1MDB borrowings may almost all be illegal, but will Najib accept blame or will he have Johari Ghani take the fall?

by Ganesh Sahathevan


The Malaysian Loans Guarantee (Bodies Corporate) Act 1965 which regulates the issuance of Malaysian Government guarantees,states,among other things:

Restriction on borrowing powers of body corporate so long as guarantee outstanding
6. So long as the Government shall continue liable under any guarantee given under this Act in respect of any sums raised by a body corporate, the body corporate shall not except with the consent of the Minister exercise any other power to borrow possessed by it.


Now,according to information put out by 1MDB in 2014,the Malaysian Government explicitly guaranteed two loans, a RM 5 Billion Medium Term Islamic Note issue, and a RM 800 Million term loan.
It appears that all other borrowing came after that, but it is not clear if 1MDB had obtained government approval to raise those loans. Recall that PM Najib has declared that he had nothing to do with 1MDB,except as some sort of absentee overseer.
However, Malaysia has two finance ministers, and therefore ,the blame must fall on the Second Finance Minister , Johari Ghani.Of course, he may want to blame any number of his predecessors, but he cannot , as he did recently with the IPIC matter, claim that he has nothing to do with any of it.

All this in addition to the problem of  dealings with IPIC breaching the External Loans Act 1963.






END


References

Wednesday, 23 April 2014 | MYT 12:00 AM

Bulk of 1MDB loans guaranteed by Govt

BY GURMEET KAUR

PETALING JAYA: More than two-thirds of 1Malaysia Development Bhd’s (1MDB) total borrowings of RM36.25bil are supported by guarantees either from the Government, the company itself, which is entirely owned by the Minister of Finance Inc (MoF Inc), or backed by its partners from Abu Dhabi.

The fund’s latest financial accounts ending March 31, 2013 viewed by StarBiz showed that of the total borrowings, a total of RM28.22bil of its loans and bonds were secured.

Interestingly, 1MDB’s only unsecured loan of US$3bil (RM9.9bil) came with a “letter of comfort” from its shareholder - MoF Inc.

This amount was raised by its subsidiary, 1MDB Global Investments Ltd, and the proceeds are to be used as seed capital for the development of the Tun Razak Exchange project along Jalan Tun Razak in Kuala Lumpur.

The interest on the unsecured private debt securities of US$3bil is at 4.4% per annum, which surprisingly is lower than the rates charged on some of the loans that were guaranteed by the Government.

Generally, the interest rates on the loans backed by guarantees were between 4.04% and about 6%. For papers that are backed by assets of 1MDB such as its land, the interest rates that the market charges the fund is higher at between 7% and 8%.

For instance, a RM330mil redeemable bond that had been issued with maturity periods between 6.5 and 13 years and secured against the assets and properties of 1MDB carried the highest cost of funds, ranging between 7.1% and 8.35%.

The biggest loan that is guaranteed by the federal government is the maiden RM5bil Islamic medium-term notes that were raised when the fund started in 2009. The 30-year bond issue was priced at an annual rate of 5.75%, a level considered high for a Government-guaranteed bond.

The only other secured loan that is fully guaranteed by the Government is an RM800mil term loan with a tenure of 10 years maturing in 2022.

Repayment of the principal is over 14 instalments beginning April 2016 with interest charged on a half-yearly basis at 4.04% per year.

As to the corporate guarantee issued by companies from Abu Dhabi, it is mainly for the US-dollar debt papers that 1MDB had taken to purchase power plants from the Tanjong and Genting groups.

International Petroleum Investment Co PJSC (IPIC), which is an investment company of the Abu Dhabi Government, had guaranteed US-dollar debt papers to the tune of US$3.5bil to help 1MDB fund the purchase of the power plants.

In return for this corporate guarantee from IPIC, 1MDB has given a 10-year option to Aabar Investment PJS to acquire up to a 49% equity interest in both the power plants.

There is a refundable deposit held aside as collateral for the guarantee by IPIC and part of 1MDB’s strategy to list its energy assets, which is targeted within the next one year.

