MDB debacle, will become more clear to all even if she chooses to remain silent. Silence is not golden.

May 7, 2016 Elections: Sarawak political machine will prop up Najib


April 24, 2016

 

May 7, 2016 Elections: Sarawak political machine will prop up Najib

by James Chin, University of Tasmania

http://www.eastasiaforum.org/2016/04/23/sarawak-political-machine-will-keep-propping-up-najib/

On  May 7,  residents of Sarawak, the larger of the two Malaysian states located on Borneo island, will be going to the polls. Sarawak is the only one of Malaysia’s 13 states to hold its state and federal polls separately. This is the first election in Malaysia since the emergence of the 1Malaysia Development Berhad (1MDB) crisis engulfing Prime Minister Najib Razak.

Prime Minister Najib Razak at Malaysia's parliament in Kuala Lumpur on 26 January 2016. (Photo: AAP)

Many Malaysian and international pundits are using the results of the upcoming Sarawak polls to see if the 1MDB scandal will affect Malaysian voter behaviour. Najib has taken a personal interest in the polls, visiting Sarawak more than 50 times since he took power in 2009.

It is fairly obvious that he is looking for a big win in Sarawak to use as political capital and momentum for the next federal polls, due in 2018. Many international and Malaysian observers are speculating about how Najib’s political position may have been weakened by allegations that US$1.1 billion (or more) from the 1MBD fund ended up in his personal bank account. But they often overlook that a major part of Najib’s political strength has been his considerable ability to maintain a majority in parliament.

It is important to understand that Malaysia’s elections are free, but not fair by any standards. Gerrymandering, vote-buying, the use of government machinery for voter mobilisation and state control of the mainstream media are all part and parcel of the game. Far more seriously, the Election Commission of Malaysia is consistently accused of bias towards the ruling Barisan Nasional (BN) coalition government.

But the key is the way parliamentary seats are divided. Essentially, there are three blocs of constituencies in the 222-seat Malaysian parliament. The first is the urban constituencies, almost all of which have an ethnic Chinese majority. Second are the semi-rural and rural constituencies in the Malayan Peninsula — by contrast, almost all are ethnic Malay majority seats. While Najib has been able to win about 60 to 70 per cent of the rural Malay vote, BN has consistently lost the Chinese urban vote.

The third, and most important, are the 57 seats in the states of Sabah and Sarawak on Borneo (collectively known as East Malaysia). The majority ethnicities in these two states are the native Kadazandusun in Sabah and the Dayak in Sarawak. For the past two decades, these two states have voted overwhelmingly for BN. In the 2013 general elections, BN won 47 of 57 East Malaysian seats. Sarawak alone contributed 25 BN MPs to the federal BN government.

Currently Najib has a 21-seat majority in the Malaysian parliament. In other words, without East Malaysia (or Sarawak alone), Najib’s government would have fallen in 2013. Sarawak’s main party, Pesaka Bumiputera Bersatu (PBB), is now the second largest BN component party after Najib’s United Malays National Organisation (UMNO). Is it any wonder that Najib has taken a personal interest in the upcoming Sarawak polls?

The good news for Najib is that he has nothing to worry about. As they say in Kuching, the capital of Sarawak, ‘BN is sure win, lah!’ Sarawak is much like a foreign enclave in the Malaysian federation. Sarawakians do not really see themselves as part of Najib’s ‘1Malaysia’. Rather they see themselves as Sarawakian first and Malaysian second. The ethnic, religious and partisan cleavages that dominate politics in the Malayan Peninsula have comparatively little relevance in Sarawak. In fact, it is the only state where UMNO does not have a single branch.

Local issues predominate: things like the 1MDB scandal and Najib’s other shenanigans are non-issues outside the urban settlements. The most prominent political campaign in this state election is for a movement called ‘S4S’ or Sarawak for Sarawakians. S4S is pushing for the eventual secession of Sarawak from the Malaysian federation, claiming that Sarawak (and Sabah) have not benefited from being in the federation for the past half century.

adenan-satem

On top of this, Adenan Satem, Sarawak’s new Chief Minister, can expect to benefit from a ‘honeymoon vote’. He took power in 2014 after the controversial former chief minister Taib Mahmud stepped down (or rather stepped up, since he became Governor of Sarawak) after more than three decades in the job.

Just to make sure, 11 new state constituencies were created for this coming state election, bringing the total to 82 state seats. The way the boundaries were drawn, it is impossible for BN to lose 10 of these 11 new seats.

The only group of Sarawakians that is expected to vote against BN is the urban Chinese. They have never forgiven Taib’s alleged kleptocracy. Being better educated, and with access to the internet and social media, the urban Chinese want to send a clear message to BN that while it is good that UMNO is not in Sarawak, nothing is politically forgotten until Taib and his proxy Adenam give up their stranglehold over Sarawak politics.

The upcoming Sarawak elections will likely amount to nothing but a big yawn. Chief Minister Adenan will get the all-important two-thirds majority in the state legislature and Najib will claim some credit for the results. Those who know Sarawak politics well will realise that this is pure nonsense — the results will be the same as usual regardless of how many times Najib has shown his face in Sarawak.

Professor James Chin is Director of the Asia Institute at the University of Tasmania

What The Country, Especially The Malay Must Decide And Do


April 24, 2016

 

What The Country, Especially The Malay Must Decide And Do – By Matthias Chang