Playing games with names – Jho Low’s modus operandi

December 18, 2015

by The Sarawak Report

The Auditor-General, who is known for his upright approach, is going to have a hard time re-setting a date for the publication of his report into 1MDB – due today, but postponed till further notice.

Like the Attorney- General, Deputy Prime Minister, Head of the Public Accounts Committee, Vice President for UMNO, Special Branch Chief and shortly the Head of the Central Bank, he may find himself replaced first.  At least he is still alive, unlike the investigator from the MACC into this dirty business, Anthony Kevin Morais.

Today’s report in the Wall Street Journal shows that 1MDB paid a total of US$850 million into a bogus off-shore company, using the name of the Abu Dhabi fund Aabar, Aabar Investments PJS Ltd. It appears to explain the mystery as to why 1MDB has maintained in its statements and annual reports that it paid some US$2.4 billion in total to Aabar/IPIC, whereas IPIC reports indicate nothing was received.

In short, 1MDB sent the money to a BVI company with virtually the same name as Aabar Investments PJS, but which belonged to somebody else.

Anyone who has followed the PetroSaudi joint venture scandal will recognise a familiar scam with 1MDB purporting to be under the impression it has paid money to one company, when in fact it went to another entirely.

Playing games with names – Jho Low’s modus operandi

The news follows on from our own expose earlier this week detailing that, contrary to claims by 1MDB, the Seychelles company Good Star Limited belongs entirely to Jho Low. This confirms that US$700 million which 1MDB still claim was paid into their joint venture with PetroSaudi was in fact siphoned off by the Prime Minister’s nominee, who was running 1MDB’s operations and also running off with a great deal of the money.

The Aabar Investments PJS Limited revelation also provides further evidence of a clear ‘modus operandi’ by the youthful Official Advisor to 1MDB, which was the title given to Low. We can point to numerous transactions involving Jho Low and his nightclubbing friend, Aabar’s Khadam Al Qubaisi, which essentially consist of playing games with names to give the impression that shadowy off-shore companies were genuine subsidiaries of major concerns.

These bogus companies, playing in the opaque world of off-shore tax havens, have all turned out to be linked to suspicious losses of money from 1MDB.

PetroSaudi International Limited (Seychelles)

Take PetroSaudi International Limited, Seychelles, which was positioned as a subsidiary to PetroSaudi Holdings Limited (Cayman), itself involved in the joint venture with 1MDB.  In fact (after considerable to-ing and fro-ing about how to set up the arrangement) this was a company totally controlled by Jho Low through an investment management deal with one of his own off-shore companies Panama Investment Manager, which gave him control over all its money.

Tarek Obaid had agreed to act as the Director of PetroSaudi International Limited, Seychelles, but in a personal capacity, not linked to the main joint venture partner as alleged.

During its buy out of UBG, orchestrated by Jho Low, who had a major personal stake in the UBG, there was much concern expressed by AmBank officials negotiating the deal about who exactly did own this supposed off-shoot of PetroSaudi (which had received the money eventually used to buy UBG from 1MDB).

They were told that the shady nature of the ownership was owing to the need to conceal the private interest of the King of Saudi Arabia in the deal.  They accepted the excuse, which was a lie.

SRC Global

Business partners and party pals Jho Low and Khadem Al Qubaisi

In 2013 the Aabar owned Spanish oil giant CEPSA purchased the Canadian company Coastal Energy for US$2.3 billion, in a deal masterminded of course by their boss the then all-powerful Chairman Khadem Al Qubaisi. Strangely, he did the deal in tandem with a private company owned by none other than Jho Low, which took an option on the sale in its alleged role as ‘facilitator’. That company of Jho Low’s went by the name of Strategic Resources Global.  The details of SRG’s involvement have yet to be published, however insiders have intimated that the point of the option was that it could then be valuably sold back to CEPSA.

Given Low’s established history of using 1MDB money as backing for other private deals forged together with his pal Khadem from Aabar (see our exposes on the London Hotel bids of 2011) there can only be questions asked as to the strikingly similar name of the 1MDB subsidiary SRC International Sdn Bhd.

