IS 1MDB IS TURNING OUT TO BE BN’S WATERGATE?

Is 1MDB even needed or relevant? Most of the projects and commercial deals undertaken by the company could have been distributed to the more established GLICs such as Khazanah Nasional, Permodalan Nasional Berhad and several others.

Khoo Kay Peng, The Ant Daily

The 1Malaysia Development Berhad (1MDB) case is shaping up to become Barisan Nasional’s biggest fiasco. To be honest, no one is capable of knowing if the Ministry of Finance’s (MoF) wholly owned company is ever going to be profitable or not.

However, the main issue is not about the company’s profitability. The manner the company has conducted its business in sheer secrecy and privacy is the main problem. If this is a government linked company, the board of directors and the MoF should know that it has to be accountable and answerable to Parliament and the public.

The sheer size of funds and transactions handled by 1MDB are definitely going to be scrutinised by the Opposition. When the issue was blown out of proportion, 1MDB’s response to its critics has elicited distrust.

If the deals are above board, the company must be transparent about whom it is dealing with. It is unfathomable why its part and present chief executives had denied any links with the flamboyant billionaire dealmaker Low Taek Jho or popularly known as Jho Low?

On Low’s connections with 1MDB, its newly appointed president and group executive director Arul Kanda Kandasamy stressed that this was nothing more than a speculation by third parties. He claims that no documents were found involving Low with the company.

Arul Kanda’s denial begets more serious questions.

First, whistleblower website Sarawak Report has released a slew of emails implicating Low’s direct involvement in the 1MDB’s joint venture with PetroSaudi. Are the emails authentic?

When CNBC asked Low if the email trail was fabricated, Low merely replied: “My views are always sought by numerous parties because I have a very good relationship with the Middle East, and I always advocate for partnerships and globalisation”. Low did not deny his involvement.

How is it possible that Arul Kanda was not made aware of Low’s involvement? If Arul was not made privy to the information, is he a designated fall guy along with a few of his board members? Is Arul the right person to help reclaim the credibility of the company after some serious allegations if he has no thorough knowledge of its deals?

Second, the emails did suggest that Low was the main man who put together the deal. Was it a Jho Low deal? The answer was positive when the writer asked a person closely connected to the Prime Minister’s Office.

Low said he was involved in the Terengganu Investment Authority in early 2009, but was not hired by 1MDB subsequently when it was formed after June the same year. He repeated the statement released by PetroSaudi that all the funds from 1MDB went to PetroSaudi.

Ironically, the US$700 million from the PetroSaudi/1MDB joint venture eventually ended up in the Good Star Limited account. Good Star Limited is a fund management company purportedly owned by Low.

Supporters of 1MDB have argued that the funds still belonged to PetroSaudi and are merely being managed by Good Star Limited. If the allegations are true, Arul and Low’s denials of Low’s connections with 1MDB are going to take a serious dent. If Good Star Limited has received the US$700 million from PetroSaudi and if Low has an indirect interest in the former, he could be deemed to have benefited commercially from his ‘advice’ to the 1MDB.

Looks like it is better for both 1MDB and the BN government to be more transparent. It is not a crime that Low is involved in the 1MDB deals. However, it is a breach of trust if both the 1MDB and the BN government have misled the public on Low’s involvement. The government must address this issue wisely. It must do the necessary to stop hurting Malaysia’s image and perception among global investors.

Finally, is 1MDB even needed or relevant? Most of the projects and commercial deals undertaken by the company could have been distributed to the more established GLICs such as Khazanah Nasional, Permodalan Nasional Berhad and several others.

1MDB’s lack of profile means the company was forced to raise funds more expensively although the federal government guarantees the bonds. Its rates are at least two percent higher than the usual government bonds. Can the government, especially MoF, justify the creation and purpose of the 1MDB?

Who are the losers of the 1MDB saga? 

It is apparent that the allegations hurled by the critics of 1MDB and the government’s reluctance to subject the 1MDB to a full scrutiny are making the country looking like a cowboy town. The main losers are the Malaysian economy and the perception of the country as an attractive destination for global investors. 

Both sides of the political divide have the responsibility to ensure that the saga does not destroy the country’s image and perception. For now, it is pertinent for 1MDB to accept full accountability and disclosure. It should not hide behind the non-disclosure clause in its commercial contracts. The Opposition must strive to seek for answers but refrain from politicizing the issue. 

The government must do whatever it takes to restore investors’ confidence in the country and the economy. It should refrain from using any legislative coercive power to restrain and detain its critics. It has a duty to ensure that the public is given a satisfactory answer on 1MDB and the company’s dealings are not detrimental to the country’s financial health. 

On top of the pile of questions waiting to be answered is how a newly established GLIC is capable of raking up nearly RM42 billion of debts? Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah has admitted that 1Malaysia Development Bhd’s (1MDB) financial position is not sustainable because its debts are too high. He said that 1MDB’s gearing ratio, which is a measure of debt against capital, was 17 times and unsustainable at its present form.  

The government should stop the threats, end the drama and start to answer the questions. This is the only way to restore its credibility.