Pua raises refund poser after Bandar Malaysia deal collapse

Following a reported collapse of the RM7.41 billion Bandar Malaysia deal, DAP lawmaker Tony Pua today questioned whether state investor 1MDB will have to refund RM741 million in deposits paid by the Johor-based Iskandar Waterfront Holdings (IWH) and China Railway Engineering Cooperation (CREC) consortium (IWH-CREC).

“There is now the all-important question as to who will refund the RM741 million deposit paid to 1MDB by the IWH Consortium?

“Will 1MDB now refund the deposit, or will MOF (Finance Ministry) have to once again bail out 1MDB by forking out the RM741 million as a result of the 1MDB real estate fiasco?” he said in a statement.

Pua said this in response to an announcement by Ministry of Finance-owned TRX City Sdn Bhd yesterday that the share sale agreement (SSA) entered into on Dec 31, 2015, with the consortium had lapsed, after the consortium failed to meet its payment obligations despite repeated extensions. 

Describing the announcement as unsurprising, Pua said he had previously questioned the reasons behind the proposed sale to a consortium with total net assets of barely RM3.8 billion or less than half the transaction value. 

“For the financial year ending 31 December 2015, the company’s net profit before tax was only RM170.4 million.

“Despite IWH clearly attempting to bite off more than it can chew, 1MDB had proudly announced on Dec 31, 2015 that the IWH-Bandar Malaysia sale agreement ‘marks the final major milestone in the 1MDB rationalisation plan as presented to the cabinet of Malaysia on 29 May 2015’,” he said. 

Error of judgment

Pua pointed out that he had raised further questions in Parliament over the project’s status in November last year and April this year. 

The replies, he said, only revealed that the IWH consortium will pay a 6 percent interest on outstanding payments until the sums have been fully paid in 2023. 

With the deal termination, Pua said the Finance Ministry now has to service the RM2.4 billion of sukuk (Islamic financial certificates) which 1MDB took to fund the Bandar Malaysia project. 

The ministry will also need to pay Perbadanan Pewira Hartanah Malaysia, a wholly-owned subsidiary of the Armed Forces Fund (LTAT), which received a RM2.7 billion contract to relocate the Air Force Military Base, he said.

RM2 billion is still outstanding, he said.

In signing the deal, Pua said that 1MDB president and CEO Arul Kanda Kandasamy had at time boasted of how the IWH-CREC consortium would be a highly attractive development partner for Bandar Malaysia. 

As such, Pua said Arul Kanda must now resign to take responsibility for his “severe error of judgement” which had caused losses for the government.

The Bandar Malaysia deal was previously touted as part of the 1MDB rationalisation plan to pare down its debt.

The 486-acre prime land in Sungai Besi had since been transferred and placed under the Finance Ministry.

TRX City said the government will now shelve its plan to sell the land.- Mkini