Here’s what one can do with 1MDB’s RM40b losses

A QUESTION OF BUSINESS | Even as 1MDB CEO Arul Kanda Kandasamy scurries around the country to assure voters that 1MDB is not missing money, everything is hunky-dory and boasting he has reduced debt from RM50 billion to about RM30 billion, it is still very clear that all is not well and 1MDB may have lost as much as RM40 billion already.

While Arul may think that he is gaining major traction with would-be voters through what he thinks is his bold, ballsy electioneering, he may be lulled into thinking that by the audience he preaches to, who are mostly BN supporters, and therefore are already converted and deliberately quite blind.

Despite all that bravado in front of friendly audiences, he has shown himself to be lacking “scrotal gumption”, to use Justice Mahadev Shankar’s wonderful choice of language, when he turned down my offer to have a public discussion on 1MDB after he called me a coward.

So how did Arul bring down the debt from RM50 billion to RM30 billion?

By selling power assets at a loss which was bought with bank loans in the first place of around RM10 billion. The sale extinguished that borrowing and further borrowings of about RM10 billion in the books of the power companies, all of whom took substantial loans to build their power stations. And he goes around boasting about this, the sale of the only solid assets 1MDB acquired and that too at an inflated price. Most of the rest of the assets cannot even be found.

First, some US$7 billion of 1MDB assets cannot be accounted for or verified. In other words, it has gone missing. Now who says this? Our own auditor-general in a report which has been classified as secret under the Official Secrets Act. Numerous press reports, one of which is here, quote this figure and this has not been denied or refuted to date.

Meantime, the US Department of Justice (DOJ), in an updated report, said that 1MDB officials and their associates had embezzled US$4.5 billion between 2009 and 2014, which it added further was laundered through the global financial systems, including in the US. That explains part of the missing money. It is the most extensive action brought under its Kleptocracy Asset Recovery Initiative.

The department said that the money was used for personal gain. They include purchasing luxury properties, artworks, a private jet, jewellery, funding a movie production company which produced movies like ‘The Wolf of Wall Street’. The luxury yacht, ‘The Equanimity’, which is said to belong to Malaysian businessperson Jho Low, was one of the assets on the list.

Jho Low, whose full name is Low Taek Jho, was portrayed as the mastermind of the money-laundering scheme in the DOJ lawsuit. Several other persons were named in the lawsuits, including Jho Low’s friend Riza Aziz, who is also the stepson of caretaker prime minister Najib Abdul Razak, several 1MDB officers, and an unnamed "Malaysian Official 1", who everyone but Arul knows is Najib himself.

Add to this figure of US$7 billion, or about RM28 billion, a sum of about RM12 billion which includes items such as bond mispricing of RM6 billion, overpayment for assets by RM3-4 billion and overpayment to financial advisers of about RM2 billion. A detailed explanation of how this was obtained is in this report, the first part of which I wrote. That makes a total of around RM40 billion at least.

10 things we can do with RM40b

Here are 10 things which we can do with the RM40 billion that 1MDB has lost. And remember, that the money was not strictly speaking lost but was embezzled and diverted for the enrichment of mainly a handful of individuals, stolen in other words by people who we really do not have to name again here.

1. Every household in Malaysia can get RM6,300, assuming that the average household has five people, making it six million households in a population of around 30 million people. This is an indication of how much each household in the country effectively bears for this alleged theft. Put in another way, every man, woman and child in Malaysia had over RM1,300 stolen from him or her - a theft of unprecedented proportions.

2. Enable 1.33 million local students to get degrees at government universities locally, assuming tuition costs and hostel expenses at RM10,000 per year for three years. This shows the kind of educational opportunity lost for our children, especially those of us who are poor.

3. Pay salaries of 80,000 teachers for 10 years, based on an average salary of RM50,000 a year. This indicates the possibilities for earnings enhancement foregone by the government.

4. Build 333 150-bed hospitals at a cost of RM800,000 per bed or 50,000 beds. Some estimates say that 30,000 beds in hospitals are required now. The 50,000 beds will more than meet current requirements. How much could have been done for medical care with that kind of money!

5. Build 800 schools at a cost of RM50 million accommodating 1,000 students each or 800,000 students in total, or 40 well-equipped universities at a cost of RM1 billion each.

6. Feed 100,000 families for 22 years, at RM50 per day for each family or an entire city of one million families (not people) for two years and two months. That’s a city bigger than Kuala Lumpur.

7. Ten million Modenas Kriss MR2 motorbikes. You can give one new motorcycle for every one of the six million households (assuming five to one household) in the country and still have four million motorcycles left over.

8. One million Proton Sagas. Every six households can get a Proton Saga for the amount of money stolen and squandered at 1MDB.

9. Forty yachts the equivalent of ‘The Equanimity’, or about 400 RM100 million pink diamond necklaces. The DOJ says ‘The Equanimity’ belongs to the mastermind behind 1MDB Jho Low, costs about RM1 billion and is one of the assets being seized which was bought with money stolen from 1MDB. It said that US$27.3 million was used to purchase a necklace for the wife of “Malaysian Official 1”; we all know who she is.

10. About 10 Kuala Lumpur City Centres, four Kuala Lumpur International Airports, two Putrajayas, nearly seven North-South Expressways or four-fifths of the cost of the MRT - plenty of infrastructure possibilities.

It is amazing that such wealth has been concentrated in the hands of a handful, who are now buying all kinds of luxuries because they have no idea what to do with the money. And there is no telling how much more will go into the hands of crooks and thieves if this government continues to be in power.

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P GUNASEGARAM will vote against 1MDB, Arul Kanda, Jho Low and all the officials and others who conspired in the RM40 billion loss for the rakyat and/or prolonged the agony for us all. No offence, Arul, it’s just a question of business. E-mail: t.p.guna@gmail.com. - Mkini