Malaysia's new government will pump in more funds to complete the Tun Razak Exchange (TRX) development in Kuala Lumpur, even though billions earmarked previously to build the financial centre was instead diverted to pay the debts of troubled state fund 1Malaysia Development Berhad (1MDB).
TRX was a pet project of former premier Najib Razak, who named it after his father and Malaysia's second prime minister Razak Hussein.
"The Cabinet has met and decided the TRX project shall be completed, with government funding of up to RM2.8 billion (S$950 million)," Finance Minister Lim Guan Eng announced yesterday.
The funds will be used to complete infrastructure works and will be paid in tranches until 2024. "The alternative... is to pay RM3.51 billion in compensation claims, as well as (having) an eyesore of an abandoned mega project in the heart of Kuala Lumpur," he said.
By completing the project, the government hopes to recoup all misappropriated funds, repay all borrowings, recover all funding investments and opportunity costs as well as potentially achieve a small surplus return.
According to Mr Lim, the government had extended RM3.7 billion to TRX City - which owns both the TRX project and another flagship Kuala Lumpur development, Bandar Malaysia - since 2012 in the form of guarantees, advances and land purchases. Of that sum, RM3.1 billion was misappropriated by TRX City's former parent company 1MDB to repay its loans, leaving TRX City cash-strapped and unable to complete the development.
"This project is a classic example of how 1MDB has used its (funds) to pay off debts not related to this project," Mr Lim said.
TRX City said yesterday that it will lodge a police report on allegations that funds meant for TRX development were used to repay 1MDB loans.
In a Facebook post last night, however, Mr Najib denied Mr Lim's assertions about the project, and accused him of "spreading half truths and outright lies".
The Ministry of Finance took over TRX City in March last year, as part of 1MDB's rationalisation plan after the state fund racked up debts of more than RM50 billion.
The additional funding of RM2.8 billion brings the government's total outlay in TRX to RM6.5 billion. When the project is completed, the government hopes to realise the full value of the project, estimated to be at least RM7.6 billion.
To date, TRX City has sold parcels of land on the 28ha site to local and foreign investors such as Mulia Property Development, HSBC, Affin Bank, Malaysia's pilgrim fund Lembaga Tabung Haji, and local construction groups WCT and IJM.