Malaysia parliamentary committee calls for probe into 1MDB accounts

Site of the Tun Razak Exchange financial district project in Kuala Lumpur, on Feb 12, 2015. -- ST PHOTO: REME AHMAD 
Site of the Tun Razak Exchange financial district project in Kuala Lumpur, on Feb 12, 2015. -- ST PHOTO: REME AHMAD 
A respected Malaysian parliamentary committee on Thursday called for an official probe into the accounts of 1Malaysia Development Bhd (1MDB), a day after the Cabinet was briefed on a RM3 billion (S$1.1 billion) injection into the heavi
A respected Malaysian parliamentary committee on Thursday called for an official probe into the accounts of 1Malaysia Development Bhd (1MDB), a day after the Cabinet was briefed on a RM3 billion (S$1.1 billion) injection into the heavily-indebted investment agency. -- PHOTO: REUTERS

KUALA LUMPUR - A respected Malaysian parliamentary committee on Thursday called for an official probe into the accounts of 1Malaysia Development Bhd (1MDB), a day after the Cabinet was briefed on a RM3 billion (S$1.1 billion) injection into the heavily-indebted investment agency.

The Public Accounts Committee (PAC), of which members include senior government and opposition MPs, asked for the Auditor-General to "quickly carry out an audit" into 1MDB before it summons the fund soon to check into aspects of its finances.

PAC chairman Nur Jazlan Mohamed, an MP from ruling party Umno, said his committee has identified several issues that need immediate auditing, including the source of funds 1MDB used to pay off a RM2 billion debt to Malaysian banks, and a "new injection of RM3 billion from the government".

"The people need to know the truth and the government must be transparent in 1MDB matters; if it were true that all investments and operations of the company are legal, let these be confirmed by a government department, the Auditor General," he said.

Mr Ananda Krishnan, Malaysia's second richest man, had reportedly lent the RM2 billion to 1MDB - of which chief adviser is Prime Minister Najib Razak - in exchange for being a key investor in the upcoming initial public offer (IPO) of the fund's energy division.

The Straits Times also learnt that the issue of the RM3 billion cash injection was raised at the Cabinet's weekly meeting on Wednesday.

After media reports last week of the RM3 billion  from the Finance Ministry, 1MDB president and group executive director Arul Kanda said it would seek refinancing "from the best available sources".

"We further stated that our 100 per cent shareholder, the Ministry of Finance, will be involved, as relevant and as required, in the interest of maximising shareholder value," he said in a statement last week.

1MDB did not respond to a request for comment following the PAC's statement, which comes on the back of accusations by opposition MPs that the government was bailing out the fund. 

The warning by PAC, a bipartisan parliamentary committee, trains an uncomfortable spotlight on the controversial firm which chalked up more than RM42 billion in debts after just six years in existence. 

Previous criticisms of the fund have mainly come from the media and ex-government leaders including former premier Tun Dr Mahathir Mohamad and former finance minister Tun Daim Zainuddin.

The fund was set up in 2009, a few months after Datuk Seri Najib became Prime Minister. Mr Najib, who is also Finance Minister, heads 1MDB's board of advisers.

The fund has bought 15 power plants in five countries and bought landbanks in Malaysia in a grow-fast strategy by issuing several bonds that it is struggling to pay back.

Unlike Malaysia's sovereign fund Khazanah Nasional which taps public funds for its investments, 1MDB generally raises its own cash for its corporate moves, hence the ballooning loan exposure. 

1MDB, under its new chief Mr Arul, is working out aggressive strategies to cut its debts including by selling off assets and bringing in partners in its property projects. Mr Arul, who came on board last month, also promised not to embark on new purchases.

The Straits Times understands that the fund is considering selling off two landbanks in Penang and Malacca to raise RM2 billion.

It also hopes to raise RM12 billion to RM14 billion in the IPO of its power plants in the second half of the year. These assets will be grouped under Edra Energy, with about half of the IPO proceeds expected to be used to repay debts, said industry executives and bankers familiar with the plan.

Further, 1MDB is actively seeking joint venture partners in carrying out its two giant property projects at the edge of Kuala Lumpur, named the Tun Razak Exchange and Bandar Malaysia. 

Such partners will provide extra cash that would be used to further reduce the fund's debts and hasten the pace of construction, the executives say.

reme@sph.com.sg

shannont@sph.com.sg