The shadowy nature of SRC International has caused constant comment in Malaysia, set up as it was with RM4 billion borrowed from the public pension fund KWAP, which has never been properly accounted for.  One of its known ventures however (through a BVI vehicle naturally) was a joint venture with none other than that sturdy business partner Aabar and KAQ, named none other than Aabar-SRC Strategic Resources Ltd.

Was name play once again at work as money flushed through these off-shore concerns with such similar names and confusion of cross-ownerships?  Did, by any chance, money flow in this fashion from the pension fund through 1MDB and its joint ventures with Aabar and into a private deal between Jho Low and Khadem?

We cannot know, because when questioned on these matters, the Finance Minister (cum Prime Minister, cum sole shareholder of 1MDB) hived SRC off from 1MDB and put it under his own Ministry of Finance portfolio, from where he has refused to release transparent accounts ever since.  The public money remains unaccounted for!

Merryl Capital

Move on to what the Australian newspaper describes as the mysterious off-shore company Merryl Capital, which was stuck right in the middle of the unravelling scandal in Australia over the finance company Bridge Global, which Najib (doubtless on the advice of 1MDB’s advisor Jho Low) used to invest the alleged profits (obtained not in cash, but in ‘promissory notes’ mind you) made from the PetroSaudi deal, from which Good Star had siphoned most of 1MDB’s original investment.

As the Australian points out, despite its name, this entity has nothing to do with the more famous Merryl Lynch.

Bridge Partners didn’t pay in cash but in promissory notes — IOUs — which 1MDB then invested in Bridge Global Absolute ­Return. According to Bridge Global’s prospectus, Bridge Global Absolute Return is managed by Hanhong, a Hong Kong securities company in which it planned to buy a half stake.

Bridge Global Absolute Return owns almost 10 per cent of Bridge Global, making it the company’s second-biggest shareholder behind another mysterious offshore entity, Merrill Capital, which owns 10.2 per cent.

Despite its name, Merrill Capital appears not to be linked to Merrill Lynch, according to Mr Childs’ affidavit. It is instead a UAE company associated with Mr Goh that owns some 8.5 per cent of Avestra.

To cover the Petrosaudi hole, it’s alleged that in 2012 1MDB signed a deal with Abu Dhabi’s International Petroleum Investment Corporation under which IPIC guaranteed $US3.5bn of bonds issued by 1MDB.

Aabar Investments PJS Ltd

So, it looks like we have an established modus operandi indeed when it comes to the way Jho Low played David Copperfield conjuring tricks with 1MDB’s money, as it slipped away from the public fund that was being administered by his boss the PM, and into companies with names designed to make them sound like a more reputable outfit linked to established 1MDB deals.

Khadem was sacked in Abu Dhabi after irregularities were exposed

The latest revelation that US$850 million was likewise transferred to Aabar Investments PJS Ltd by 1MDB thus follows an established pattern.  The WSJ have reported that Aabar has confirmed that this off-shore BVI entity, which was opened to take the money and then closed down agains shortly after, has nothing to do with their own group.

Abu Dhabi have, of course, long since sacked Khadem Al Qubaisi, after all these irregularities came to light at the start of the year.  Yet, Malaysia’s PM continues to defend 1MDB and Jho Low and he is obstructing vigorously the attempts to investigate what went wrong with all that missing money.

Other off-shore companies with surprisingly similar names to more reputable firms doubtless wait to be discovered and the 1MDB scandal continues to inevitably unravel in the face of the international investigations underway.

READ the full story by Wall Street Journal below:

http://www.wsj.com/articles/malaysias-1mdb-sent-850-million-to-entity-set-up-to-appear-owned-by-abu-dhabi-wealth-fund-1450333025

Happy Birthday Singapore, Happy Birthday Rosli Dahlan

August 19, 2015

by Din Merican in Kuala Lumpur

I just came back from Cambodia for a short visit two days ago. As I landed in KLIA after a very nice and comfortable MAS Flight 755, I felt a sense of longing (rindu) for my home country. For all my criticisms of the kleptocratic UMNO government led by a dishonest and lying Prime Minister,  I love Malaysia. As I look around, I see only beautiful Malaysian faces, which adds to my sense of longing.