The term loans taken by 1MDB to purchase the power plants are expensive, as they are charged at the cost of funds plus a margin of 2% per year that is payable at intervals of three months.

To buy the Tanjong group’s power plant, 1MDB had taken up a term loan of RM6.17bil, while the syndicated bridging loan to part-finance the Genting group’s power-generation unit was RM607.52mil.

This is also guaranteed by the company with interest payable on a quarterly basis at the cost of funds plus a margin of 2% per year.

JUN

7

IPIC cash injection against the laws of Malaysia? Malaysia's External Loans Act 1963 may mean IPIC gets nothing 

by Ganesh Sahathevan

The 4th of June 2015 was the date by which the Government of Malaysia (GOM) said the UAE's  International Petroleum Investment Company  (IPIC) would settle its debt of approximately USD 1 billion  owed to a consortium led by Deutsche Bank.

Recall however that this  debt deal was announced without it being deliberated by Parliament.Subsequently it does not look like it has been  gazzetted, as required by Malaysia's  External Loans Act 1963.

Prima facie it does appear as if the GOM is not allowed by its own laws to accept funding in any form from IPIC,or from anyone else for that  matter , unless duly authorized by Parliament. For IPIC this means that even if that USD 1 billion has been payed over,whatever the GOM has promised pursuant to the deal may be ruled  illegal, and IPIC may not get anything in return.

The relevant legislation is provided below for reference,and readers are reminded that these rules are in place to ensure that government spending and borrowing is properly regulated,and politicians are restrained from driving  the country off a fiscal cliff.



END

AUTHORITY TO BORROW Power to raise external loans, and application of sums raised 

2. (1) The Minister (that is to say, the Minister for the time being charged with responsibility for finance) may from time to time raise loans outside Malaysia— (a) for the purposes of the Federal Development Fund or some one or more of those purposes; or (b) for the repayment or amortization of loans raised outside Malaysia, whether under this section or not.

(3) The sums raised under this section shall not exceed the sum specified from time to time by the Yang di-Pertuan Agong by order published in the Gazette and such order shall as soon as possible after its publication be laid by the Minister before the Dewan Rakyat; and in applying this subsection sums raised in a currency other than ringgit shall be converted into ringgit as at the day when the amount to be raised is determined and by the use of such rate of exchange as the Governor of Bank Negara may certify to be then appropriate

(4) Subsections (1), (1A) and (2) shall authorize the Minister to include among the terms and conditions of any external loan provisions for exemptions from taxes or for exempting from exchange control the debt charges or any description of debt charges in respect of an externalloan; and the Minister shall by order make such provision as he considers necessary to give effect to any such exemption from tax or from exchange control, and any such order shall have effect notwithstanding anything in any written law relating to the tax, or to exchange control, as the case may be.

(6) All debt charges in respect of any external loan shall be charged on the Federal Consolidated Fund (as provided by Article 98 of the Federal Constitution), and subsections (1), (1A) and (2) have effect subject to that Article. (7) In this section “debt charges” includes interest, sinking fund charges, the repayment or amortization of debt, and all expenditure in connection with the raising of loans and the service and redemption of debt created thereby

http://www.agc.gov.my/Akta/Vol.%209/Act%20403.pdf

Republik Rakyat Tanah Melayu,where PM Najib takes instructions from President Xi,and the Malaysian Chinese Association leads talks with the CPC....

by Ganesh Sahathevan 




MCA president Datuk Seri Liow Tiong Lai said in Septmeber 2016 that MCA was at the forefront of spurring cooperation between Malaysia and China in the context of Belt and Road Initiative through a series of activities such as cadre training, seminars and dialogues.He has gone on to have meetings with Song Tao, head of the International Liaison Department of the Central Committee of the Communist Party of China (CCP).

This writer realises that many may take offence, but there is no other way of reading this latest comic sequence  of the ongoing 1MDB theft, reported by none other than the Malaysian Chinese Association's The Star:

Bandar Malaysia may see more changes to its equity structure – which may include the return of its original master developer IWH-CREC – after Prime Minister Datuk Seri Najib Tun Razak met with Chinese leaders in Beijing.

