I have written in statement dated 22 May 2018 that the Ministry of Finance (MoF) has since April 2017 made payments on behalf of 1MDB amounting to RM6.98 billion. The figure has yet to include another RM954 million to be paid before the end of this year. These payments are tantamount to a major bailout of 1MDB.
Former Prime Minister, Dato’ Seri Najib Razak wrote on his Facebook on Friday evening that it is “wrong to call it a bail out of 1MDB”.
Essentially, he argued that 1MDB had transferred all of its real estate assets, including Tun Razak Exchange (TRX) and Bandar Malaysia to the MoF per the recommendation made by the Public Accounts Committee (PAC). Hence the above payments should be rightly construed as ‘compensation’ to 1MDB.
Dato’ Seri Najib Razak could not be more wrong in making the presumption.
1. The transfer of these assets back to MoF in April 2017 was NOT a “sale and purchase” transaction, nor should it be. The MoF officials have confirmed that there was also no such S&P agreement executed to the effect. This is consistent with the PAC recommendation.
The PAC had found that 1MDB had no financial means or ability to develop, or even sell these parcels of land. Hence MoF should take over these projects to ensure their continued viability.
2. The former Finance and Prime Minister must not forget the fact these parcels of land were originally sold by the Government to 1MDB at bargain basement prices between 2010 to 2012.
a. The 70 acres TRX was sold to 1MDB for RM230 million, or approximately RM74 per square feet (psf).
b. The 486 acres Bandar Malaysia was sold to 1MDB for RM1.6 billion, or approximately RM72psf.
Why should the MoF compensate 1MDB to the tune of tens of billions of ringgit as asserted by Dato’ Seri Najib Razak, when MoF took back the land with hardly any development carried out in these projects?
3. Let me also remind the former Prime Minister that the MoF did not take over these entities “for free”.
a. When MoF took over TRX City Sdn Bhd, it came attached with a RM800 million loan from SOCSO which is due in 2020.
b. When MoF took over Bandar Malaysia Sdn Bhd, it came attached with a RM2.4 billion sukuk.
It should also be noted that the Auditor General, in his report on 1MDB has confirmed that the above borrowings were not used for the purposes intended, i.e., they were not used for the development of the above projects. This was confirmed by the 1MDB President, Arul Kanda himself, when he testified to the PAC.
Hence, if anything, MoF should be claiming compensation from 1MDB for also assuming these liabilities, not the other way around.
4. In addition, MoF has already made additional payments to, or on behalf of 1MDB with regards to the above projects.
a. MoF, via its wholly-owned subsidiary Aroma Teraju, had acquire 2.3 acres of land from TRX in September 2015 for the sum of RM250 million.
b. MoF has refunded the deposit amounting to RM741 million on behalf of 1MDB to the consortium led by Iskandar Waterfront Holdings Sdn Bhd after the Bandar Malaysia sale and purchase agreement was terminated in May 2017. This was because 1MDB had already used up the deposit paid for other purposes and did not have the money to refund the deposit paid by the consortium.
5. Finally, and perhaps most importantly, the RM6.98 billion paid by MoF on behalf of 1MDB are in relation to borrowings completely unrelated to the above real estate projects. The payments were instead made for:
a. Servicing the coupon interest of RM5 billion 30-year bond issued in 2009 which was mainly used for 1MDB’s failed investment with Petrosaudi International Limited.
b. Servicing the coupon interest for US$3.5 billion worth of 10-year bonds issued in May and October 2012, which were intended for the acquisition of power plant assets. These assets have since been disposed and their proceeds completely utilised. The bonds however still remain in the company.
c. Servicing the coupon interest for US$3 billion of 10-year bonds issued in March 2013, which were intended for the development of TRX. However, as reported by the Auditor-General, the funds raised were never utilised to develop TRX.
d. Repay in full the US$1.2 billion of advance from Abu Dhabi’s International Petroleum Investment Corporation (IPIC) which was taken in April 2015 to repay US$975 million of borrowings from a Deutsche Bank-led consortium.
Therefore, why should any returns from the real estate projects which were originally acquired cheap from the Government, be used to cover up the financial holes created by all of 1MDB’s other financial misadventures and shenanigans?
Hence, given all of the above facts and figures, there could be no other description for the RM6.98 billion worth of payments by MoF on behalf of 1MDB to date, other than to describe it as the single largest bailout in history carried out by the Government of Malaysia.
Instead of trying to spend time debating as to whether the above payments were a bailout or otherwise by MoF, it would perhaps be more productive and fruitful for Dato’ Seri Najib Razak to explain account for where all of the following 1MDB funds have gone to:
(i) US$1.83 billion invested with Petrosaudi International Limited between 2009 and 2011?
(ii) US$3.5 billion raised in 2012 for the purposes of acquiring power plants in Malaysia; and
(iii) US$3 billion raised in 2013 for the purposes of investing in TRX
The MoF will work hand-in-glove with the 1MDB Special Committee set up by the Prime Minister, Tun Dr Mahathir to uncover the complete truth behind the 1MDB in order to (i) recover as much of the lost and stolen funds as possible to plug the debts and deficits created by the Najib administration and (ii) punish those who are responsible for the worst scandal ever in Malaysia.
—-Mandarin Version —
a. 财政部透过其底下的全资子公司Aroma Teraju，在2015年9月从敦拉萨国际贸易中心收购了2.3英亩土地，总额为2.5亿令吉
i. 2015年4月，将1.57英亩的土地以1亿8850万令吉的价格（约每平方英尺2750令吉）售予朝圣基金局; 以及
(i) 2009年至 2011年间，投资在沙地石油国际公司（ Petrosaudi International Limited）的18亿3000万美元
(ii) 在2012年，为收购马来西亚发电厂而募集的35亿美元； 以及