Then I got into a taxi with my wife, Dr. Kamsiah and almost immediately the taxi driver talked about a topic that he must have spoken about to every passenger who sits in his taxi. He talked about 1MDB. He spoke of Prime Minister Najib Razak’s RM2.6 billion bank account. He was agitated by the Prime Minister’s family displaying opulent wealth during their daughter’s wedding. He mentioned the Prime Minister’s stepson, Riza Aziz, living the high life in New York and bankrolling Hollywood films of greed, sex and debauchery (he must be referring to Wolves of Wall Street) that could not even be screened in Malaysia.

Then he told us about about how difficult life has ‎been for him and other ordinary struggling Malaysians since the implementation of the GST and the con job of BR1M in making the people feel grateful to Prime Minister Najib whereas the Najib government that declared itself as a government that cared for the people in its slogan “Rakyat Didahulukan” (People First) is actually a betrayer of the people when all its actions are actually “Rakyat Dimangsakan”  (People Oppressed)and “Negara Dikorbankan” (Nation Plundered).

He spoke about how the  Deputy Prime Minister and the Attorney-General were sacked, the MACC officers and Deputy Public Prosecutor arrested, the Public Accounts Committee of our Parliament disbanded, and the Task Force outlawed. He spoke about all these matters with such detailed knowledge and then finally said “Kita rakyat awam malu, Malaysia malu. Apa dah jadi dengan negara kita?” (We the general public are ashamed, Shame Malaysia, What has happened to our country)  with such great despair that I felt sorry for him. I felt sorry for myself as a Malaysian. Indeed, what has happened? Or do I just cry for my beloved country?

I asked the taxi driver to stop by a roadside laksa and cendol stall and invited him to join me. As we ate our Kedah laksa and cendol (local delicacies), the same topic was discussed by every one eating at the stall.

Then one lady said “Nasib baik ada juga pegawai berani macam Governor Zeti Bank Negara dan‎ Pengarah SPRM Bahri”.( Luckily we have brave officers such as The Governor of BNM and MACC Director Bahri ) And another quipped ” Ada juga orang awam berani macam loyar tu….apa nama?”. (and there also brave layman like that lawyer… what’s his name ?)

My wife immediately added “Lawyer Rosli?” and they all answered “Haah, betul! Loyar Rosli Dahlan!” (That’s right, that lawyer Rosli Dahlan) and they spoke loudly about some of the things he did and said and then hurled insults against IGP Khalid Abu Bakar as a running dog. What extreme comparisons.

Hearing all these reminded me that just last week I wrote out of Phnom Penh about my young friend Lawyer Rosli Dahlan offering to help the MACC officers and all other government officers who have been victimised as a result of the 1MDB investigations. About Rosli saying it’s about principles not personalities.

I wrote about how MACC Bahri vowed to seek justice against his oppressors Till Kingdom Come!‎–Read HERE

I wrote about Rosli’s plea and warning in his letter of 2010 to MACC Chief Commissioner Abu Kassim‎ that the MACC will one day be destroyed for the things they did to him, and today the MACC is in ruins and tatters. Rosli prophetic words were:

 “I implore you not to allow this sacred institution (Institusi Keramat ini) to be used as a tool of oppression and persecution in the guise of false prosecution against innocent citizens. Otherwise, you will one day see your own hands in the destruction of t‎his institution.”

Today, Rosli’s prophecy is fulfilled. Gani Patail who had fixed Rosli and Dato Ramli Yusuff has been removed in the most humiliating manner and the MACC is as good as destroyed. What goes around comes around- the law of Karma. God’s retribution to Gani Patail and the MACC, especially Abu Kassim for not standing up for the truth by feigning illness. Abu Kassim has totally lost my respect, a general abandoning his army when they needed him most. Shameless man!

Happy Birthday, Singapore

Last evening I attended Singapore’s 50th National Day reception at The ShangriLa Hotel hosted by HE Ambassador Venu Gopala Menon, Singapore High Commissioner to Malaysia. The topic of discussion among guests at the reception was the same as what I have described above.

50 years on after Separation and Singapore has grown into a strong and dynamic city state proud of its nation building achievements. 50 years on and Malaysia is sliding down the slope to becoming a failed state. What a sharp contrast considering that Malaysia has oil and gas and other resources but Singapore has none. But Singapore has brain power and a hard working and united people, and a government that practises good governance.Today Malaysia is lagging behind, only marginally ahead of Robert and Grace Mugabe’s Zimbabwe, while Singapore forges ahead in the big league of advanced nations.