“Chinese Prime Minister Li Keqiang told Najib that China hopes the deal on Bandar Malaysia stays unchanged. Najib may have to take the Chinese wishes into consideration,” said a government source in Beijing.

And before anyone gets too hot under the collar, recall that it was not too long ago when  if anyone , let alone the MCA , had even suggested this ,ISA detention would have followed with immediate effect:

Liow said MCA was at the forefront of spurring cooperation between Malaysia and China in the context of Belt and Road Initiative through a series of activities such as cadre training, seminars and dialogues.

“We have also set up the MCA PRC Affairs Committee to promote and monitor the progress of the Belt and Road,” he said.

Given the above, and keeping with Malay tradition, a return to the former name ,Persekutuan Tanah Melayu; Jawi: ڤرسكوتوان تانه ملايو),is appropriate,only that it should now read,Republik Rakyat Tanah Melayu

END

References 

Monday, 15 May 2017

Glimmer of hope for IWH-CREC

 

PETALING JAYA: Bandar Malaysia may see more changes to its equity structure – which may include the return of its original master developer IWH-CREC – after Prime Minister Datuk Seri Najib Tun Razak met with Chinese leaders in Beijing.

“Chinese Prime Minister Li Keqiang told Najib that China hopes the deal on Bandar Malaysia stays unchanged. Najib may have to take the Chinese wishes into consideration,” said a government source in Beijing.

The Finance Ministry announced on May 3 that it had called off a deal to sell a 60% equity stake in Bandar Malaysia to a consortium comprising Iskandar Waterfront Holdings Sdn Bhd (IWH) and China state-owned China Railway Engineering Corporation (CREC).

The reason given was that IWH-CREC had defaulted on payments.

Describing the unilateral deal cancellation was “unacceptable”, the consortium said the move “runs contrary to the conduct of the parties in progressing the share sales agreement (SSA) towards its completion”.

The SSA, inked in December 2015, was worth RM7.41bil then.

The consortium was to be the master developer of Bandar Malaysia that will house the main terminus of a planned high-speed rail linking Kuala Lumpur to Singapore. The China Railway group has said it will bid for the RM60bil project.

Though IWH-CREC has indicated it is still keen on Bandar Malaysia, news reports have emerged that Malaysia is courting Dalian Wanda Group, China’s largest property and entertainment group.

Najib, who is in China to attend the Belt and Road Forum for International Cooperation, visited Wanda headquarters on Saturday morning and then called for a joint press conference where he heaped praises on Wanda.

It seemed then that IWH-CREC could write off Bandar Malaysia.

Meeting the Malaysian press at Sofitel Wanda Beijing Hotel, China’s richest man and Wanda chairman Wang Jianlin said the investment in Bandar Malaysia would be huge as it is now worth US$10bil (RM43.4bil).

“While we have not reached an agreement ... Wanda has confidence in Malaysia and its future prospects. We are willing to share our experience with Malaysia to build a one-of-its-kind mega integrated cultural and tourism project,” he said.

Najib voiced confidence that Wanda would take up the offer to participate in Bandar Malaysia and that he would announce the details “when the time comes”.

“We believe Wanda Group is in a position to deliver something extraordinary, something so imaginative that we can create Bandar Malaysia as something that all Malaysians and the region can be proud of,” Najib said.

But later in the evening after Najib held meetings with Li and President Xi Jinping, it seemed there was a glimmer of hope for IWH-CREC to be in Bandar Malaysia.

Najib said then that the formula for equity stakes in Bandar Malaysia would be changed and that foreign participants would not be just Dalian Wanda Group alone.

“We will take into account the position of CREC and other groups that are interested, including Wanda,” he said.

According to one Malaysian official who is in the Prime Minister’s entourage to Beijing, the change in Najib’s stance came after a meeting with Li.

“They met after the Wanda event. In his speech, Li made clear China’s wishes on Bandar Malaysia.

“Now the possible scenario is: IWH-CREC, Wanda and the Malaysian Government will jointly develop Bandar Malaysia.

“But the equity stake of IWH-CREC could be smaller,” said the official.

