1MDB in the spotlight

KUALA LUMPUR: The issues surrounding 1Malaysia Development Board (1MDB), which are still unresolved, remain a concern among corporate Malaysia.
During a luncheon talk yesterday, questions were raised in relation to 1MDB, including why convictions have not happened yet in Malaysia, despite convictions made by Singaporean authorities.
Organised by Malaysian Industrial Development Finance, the talk featured Finance Minister II Datuk Seri Johari Abdul Ghani and was attended by about 200 participants comprising members of the corporate world and media.
In his response, Johari said the actions taken by Singapore authorities were due to governance offences committed in Singapore, which were necessary to protect Singapore’s financial system.
Johari, who acknowledged the inefficiencies and weaknesses found within 1MDB, said any criminal case requires enough evidence in order to have a complete case and the “complete story” is needed before action can be taken.
He said the strategic development fund had the wrong business model, weak management and lacked governance, and assured the audience that the government was not avoiding the issue, adding that the authorities needed time to complete investigations. He noted 1MDB’s ongoing arbitration with Abu Dhabi’s International Petroleum Investment Co and warned that any action taken before the completion of the process could weaken Malaysia’s position.
On the arbitration, Johari said Malaysia stands firm on its decision to recover as much of the money as it can. He said the parties are expected to go through the process in London “anytime soon”.
He took the opportunity to rebut DAP’s Tony Pua, stressing that Minister of Finance Inc (MoF Inc) will not take over the debts of 1MDB.
Johari said when MoF Inc took over direct ownership of Bandar Malaysia and TRX land from 1MDB, as recommended by the Public Accounts Committee in April 2016, the most efficient and cost effective method was a transfer of TRC City Sdn Bhd (TRXC) and Bandar Malaysia Sdn Bhd (BMSB) shares to MoF Inc.
With that process, MoF Inc directly owns BMSB and TRXC, along with all the assets and the operating debts of the companies, which amount to RM2.4 billion and RM800 million respectively.
Johari said the operating debts are part of the assets and liabilities of the companies and will be serviced by project cash flows, and are separate from 1MDB debts.
Meanwhile, Johari said it will take some time to see the impact from the increase in US interest rates, which is expected to trigger a fresh round of capital outflow.
“That is the strategy of Trump’s policy now, they want to have money back to the US to be spent on their infrastructure, which they target about US$1 trillion (RM4.4 trillion),” he added.
It is observing the impact of the US rate increase on the ringgit but has not seen any significant outflow to date, as the majority of investors in Malaysia are long-term investors who will not be affected much by fluctuations in US interest rates.
Other issues raised at the talk include the country’s progress towards achieving developed nation status, Bank Negara Malaysia’s forex intervention, the ringgit’s performance, capital outflows, regulating payment gateways and digital currency as well as infrastructure and public transport.