Then I remembered that Rosli has strong roots in Singapore. He schooled in Singapore and trained with the current Chief Justice of Singapore, Sundaresh Menon, who is an outstanding lawyer and was also the former A-G of Singapore. I begin to understand Rosli from researching about and now knowing his background. Then I remembered that Rosli’s birthday is 10 days from Singapore’s National Day. That his birthday is today, August 19, 2015

So, in a hurried manner I penned this as a tribute to my outstanding friend whom I had known and become close under very strange and unlikely circumstances. I will say this to Rosli, I am proud to be your friend and I hope you will continue to be a role model and a beacon for truth and justice.

Happy Birthday, Singapore, Happy Birthday, Rosli Dahlan.

MALAYSIA: Najib Razak is a NATO Prime Minister

July 18, 2015

Sabahans have had enough of Najib’s ‘no action talk only’

 by Percy Goliu@www.freemalaysiatoday.com

The people want to be freed of price disparity and the illegal immigrant phenomenon and have lost patience with the committees sitting on the problems.

Making Hay while the Sun Shines

An Assemblyman has pointed out that Prime Minister Najib Abdul Razak was bogged down in Sabah by setting up one NATO committee after another NATO committee in response to local issues but with hardly any results. “It’s all no action, talk only (NATO),” said Sri Tanjung Assemblyman Chan Foong Hin.

“There are too many committees, but hardly any achievements.” The key issues in Sabah, he added, were the National Cabotage Policy (NCP) blamed for the higher prices and cost of living vis-à-vis the peninsula despite stagnant and depressed local wages, lower standard of living, lower minimum wage compared with the Peninsula, a lack of political power, and unfair distribution of resources.

Another key issue, he said, was the illegal immigrant phenomenon plaguing the state for decades and creating social problems and contributing to a higher crime rate including kidnappings-for-ransom.

Chan called upon the Federal Government to announce the results of three committees set up earlier viz. the Permanent Committee on Management of Foreign Migrants in Sabah headed by Home Minister Ahmad Zahid Hamidi and Sabah Chief Minister Musa Aman, the Technical Committee on Foreign Migrants in Sabah headed by Huguan Siou and Deputy Chief Minister Joseph Pairin Kitingan and the Federal Committee on the National Cabotage Policy.

Pairin is a member of the committee on the NCP. “Sabahans want to know when they would be freed of the price disparity and illegal immigrants,” said Chan.

Chan, also DAP Sabah Vice Chairman, was “welcoming” Foreign Minister Anifah Aman’s announcement that Najib had approved yet another committee for Sabah, this time a special one to study the state’s entitlement under the Federal Constitution to 40 per cent of all revenue collected by the Federal Government in the state.

Anifah said the special committee would also “thoroughly study” several other issues especially financial rights under the oil and gas royalty formula which was last paid in 1974 at 10 per cent and not the 5 per cent the state was getting today.“Ironically, Anifah neither announced the members for the committee nor when it would be set up,” said Chan. “Would this be yet another NATO Committee?”

Najib’s Malaysia: The New Sick Man of Asia

July 7, 2015

by Steve Oh@www.malaysiakini.com

COMMENT:  CIMB chairperson Nazir Abdul Razak is spot on in saying that Malaysians live in ‘dark times.’ Is this the diagnosis confirming the country as the new ‘sick man of Asia’? Corruption, which is more than just financial wrongdoings, includes the bastardisation of all public institutions in a country.

Nazir knows all about bastardisation, in particular the questionable implementation of national development plans, and probably of the country’s democracy.

The different arms of government are not independent or working vigorously to check one another against abuses of power and corruption.

The Executive Branch has total control over everything unlike in a proper democracy with separation of powers that ensures abuse of power is difficult.

The country appears stricken with a strange psychosis. The ‘dark political times’ are here because the politicians believe in their own spin ans lies. The medical doctors have a term for this condition: pseudologia fantastica, the fancy term for pathological liars, people who have the habit of compulsive lying and cheating.

It explains why they make public statements only to blame the media for misquoting them after they change their story when it suits them. Lying is the modus operandi of the corrupt.  “In this darkest of political times, we must remember to place the country and the rakyat first,” said Nazir.

