1MDB to become shell company after rationalisation plan is complete

The sign for 1Malaysia Development Berhad (1MDB) displayed at the site of the Tun Razak Exchange (TRX) project in Kuala Lumpur, Malaysia.
The sign for 1Malaysia Development Berhad (1MDB) displayed at the site of the Tun Razak Exchange (TRX) project in Kuala Lumpur, Malaysia.PHOTO: BLOOMBERG

KUALA LUMPUR (REUTERS) - Malaysia's debt-ridden state fund 1Malaysia Development Berhad (1MDB) will become a shell company once its rationalisation plan is fully implemented, according to its president Arul Kanda, state-run news agency Bernama reported.

"Based on the rationalisation plan and Public Accounts Committee's suggestion that its subsidiaries are removed (from under the company's control), 1MDB will be a shell company," Mr Arul was quoted on Thursday (April 7) as saying.

"There will be no daily operation and 1MDB will serve its debts through cash flow derived from the rationalisation plan."

Mr Arul also said the resignation offers by the six board of directors on Thursday were not a ploy to escape.

"In fact, the move allows more space for the authorities to conduct further and transparent investigations on 1MDB," he said.

Reuters reported last March that 1MDB would be left as a skeletal structure and dissolved under a debt repayment plan, in which most of its assets will be sold.

Malaysia's parliamentary inquiry into the debt laden state fund said on Thursday that the board had failed to carry out its responsibilities and its former chief, Shahrol Azral Ibrahim Halmi, must be further investigated.

The bipartisan Public Accounts Committee (PAC) said that senior management at 1MDB withheld crucial information from the board and made transactions without its knowledge or approval.

But it stopped short of implicating Prime Minister Najib Razak who heads the advisory board.

The report called for the advisory board to be abolished and any reference to the prime minister be changed to finance minister in the company’s memorandum and articles of association.

1MDB also said its funds have been fully accounted for and it did not transfer RM2.6 billion (S$898 million) into the personal accounts of Mr Najib. 

The PAC is the first Malaysian entity to level allegations against 1MDB, which is at the centre of corruption and money-laundering investigations in the United States, Switzerland, Singapore and Luxembourg. 

The 1MDB fund had piled up over RM42 billion (S$14.5 billion) in debt since its inception in 2009. 

Mr Najib has consistently denied any wrongdoing. He said the PAC report showed that former premier Mahathir Mohamed’s allegations against him were false.

Dr Mahathir quit the ruling party in February and has stood with the opposition in calling for Mr Najib to resign over the 1MDB scandal.

The scandal has fueled a sense of crisis in a country under economic strain from slumping oil prices and a prolonged slide in its currency last year.