1MDB 'bailout' is largest by KL govt

The 1MDB scandal is being investigated in at least six countries, with the United States Department of Justice alleging that some US$4.5 billion (S$6 billion) had been misappropriated.
The 1MDB scandal is being investigated in at least six countries, with the United States Department of Justice alleging that some US$4.5 billion (S$6 billion) had been misappropriated. PHOTO: REUTERS

Finance minister cites $2.4b paid to service state fund's debt as ex-PM denies bailout

The Malaysian government has dismissed claims by former premier Najib Razak that the debt-riddled 1MDB was not bailed out with a sum of RM7 billion (S$2.4 billion), with Finance Minister Lim Guan Eng saying yesterday that a further RM5 billion of public funds had in fact been allocated to cover the state fund's liabilities.

Mr Lim was responding to Datuk Seri Najib's comments in a Facebook post last Friday that there was no bailout of 1MDB or 1Malaysia Development Bhd by his government.

The new finance minister described the RM7 billion paid by the Ministry of Finance (MOF) to service 1MDB debt in the past year "as the single largest bailout in history carried out by the government of Malaysia".

He said in a statement that Mr Najib "could not be more wrong" in construing the payments as "compensation" for the transfer of assets to MOF.

The public comments by Mr Lim and Mr Najib are being closely watched by Malaysians, as under the previous government, discussions on 1MDB were not allowed and top officials were sacked or transferred out for looking too deeply into its financials.

The 1MDB state fund was started soon after Mr Najib took office in 2009. As prime minister, he led the state fund's board of advisers until 2016.

The 1MDB scandal is being investigated in at least six countries, with the United States Department of Justice alleging that some US$4.5 billion (S$6 billion) had been misappropriated.

Under Mr Najib, Malaysia sold some of the 1MDB assets and was paying off its debtors, with the disposal of two prime land banks being the final plank of a rationalisation plan .

The former prime minister had said 1MDB had governance issues but "you cannot just accuse somebody of being a thief or anything unless there is evidence. It's been cleared, there's been no wrongdoing - I stand by it".

But Mr Lim, now Finance Minister after the Pakatan Harapan coalition won the May 9 general election, is looking at 1MDB with a more critical eye as billions of dollars of public funds are involved.

Mr Lim, in rebutting Mr Najib yesterday, noted that two land parcels were taken back from 1MDB with RM3.2 billion of debt attached.

"Why should the MOF compensate 1MDB to the tune of tens of billions of ringgit as asserted by Datuk Seri Najib Razak, when 1MDB has hardly carried out any development on the land?" he said.

The landbanks in question are the 28ha Tun Razak Exchange (TRX) financial centre in Kuala Lumpur, and a 197ha Bandar Malaysia township just south of the capital, set to be the terminus for the high-speed railway to Singapore.

"The former finance and prime minister must not forget that these parcels of land were originally sold by the government to 1MDB at bargain basement prices between 2010 and 2012," he added in the statement, referring to prices of RM72 to 74 per sq ft or a total of RM1.8 billion.

Mr Najib, who is being investigated in relation to missing funds from 1MDB, had said on Friday that "the arrangement, as I can confirm, is for MOF to service 1MDB debts in return for taking over the assets".

"Put another way, had those assets remained in 1MDB, it could have developed and sold the assets on its own, and used the proceeds to pay its debt," he added.

Under Mr Najib's watch, 1MDB sold back plots in TRX to state-controlled entities for huge profits - including a plot to pilgrimage fund Tabung Haji for RM188.5 million and another plot to Affin Bank, controlled by the Malaysian armed forces fund, for RM255 million.

A version of this article appeared in the print edition of The Straits Times on May 28, 2018, with the headline '1MDB 'bailout' is largest by KL govt'. Print Edition | Subscribe