Li and Xi had reiterated China’s interest in the KL-Singapore High-Speed Rail, Najib said.

The Saturday evening statement by Najib is seen as telling the Chinese leaders their wishes are being taken into consideration in the revised formula for Bandar Malaysia.

China, which has often said it treats Malaysia as a close friend, has responded to Najib’s call for help many times.

In 2015, when the local economy was battered by the outflow of foreign funds, China came in to buy up energy assets of 1MDB and the Bandar Malaysia stake – both seen to be above market price.

It also supported the ringgit by buying Malaysian government bonds.

Last November, when Najib asked China to import more Malaysian palm oil, Xi agreed.

Palm oil prices rose after China’s pledge. In the first three months of this year, its purchase of palm oil doubled.

The MCA’s dangerous dance with the CCP

May 14, 2017

Allowing the Central Committee of the Communist Party of China to embed itself into Malaysia's political framework undermines our nation’s security and compromises our political process.

COMMENT

By Dennis Ignatius

Prime Minister Najib Razak is currently in China to attend the “New Silk Road Summit” hosted by President Xi Jiping. The summit, which began on Friday, brings together 28 heads of state/government and representatives from over 80 countries to discuss President Xi Jiping’s flagship “One Belt, One Road” (OBOR) initiative.

While the attention of many Malaysians will understandably be focused on how the unravelling of the Bandar Malaysia project will play out and what it might mean for the future of Malaysia-China relations, something equally important will be taking place with much less fanfare: the meeting between Transport Minister Liow Tiong Lai (who is accompanying the Prime Minister) and Song Tao, head of the International Liaison Department of the Central Committee of the Communist Party of China (CCP).

The minister, who is also president of the Malaysian Chinese Association (MCA), was quoted in a local report as saying that he was keen to strengthen the MCA’s cooperation with the CCP in matters involving “culture, education and cadre training” as well as “extending such cooperation to the business front.”

Party-to-party ties

Taking advantage of the burgeoning ties between Malaysia and China, the CCP has quietly sought to augment state-to-state relations with Malaysia with even closer party-to-party ties with the MCA.

The MCA, for its part, has eagerly reciprocated the CCP’s overtures in the hope that China’s political endorsement and support might help it regain the confidence of Malaysian Chinese voters who, in the last elections, punished the party severely for being too subservient to Umno.

It is nothing short of rank dependence upon a foreign power to achieve domestic political goals and is a measure of just how desperate they are.

Political involvement

In keeping with this new relationship, CCP representatives now attend the MCA’s annual meetings while PRC diplomats increasingly accompany MCA politicians when they visit their constituencies or meet with local Chinese trade and business associations.

The PRC diplomatic mission here openly encourages Malaysian Chinese to support both the MCA and the Barisan Nasional (BN) government. Indeed, the PRC ambassador is on record as saying that Malaysian Chinese must support the MCA if they wish to have a voice in Cabinet, ensure strong ties between Malaysia and China and benefit from PRC projects and business opportunities.

Such open interference in domestic politics is, of course, contrary to both diplomatic practice as well as China’s oft-repeated promise of non-interference in the internal affairs of other countries. It would never have been tolerated in the past but such is China’s influence in Malaysia today that the government now turns a blind eye to it.

The MCA is also the main propagandist for the OBOR initiative through its Belt and Road Centre (Mbrace) and does more to promote it in Malaysia than even the Chinese embassy itself. At last count, the MCA helped recruit 46 Chinese guilds and associations to endorse the OBOR initiative and mobilise local support for it.

In addition, the MCA has set up a PRC Affairs Committee to promote relations with China, prompting one opposition MP to remark, with some justification, that the MCA appears to be “acting as an agent of China.”

Cadre training

Cooperation and fraternal ties between the CCP and the MCA now seem set to deepen yet further with the inclusion of cadre training. While details are still sketchy, it is well known that cadre training is an essential part of the CCP’s indoctrination methodology.

The CCP is thought to have more than 2900 cadre training schools at all levels where CCP cadres are trained in the party’s ideological struggles and strategies, grassroots mobilisation, and economic and social policies as well as management and administration.