Tell it to the Electoral Commission, the Police and the Judiciary, among other tainted offices, which are prone to siding with the powers-that-be and where stifling dissent is in the national interest.  Obeying political orders can be perilous as the killers of Altantuya Shaaribuu will testify. ‘Who gave the orders?’ is still the other unanswered question.

Where is the money?

Among the unsung heroes who have no monuments, we can’t overlook those Malaysians who have willingly and sacrificially endured years of ‘deprivation’ in ‘lost opportunities’ because of their race to accept affirmation policies however apparently unfair.

Why are politicians, present or past, among the richest Malaysians though they may not be named in Forbes magazine’s richest list? Today more and more Malaysians are not buying into the deception and it is a treacherous act to have a government programme like the Biro Tatanegara (BTN) teaches racism.

This dubious programme allegedly and evidently poisons the minds of young Malaysians of one race against another while the government funds a council to promote national unity. Sheer hypocrisy.

How sick is that?

The 1MDB presumably was meant to enrich the nation and attract foreign investments. But why were much-needed billion dollar funds taking a tax-holiday in Singapore and foreign banks?

Not just Gone, but to Jail you Go

How has 1MDB helped development when all its profits seem to come from wheeling and dealing in real estate or buying and selling assets? There is no real industry, no development, only quick speculative profits. So much for the key performance index that does not seem to apply when the government plays guarantor.

For a government that legislated against property speculation why does it brag about its profits from buying and selling properties? No wonder Dr Mahathir Mohamad, Tony Pua and Rafizi Ramli think the sums don’t add. Others do too.

“Where is the money?” Mahathir demands. The Wall Street Journal says US$700 million (RM2.6 billion) found its way into Prime Minister Najib Abdul Razak’s bank account. Checkmate? Not quite, not yet. But you wonder if the leader will recover and still retain enough credibility to be effective. When a leader has to appeal to the people for sympathy then you know the government will soon be saying ‘Houston, we have a problem.’ And it is one not only of perception but reality.

Will Najib still retain the moral authority and respect of the people and his political peers to lead despite the millstones around his neck from the many personal scandals?

Suspected criminal activity
 
The 1MDB cannot be allowed to pass as just another political scandal. Attempts to get answers are not an alleged political conspiracy like Anwar Ibrahim’s Sodomy II trial. At its core is suspected criminal activity and there has to be a proper investigation to dispel the allegations and exonerate the suspected or convict the corrupt.

No one is above the law and no one is guilty until found guilty. But how do you get to the bottom of the suspicions, the allegations and the contradictions, if there is no proper inquiry into the much-publicised scandal?

Hoping to be rewarded on retirement

Why is the Auditor-General taking so long to give us the audit report on 1MDB since it was ordered in March, more than three months ago? As a former auditor, I dare say, I would have completed the assignment and gone for a summer holiday in Europe and returned in all that time.

Three auditors were changed since the company’s inception in 2009 and that ought to have raised eyebrows and sounded the alarm.  Is anyone that naive to believe the audit trail of the vast sum of RM42 billion does not need to be investigated and that the country should move on with business as usual? That indeed would be the most sickening thought of all.

STEVE OH is the author of the novel ‘Tiger King of the Golden Jungle’ and composer of the musical of the same title. He believes in good governance and morally upright leaders.

 

The long awaited smoking gun may have arrived (?) to bury Najib’s political career(?)

July 3, 2015

READ: The Prime Minister’s Office is running out of excuses. What political sabotage is the PMO talking about? The Prime Minister is caught with his hands in the till. Only the power of his office is protecting him  for criminal action  while UMNO’s apathy keeps the man in office. Let the financial and currency markets punish him.–Din Merican

http://www.wsj.com/articles/SB10130211234592774869404581083700187014570

http://www.freemalaysiatoday.com/category/nation/2015/07/03/pmo-latest-claims-are-continuation-of-political-sabotage/

The long awaited smoking gun may have arrived to bury Najib’s political career(?)

 By John Berthelsen

http://www.asiasentinel.com/politics/could-this-be-the-smoking-gun-for-malaysias-pm/

Gotch ya, Najib

The publication today, Friday July 3, of devastating articles in the Wall Street Journal and the Sarawak Report tying Malaysian Prime Minister Najib Tun Razak to the diversion of nearly US$700 million from the state-backed 1Malaysia Development Bhd into his own accounts could be the final blow to bring down a leader who has been bullet proof from years of charges against his integrity.

