Govt to inject RM2.8b in TRX after embezzlement by 1MDB

PUTRAJAYA: The Finance Ministry will inject up to RM2.8 billion in additional funds to complete the Tun Razak Exchange (TRX) project after confirming that RM3 billion has been misappropriated from it to service the debts of 1Malaysia Development Bhd (1MDB).
Finance Minister Lim Guan Eng said RM3 billion of government funds were misappropriated from TRX City Sdn Bhd (TRXC), resulting in a lack of funds to complete the TRX project.
"Since 2012, the federal government has guaranteed borrowings, extended advances and provided transfers as well as purchased land from TRXC amounting to RM3.7 billion," he told reporters today.
"Of this RM3.7 billion of transfers, a total of RM3 billion were misappropriated by 1MDB, mainly for 1MDB loan repayments."
TRXC is a wholly owned subsidiary of the Finance Ministry and is the master developer for TRX. It was formerly known as 1MDB Real Estate Sdn Bhd and was formerly a subsidiary of 1MDB.
TRXC was transferred to the ministry on March 31, 2017, as advised by the Public Accounts Committee as it was unable to secure land sales or bank financing, due to its association with 1MDB.
Lim said the management of TRXC, represented by its CEO Datuk Azmar Talib and executive director Tan Hwa Min, has been instructed to lodge a report with the investigative panel of 1MDB and the police on the misappropriation of funds.
"The money is not there for the development of the project. I think it is very clear who authorised it. We will let the investigative panel handle it because this involves individuals … the present CEO would be able to answer who instructed the money to be used. He will play a very important role in the report, on what actually happened," he said, when asked to elaborate on how the funds were misappropriated.
Lim said the Cabinet has decided to support the project to recoup all misappropriated funds, repay all borrowings, recover all funding investments and opportunity costs as well as potentially achieve a small surplus return.
TRXC is required to complete all the necessary infrastructure works in TRX costing up to RM2.8 billion. At the same time, the ministry will embark on value engineering to further reduce the cost.
The RM2.8 billion will be disbursed in stages up till 2024 and the ministry is looking at RM344 million this year.
Lim said if the project is not completed, there would be RM3.51 billion of compensation claims and an "eyesore" of an abandoned mega project in the heart of Kuala Lumpur. In addition, the government would also lose the RM3.7 billion transferred earlier to TRXC.
With the additional funding, it brings the government's total funding in the TRX project to RM6.5 billion. Upon completion, the full value of the project of at least RM7.6 billion will be realised.
"This decision will help allay concerns among the local and foreign investors, who have put in billions of ringgit, on the fate of TRXC," said Lim.
To date, TRXC has sold parcels of land to local and foreign investors such as Mulia Property Development, HSBC, Affin Bank, Lembaga Tabung Haji, WCT and IJM, whose building would be tenanted by Prudential.
The Exchange 106 Tower and the Prudential building are expected to be ready by early next year. The Exchange 106 Tower is 90% completed while infrastructure for the entire project is about 80% completed.
Meanwhile, Lim said fuel subsidy for RON95 and diesel is estimated at RM3 billion for this year, depending on oil prices. The prices of RON95 and diesel will remain at RM2.20 and RM2.18 per litre respectively till year-end.