In recent years, the CCP has begun inviting foreign political parties with which it wishes to establish close ties to participate in their cadre training programmes. While the curriculum for foreign participants is slightly different, the objective of influencing and indoctrinating foreign political parties remains the same. Over the longer term, the CCP hopes to build a core of foreign cadres who are sympathetic to, and supportive of, the CCP and its foreign policy and ideological goals.

Given the nature of the CCP’s cadre training programme, one has to wonder why the MCA would want to discuss cadre training with the CCP. And is it consistent with our sovereignty and independence to allow a foreign political party, and a communist one at that, such ingress into our domestic political process?

A threat to our political process

Not since the now defunct Malayan Communist Party (MCP) has a local political party chosen to so thoroughly align itself with a foreign political party and promote the policies of a foreign government in such a manner.

To be sure, China is Malaysia’s most important political and economic partner and we ought to go all out to develop close and mutually beneficial relations with it.

At the end of the day, however, relations with China, as with other countries, is about contributing to national development and strengthening national resilience. Allowing the CCP to embed itself into our political framework undermines our nation’s security and compromises our political process; it should alarm all right thinking Malaysians.

Dennis Ignatius is an FMT reader.

With a firm belief in freedom of expression and without prejudice, FMT tries its best to share reliable content from third parties. Such articles are strictly the writer’s personal opinion. FMT does not necessarily endorse the views or opinions given by any third party content provid

Sunday, 4 September 2016

China biggest player in manufacturing

 

KUALA LUMPUR: China has overtaken the United States and Japan as largest foreign investor in the manufacturing industry in Malaysia in the first quarter of the year, said the Chinese Ambassador to Malaysia.

Quoting statistics from the Malaysian Investment Development Authority, Dr Huang Huikang said Chinese foreign direct investment in Malaysia has reached US$400mil (RM1.6bil) in Q1.

Dr Huang was speaking at the opening of “Belt and Road Initiative: Malaysia-China Business Dialogue” at Wisma MCA yesterday.

MCA president Datuk Seri Liow Tiong Lai welcomed the news, adding that Malaysia had been urging China to correct the investment imbalance between the two, which saw our investment in China amounting to six times that of Chinese investment here.

The dialogue was jointly organised by MCA and the Chinese Communist Party’s (CPC) China Economic Cooperation Centre. It was the second edition following the inaugural dialogue in Beijing in July last year.

Liow said MCA was at the forefront of spurring cooperation between Malaysia and China in the context of Belt and Road Initiative through a series of activities such as cadre training, seminars and dialogues.

“We have also set up the MCA PRC Affairs Committee to promote and monitor the progress of the Belt and Road,” he said.

Liow noted that Malaysia offers peace of mind to Chinese investors with the nation’s political stability, stable legal and economic systems, and sustainable policies.

Malaysia’s strategic location also makes it China’s gateway to Asean, West Asia and South Asia, he added.

Liow said the Belt and Road Initiative, introduced three years ago, looks set to be a game-changer on a global scale by introducing a third global trade axis for Asia, Europe and Africa.

“In the past, global economic and trade hubs have been centred on the Atlantic Trade Axis and Pacific Trade Axis,” he said.

“With trade routes along both land and sea, the Belt and Road’s

Spanning 65 nations over three continents with two-thirds of the world’s population, Belt and Road seeks to enhance connectivity by way of policy, infrastructure, trade, capital and people.

Also present at the opening were MCA deputy president Datuk Seri Dr Wee Ka Siong, CPC Central Committee International Department assistant to minister Li Jun, Associated Chinese Cham­bers of Commerce and Industry Malaysia president Datuk Ter Leong Yap, and Federation of Seven Clan Associations Tan Sri Koo Yuen Kim.

Liow later told a press conference that the two countries’ bila­teral trade goal of US$160bil (RM640mil) by 2017 was a difficult one, judging from the current world economic situation, volatile oil prices and weak ringgit against the US dollar.

“Prime Minister Datuk Seri Najib Tun Razak will be visiting China in October. Hopefully, his visit will reap fruitful results and strengthen two-way trade,” he said.