LAST_UPDATEFri, 20 Jul 2018 8am

1MDB In RM42 Billon Debt - Is Malaysia On The Verge Of Financial Turmoil?

FOR the more political-aware and savvy people of Malaysia, the name Datuk Seri Khairuddin Abu Hassan would probably ring a bell. He was propelled into the limelight when he published the controversial book “50 Dalil Kenapa Anwar Ibrahim Tidak Boleh Jadi PM” that was used against Anwar and eventually contributed to the former Deputy Prime Minister’s sacking from the government in 1998.

Last Friday, the Batu Kawan Umno division deputy chief managed to make the headlines once again when he lodged a police report against 1Malaysia Development Bhd (1MDB). Khairuddin, who said he was acting for the sake of public interest, called for ‘detailled and comprehensive’ investigation, and urged the authorities to interrogate 1MDB’s directors as well as representatives of any company that might be implicated in its scandals.

"The public outcry has gone on for too long. There have been many queries from the public, the opposition and even three former finance ministers. Reports in the business newspaper The Edge had also pointed out these issues. But 1MDB just kept mum. It denied nothing and just kept quiet. Just imagine the RM41.9 billion debt recorded by the company. It is a public issue. If anything goes wrong with the board, it will affect the government and in turn, affect the people,” he said.

Attack From All Angles

As the brainchild of Prime Minister Datuk Seri Najib Tun Razak, 1MDB is Malaysia’s second sovereign wealth fund after Khazanah Nasional Bhd. The company has received plenty of scrutiny by Pakatan Rakyat (PR) leaders for its massive debts, dubious land deals and how its transactions are kept in secrecy.

Datuk Seri Khairuddin Abu HassanDatuk Seri Khairuddin Abu Hassan

But Khairuddin’s action has taken the attacks to a whole new level, as this was no longer coming from the opposition party. Umno secretary-general Datuk Seri Tengku Adnan Tengku Mansor, popularly known as Ku Nan had urged Khairuddin to retract his police report. "This is the problem of Umno people who do not understand the struggles of the party. We cannot listen to just any story from websites, Internet or social media," Ku Nan was quoted as saying. "Let us not be taken in by these unwanted perceptions that come from the opposition. He made a police report, I cannot understand (it). Why do we have to enter the opposition's trap of lies?” he added.

But was this really, as Ku Nan put it, ‘the opposition’s trap of lies’? One of the loudest critics of 1MDB is in fact former Prime Minister Tun Dr. Mahathir Mohamad himself. “Many oil producing nations set up sovereign wealth funds, which are surplus funds they generate from selling hundreds of millions of barrels of crude oil a year. Malaysia only produces 650,000 barrels of oil a day and there isn’t much surplus from oil sales by Petronas. Most of the income goes to the government and the rest is invested. Government revenue from this isn’t much. So the 1MDB funds are not surplus but national debts. Ever increasing national debts, which have to be paid, eventually,” Mahathir wrote in his blog

“From what I know, funds from 1MDB were used to procure three power plants from YTL, Ananda Krishnan and the proprietor of Jimah power plant in Negeri Sembilan. The acquisition was more expensive than the market price. At least four billion ringgit in total cost,” the former Premier explain while also adding “We can do without the 1MDB”.

Khairuddin also fired back by saying that Umno leaders should stop being cowards. “We want to uphold the truth, but why is it that there are some quarters who seem so brainless and are furious with me lodging the police report the other day?”

Financial Turmoil

Petaling Jaya Utara MP Tony Pua said Khairuddin’s police report proves what dire straits the wealth fund currently finds itself embroiled in. Furthermore Pua revealed that 1MDB had recently missed a deadline to repay an outstanding debt, and to make matters worse, this was not the first time that the incident had occurred.

Tony PuaTony Pua

“On November 30, 2014, 1MDB was due to repay an RM2 billion debt but has failed to do so to date. Instead, it has asked for a further extension from the financiers. Prior to this, the March 2014 1MDB financial statements revealed that 1MDB was forced to extend for 6 months a syndicated bridging loan amounting to RM6.17 billion when it was due on November 22, 2013,” Pua, who is also DAP National Publicity Secretary said.

"The repayment of the loan was again extended after 1MDB failed to repay it in May 2014 and was only able to do so in August this year. The company had to restructure the balance of the loan into a RM2 billion short-term loan and an RM3.5 billion 10-year bond. The Singapore Business Times had reported that 1MDB’s debt rescheduling came at an expensive price of 2.5% interest above the annualised cost of funds, on top of the RM20 million to RM30 million in upfront fees," he added.

Pua, who is one of the fund’s fiercest critics, explained that the RM2 billion loan was now due but 1MDB will be forced to ask for an extension again, to which the financiers will have no choice but to give consent. “This is because an official default on the RM2 billion loan will not only cause 1MDB to automatically default on the balance RM42 billion debt, but also likely cause a collapse to the Malaysian domestic banking system,” he said.

PKR secretary-general Rafizi Ramli also raised concerns over the company’s debts, claiming that if it continued to record massive losses each year, it faces genuine possibility of bankruptcy. “There are no government-owned entity that has ever recorded billions of ringgit losses like 1MDB,” he said while urging Barisan Nasional lawmakers to ‘open their eyes’.

Pua alo urged 1MDB to immediately offer itself to an audit investigation by the Auditor General and the PAC.

Pressure On Najib

The mountain of debt that 1MDB has accumulated is causing tremendous fear to the public especially as the ringgit is currently weakening against the US dollar. Oppostion leader Anwar Ibrahim has demanded that Najib, as both the country’s Prime Minister and Finance Minister to step up and provide decisive leadership for the country.

“Where’s the leadership in all this? There has not been one statement forthcoming from the prime minister-cum-finance minister alluding to the current state of our economy, let alone the problems the people are already facing and will have to endure,” he said.

Pokok Sena MP Mahfuz Omar is another politician who has asked Najib to either quit vacationing or quit as Finance Minister. “Seeing that this crisis is causing a huge problem towards our country, I urge the Prime Minister to cancel the vacation that he planning after his visit to Korea. He needs to return home immediately. I understand that after this visit to Korea, he is planning an overseas vacation and time-off with his family. He can't leave this country while it is currently in a state of turmoil,” said the PAS Information Chief.

Even former Election Commission chairman Tan Sri Abdul Rashid Abdul Rahman is openly criticizing Najib. “Please stop lying to the rakyat and go do your work. Please also tell the Malay leaders to be honest and do whatever they can’” the Perkasa vice-president said.

Tonight (16 December), Pua along with Serdang MP Ong Kian Ming and the Executive Director of PAS Research Centre Dr. Dzulkefly Ahmad will be in a forum on “Mounting Debts” in Johor Bahru. The title of of the forum is “1MDB - 1Malaysia Dalam Bahaya” which translated means 1MDB - 1Malaysia in danger. And with mounting debts that our government-owned wealth fund currently finds itself in, that is exactly the prospect we find ourselves in as a country — in deep and dire danger!


- mD