Thursday, September 3, 2015

1MDB: Siapa Kata Sudah Dijawab?

1MDB book

(Comments by Sarawak Headhunter in red)
(The Star) – Allegations on 1MDB ranging from Terengganu oil almost being used as collateral and Tabung Haji deposits used as a bailout to claims that investment returns went into controversial businessman Jho Low’s accounts have all been answered.

ALL the answers are merely recycled bare denials, as if anyone and everyone must take 1MDB's word for everything. 1MDB has absolutely no credibility left and this book is a feeble attempt at shoring up its rotten foundations.

A book titled Siapa Kata Tidak Dijawab (Who Says It’s Unanswered), in explaining the Terengganu issue, said that in 2009, discussions between the federal and state governments were held over the issue of contribution of each party to Terengganu Investment Authority (TIA) where the initial plan was for it to have a paid-up capital of RM11bil.

Among the plans was for the Government to guarantee the raising of sukuk worth RM5bil by TIA but the state government eventually decided to pull out of the deal.

“In September 2009, TIA became a federal agency and was renamed 1MDB. Therefore, there is no issue of 1MDB trying to use the state’s oil and gas as collateral,” it said.

There is no question of using the state's oil and gas as collateral, since these are all vested in Petronas, rightly or wrongly. There was probably a half-cocked idea to use Terengganu's royalty share from oil and gas as collateral or leverage (such as by capitalising future earnings, like Daim did with the future toll revenues of PLUS), thus enabling the immediate "unlocking" of billions of ringgit of future revenue.

Since the state government, who had rights to the royalty, would have been averse to the idea, having no control over those revenues and potentially losing out in the future, this idea probably had to be aborted.

So of course now there is no such issue. But it certainly would have been an issue at the time.
The book also explained that the purchase of land by Tabung Haji was not a bailout, pointing out that discussions to buy a plot of land at Tun Razak Exchange went on as early as 2013 and that Tabung Haji was interested as the company wanted to be involved in the development of an international financial hub.

What happened to this so-called "international financial hub"? Has that also been aborted or merely waiting for the bailout of 1MDB to take place? Given 1MDB's present dire position, everything that it does which involves other government agencies such as Tabung Haji could rightly be categorized as a bailout, irrespective of the actual intentions of Tabung Haji.

It clarified that Tabung Haji did not buy the lot to develop “Signature Tower” but had bought a lot – at a discounted price of RM2,860 per sq foot and located at a prime area in TRX – to develop some serviced apartments.

This raises more questions than answers. What has the development of serviced apartments got to to with the avowed interest of wanting "to be involved in the development of an international financial hub"?

What price did 1MDB buy the land for? Is the price really at a discount if it is above the current market value?
In the book, it was also denied that any money from 1MDB had gone into Low’s accounts or that of any third party, after PetroSaudi returned US$2.318bil to the company which comprised initial investment of US$1.83bil and US$488mil in revenue.

Show then where the money actually went to. Mere denials are insufficient. What happened to this money that had purportedly been returned? Where did it go to and in what form is it now?
“1MDB received a short-term loan of RM950mil from the Government in March. This was needed while waiting for asset monetisation to be done,” it said on why the company needed government help.

When will this "asset monetisation" take place and in what form? Why doesn't 1MDB have sufficient cashflow to meet it current obligations? Isn't this a classic case of insolvency? In spite of denials, isn't this RM950 million loan also a bailout?
On why it needed a rationalisation plan, it was explained in the book that this was important to drastically reduce 1MDB’s debts and to ensure its business plans in the energy and real estate sectors could proceed.

Why is such drastic reduction of 1MDB's debts even necessary if in the first place it had been properly incurred? Can its business plans really be "rationalised" now if there was something wrong from the start? What is really wrong with 1MDB? Can its purported "rationalisation plan" save 1MDB? Wasn't 1MDB rational to start off with?

Under the rationalisation plan, the company will merge its activities, increase corporate administration and monetise its assets to reduce debts.

How is such "monetisation" of 1MDB's assets going to reduce debts without incurring more debts? Will it be another case of digging a bigger hole to cover up an already big hole?

“To date, the plan has shown success where the company’s debts had been reduced by RM3.6bil. A deal with International Petroleum Investment Company (IPIC), our Abu Dhabi-based partner, will reduce another RM16bil from the debts,” it said.

Will the terms of this deal be in favour of 1MDB or IPIC? Will it be sufficient to save 1MDB or merely to buy time? Does this deal require any government guarantees? Will this deal be disastrous like all its other deals? Why is 1MDB not being open about its deals? What have they got to hide? Dp they really even have a deal at all?

See also Sarawak Report: "Binding Agreement" or "Engaged In Discussions"? - 1MDB's Multi-Billion Dollar Muddle 
On the development of TRX, a joint venture with Australian company Lend Lease was signed in March to develop 6.8ha of land and Indonesia’s Mulia Group had purchased land to build “Signature Tower” at RM665mil, while for Bandar Malaysia, 1MDB received proposals from over 40 local and international companies and an independent consultant was appointed to conduct a feasibility study for plots of land in Air Itam in Penang and Pulau Indah in Klang.

Until the terms of all these deals are clear, there is no assurance that any or all of them in their entirety can save 1MDB from becoming a collosal disaster and burden on the government in particular and the Malaysian economy in general.
The book said that although 1MDB was facing challenges, concrete steps had been taken to ensure that the company achieved its objectives, settled its debts and the Govern­ment and people benefited from programmes outlined by it.

Of course, this could all be wishful thinking. Burial in concrete is a hallmark of the mafia. The Malaysian people await with bated breath.

Al Tugauw
Sarawak Headhunter

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