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Thursday, May 24, 2018

Report: Bank Negara RM2b land deal meant to bail out 1MDB


Bank Negara Malaysia’s acquisition of a 22.5-hectare plot of land for RM2 billion from the government was allegedly meant to help pay off 1MDB debts.
This is according to a report from the Wall Street Journal (WSJ), which claimed that the money from the land deal was used to pay off 1MDB’s obligations to an Abu Dhabi state fund due at the end of 2017. 
While WSJ did not name the Abu Dhabi state fund, The Edge Markets identified it as International Petroleum Investment Co (IPIC).
“The Malaysian fund said in December (2017) it came up with the money via an 'ongoing rationalisation programme' that involved selling off holdings like power plants and land.
“Instead, the people familiar with the transaction said, the money came from a land deal involving the central bank,” the WSJreported today. 
The Abu Dhabi state fund had in 2015 stepped in to bail out 1MDB, with an agreement from the Finance Ministry to repay them US$1.2 billion by the end of 2017. 
People familiar with the matter said 1MDB had almost no cash flow, according to the WSJ, and so as the deadline on those obligations neared, the government supposedly turned to the central bank. 
WSJ reported that the RM2 billion proceeds from the land deal with Bank Negara purportedly went into a special purpose vehicle set up by the Finance Ministry to pay off a portion of 1MDB’s debt to the Abu Dhabi fund, according to people familiar with the transaction. 
On January 4, 2018, it was reported that Bank Negara had purchased a 22.5-hectare plot of land for RM2 billion from the government. 
This came just a week after 1MDB’s December 27, 2017 deadline to pay off part of its debts to the Abu Dhabi state fund. 
The land was supposedly acquired by Bank Negara to be utilised for the relocation of the Global Islamic Finance University and the International Shari’ah Research Academy for Islamic Finance.
Bank Negara had said that the land was located contiguous to its Sasana Kijang complex and it was also near other financial training centres. 
The central bank also previously clarified that they were the ones that had approach the government about the land deal, and not the other way around. 
“To be clear about it, it was not the government that wanted to sell that land to us.
“We actually approached the government many months ago to buy the land,” Bank Negara governor Muhammad Ibrahim reportedly said at the time. 
Muhammad also described the market-value purchase as an “arm’s length transaction,” where both buyer and seller acted in their own interest and were not under any pressure from the other party.
DAP lawmaker Tony Pua, however, had disputed Bank Negara's claim on the sale, asking instead if the transaction was an attempt by the government to raid the Bank Negara's coffers.
Pua questioned why the central bank bought land from the government at market price if it intended to develop an education hub on it, as land acquired for public universities are usually transferred at a nominal rate.
He further noted that the Bank Negara deal was finalised around the same time 1MDB made its payment to IPIC, on Dec 27 last year. -Mkini

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