The danger is that there have been so many smoking guns in the past, including detailed evidence by French investigators of bribes to buy French submarines when Najib was Defense Minister, that yet another won’t matter. Nonetheless, according to the two publications, government investigators in Malaysia have traced the money in deposits from 1MDB into Najib’s personal bank accounts. The investigators’ findings apparently were leaked, possibly through former Prime Minister Mahathir Mohamad, who has been on a two-year crusade to drive Najib from office and put him in jail.

Given the considerable details of the information now in print, he may well succeed. Indeed sources in Kuala Lumpur have told Asia Sentinel that Mahathir has considerably more information. Attempts to reach the former premier in the past have been uniformly unsuccessful.

“If this is true, it’s a TKO for Najib,” said a Kuala Lumpur-based lawyer. “Go to jail, do not pass go. It looks like the Tun [Mahathir] has dropped the nuke.”

It’s all a plot

A spokesman for Najib denied any wrongdoing to the Wall Street Journal and said the allegations had been fabricated by his political enemies. Nonetheless, the investigation documents, made available to the two publications, mark the first time Najib has been connected personally to irregularities over the fund, which has amassed RM43 billion [US$11.3 billion] in liabilities, as much as RM25 billion of it believed to be unfunded.

Four separate Malaysian agencies are probing the fund. But government agencies are notoriously beholden to the United Malays National Organization (UMNO), the leading component of the Barisan Nasional, the ruling national coalition. According to the reports, the bulk of the money was transferred by wire from the Singapore branch of the Swiss Falcon private bank, owned by the Abu Dhabi- based Aabar fund, into Najib’s private AmBank account in Kuala Lumpur in March 2013, just prior to the government’s calling the last general election.

Your Hand is in the Till

Najib has withstood a continuing barrage of difficult questions about the fund for more than two years, blaming political enemies and repeatedly rounding up the divisional warlords of UMNO to back him, primarily because he has provided them with vast amounts of money for their personal operations, much of it flowing from the 1Malaysia Foundation.

Equally devastating stories about the activities of Najib’s wife and money steered to the 2013 election in the New York Times and the Wall Street Journal respectively have been shrugged off without apparent serious damage to the prime minister although he recently delayed the UMNO party elections for 18 months to forestall any challenge from Mahathir’s forces in the party.

The 90-year-old Mahathir has become the point man in the effort to bring Najib down. According to sources in Kuala Lumpur, he has amassed a substantial amount of information in addition to what hs been leaked to him by government investigators who have not been able to break through the UMNO embargo.

Crescendo

The confrontation between Mahathir and Najib has reached a crescendo in recent weeks with the arrest by Thai Police of a Swiss national named Xavier Justo. The arrest was closely orchestrated by a Middle Eastern oil exploration firm called PetroSaudi, to which 1MDB loaned at least US$1 billion. Justo had been an official with PetroSaudi and left the company several years ago with a mysterious US$5 million payoff. Two years after he left, he was able to break into PetroSaudi’s computers and download 2 million emails.

The Political Yoda

Those emails were passed to Clare Rewcastle Brown, the editor of Sarawak Report, and reportedly to Mahathir. Justo’s arrest and accusations that he had tampered with them to make them more damaging is considered to be part of a move by Najib to discredit Mahathir before he could feed more documents and evidence to the press. Mahathir is believed to have additional evidence of illegal transfers of money out of the country by Rosmah Mansor, Najib’s wife, with the help of Jho Taek Low, the flamboyant young financier who helped Najib set up 1MDB in 2009.

He is said to also have additional information about the mysterious death of Altantuya Shaariibuu, the Mongolian translator and party girl who was shot to death by two of Najib’s bodyguards in 2006. The murder remains one of the most sensational in recent Malaysian history.

Given the gossip in Kuala Lumpur, Najib’s forces know what Mahathir has and are seeking to discredit him, Brown and The Edge Malaysia, the Kuala Lumpur-based financial publication, which has aggressively pursued the 1MDB story. The Edge has been issued a show-cause letter by the Home Ministry for allegedly publishing articles “that have created confusion and doubt about the government and financial institutions” and relying on Sarawak Report for its articles.

Articles in the UMNO-owned New Straits Times have accused the “heavily-tattooed” Justo of maliciously attempting to bring down the Malaysian government by altering emails to incriminate Jho Low, as he is known, and other 1MDB and PetroSaudi officials. The din over Justo has been immense in the government-owned press as Najib’s forces have attempted to discredit his enemies in the press and politics. Both the UMNO-owned television and radio have also vilified Justo.

A Momentary Respite for the Ringgit and Malaysian Stocks as 1MDB remains the No.1 Problem

July 2, 2015

by Bloomberg @www.themalaysianinsider.com

Looking Great from the Outside but Rotting Inside

A rally in Malaysia’s currency and stocks after the nation avoided a Fitch Ratings downgrade may be short-lived if it doesn’t clean up an indebted state investment company and reduce threats to its current-account surplus.

The ringgit will probably still weaken to 3.8 against the dollar by the end of this year, according to Credit Suisse Group AG and United Overseas Bank Ltd Malaysia would be among the most fragile nation’s in the region should a recovery in the euro area stall because of Greece, Credit Suisse says.

“Continued weakness in the ringgit is perhaps the best barometer of sentiment towards Malaysia and the ringgit continues to hover near its post Asian Financial Crisis peg of 3.80,” Weiwen Ng, an economist at Australia & New Zealand Banking Group Ltd, wrote in a note Wednesday.

“Malaysia continues to be caught in changing domestic and external cross-currents.”

Before Wednesday’s market rebound, foreign funds had been cashing out of the Malaysian stock market at the fastest pace in Asia this year, while the ringgit had weakened to the lowest level in a decade.

Investor confidence has been battered by growing scrutiny on Prime Minister Datuk Seri Najib Razak’s management of debt-ridden 1Malaysia Development Bhd (1MDB), as well as faltering export and state revenue after commodity prices slumped.

The challenge is to ease investor concerns quickly enough to prevent an exodus of funds whenever the US Federal Reserve starts to raise interest rates.

‘Adverse developments’

“Foreign investors will likely be uninterested in Malaysia until we see improvements in the negative factors” which include 1MDB and weak corporate earnings growth, said Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management, which oversees about US$112 billion (RM421.58 billion). He spoke a day before Fitch affirmed Malaysia’s credit rating on June 30.

“It’s a maelstrom of adverse developments.” Malaysia has taken steps to pare down 1MDB’s debt of RM42 billion (US$11 billion) as of March 2014 and is winding down the company’s operations through possible sales of land and power assets. The government has explicit guarantees for RM5.8 billion of 1MDB debt, and Fitch said there is a “high probability that sovereign support for 1MDB would be forthcoming if needed”.

“Malaysia will need to better control its off-balance sheet liabilities and improve its governance standards,” Chua Hak Bin, an economist at Bank of America Merrill Lynch in Singapore, said before the Fitch decision. “Having a public debt ceiling of 55% of GDP is pointless, if the limit is sidestepped with government guarantees and support letters.”

Domestic procurement

Najib chairs 1MDB’s advisory board and has resisted calls from former Prime Minister Tun Dr Mahathir Mohamad to step down as the country’s leader over the debacle.

Keeping the current account in surplus will also be key to boosting confidence in Malaysia, said Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp. With Southeast Asia’s third-largest economy running a fiscal deficit starting from 1998, Najib in January tried to pre-empt concerns about the possibility of a current-account gap as well.

He unveiled measures that may keep more money in the country including encouraging government-linked companies to invest domestically and increasing local goods and services in government procurement.

“Investors realising that Malaysia will not go into twin deficits is likely to lead to a recovery in the currency, international reserves and funds flow,” said Gerald Ambrose, who oversees the equivalent of US$3.6 billion as managing director of Aberdeen Asset Management Sdn in Kuala Lumpur.

A possible complication: this year, Indonesian and Malaysian governments and companies have sold more foreign-currency debt than they did in the whole of 2014 as a global bond rout pushes up yields and their currencies weaken. That raises concern it will become costlier for them to service foreign-currency debt as the dollar gains.

The ringgit fell to 3.7887 per dollar Monday, near the 3.8 level the currency was pegged at from 1998 to 2005. It closed 0.7% higher Wednesday after Fitch also raised its outlook on the sovereign to stable from negative.