Call on Adenan to honour the 1963 Malaysia Agreement which guarantees Malaysians the right to enter Sarawak for the sole purpose of engaging in legitimate political activity in the 11th Sarawak state elections

The barring of the DAP Political Bureau Director and MP for Kluang, Liew Chin Tong, from entering Sarawak today bespeaks of two things:

Firstly, the continued abuse of power in the country  to deny to Malaysians the fundamental right of freedom of movement in their own country. This will make Malaysia another reason to be the laughing stock of the world where Malaysians dan visit Beijing, Moscow, Havana but not Kuching, Sibu or Miri.

DAP supports immigration autonomy for Sarawak and Sabah to protect the two states from being  swamped by West Malaysians in the employment market, but this is not designed to deny to Malaysians the fundamental right of freedom to travel in their own country.

Section 67 of the Immigration Act 1963 makes it very clear that there should be no bar on Malaysians entering Sarawak for the sole purpose of engaging in legitimate political activity, and there is nothing which is more of a “legitimate political activity” than the 11th Sarawak state general elections.

This is why the Prime Minister Datuk Seri Najib Razak is a frequent traveller to Sarawak – to engage in legitimate political activity in the 11th Sarawak state general election on May 7.

Secondly, the determination of the Sarawak Chief Minister, Tan Sri Adenan Satem to wipe out the Opposition gains made by DAP and PKR in the previous Sarawak state general elections in  2011 – which saw the  DAP winning 12 seats and PKR 3 seats.

Adenan is mobilising all  available resources and powers at his disposal to achieve his electoral objective, including the abuse of power in  the blanket ban on Pakatan Harapan leaders and MPs from entering Sarawak to carry out legitimate political activity in the Sarawak state general election.

He hopes to pulverise the Pakatan Harapan parties of DAP, PKR and Amanah in the May 7 polling day, and if possible, to win back every one of the 15  State Assembly seat lost to DAP and PKR in the last state election.

We all want to win and do not want to lose. But let us be democrats, first and last, to win elections through a clean, free, fair and democractic contest.

The mark of a democrat is one who is prepared to accept the verdict of the voters – that while everyone wants to win and does not want to lose, we are committed to a free, fair, clean and democratic contest and will not use undemocratic means like abuses of power under the law to achieve victory.

For this reason, I call on Adenan to lift the blanket ban on Pakatan Harapan leaders and MP from entering Sarawak witht the sole purpose of carrying out legitimate political activity in the 11th Sarawak election.

I hope that Adenan will honour the 1963 Malaysia Agreement which guarantees Malaysians the right to enter Sarawak for the sole purpose of engaging in legitimate political activity in  the 11th Sarawak state elections and announce the lifting of the blanket ban on Pakatan Harapan leaders and MP, especially as Adenan’s return as Sarawak Chief Minister and Sarawak Barisan Nasional as the Sarawak state government on May 7 is not questioned or challenged.

                This entry was posted on Monday, 18 April 2016, 7:13 am and is filed under
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Malaysia’s 1MDB and Abu Dhabi Feud Over Coming Bond Payment

By BRADLEY HOPE and  TOM WRIGHT

Wall Street Journal

April 18, 2016

Officials worry that a default could further undermine investor confidence in Malaysia

A dispute between sovereign-wealth funds from Malaysia and Abu Dhabi over missing billions of dollars is coming to a head and could roil currency and bond markets this week.

The funds are feuding over who must make a $50 million bond payment due Monday. Each is saying the other failed to meet its obligations and is refusing to pay, potentially setting off a chain reaction leading to billions of dollars of bond defaults.

The dispute is the latest chapter in the scandal involving 1Malaysia Development Bhd., known as 1MDB, which is under investigation in seven countries, including Malaysia. The Swiss Attorney General said he was investigating possible misappropriations of about $4 billion.

The 1MDB fund denies wrongdoing.

The Abu Dhabi fund, International Petroleum Investment Corp., or IPIC, guaranteed $3.5 billion of 1MDB’s bonds when they were issued in 2012. Last year as 1MDB grew short on cash, IPIC also agreed to give an emergency billion-dollar loan and to make interest payments on the same bonds. In return for IPIC taking over the debt, 1MDB agreed to transfer assets to the Abu Dhabi fund.

But negotiations have broken down recently. Last week, IPIC officially said that money sent by 1MDB to the Abu Dhabi fund as payment for the bond guarantee was never received. The money was sent to an offshore shell-company that was controlled by the same two people who ran IPIC and one of its investment companies, according to documents reviewed by The Wall Street Journal and people familiar with the matter.

The 1MDB fund last week sent a memo to Malaysia’s Ministry of Finance, which owns the fund, laying out the situation. The memo, reviewed by the Journal, said that IPIC had informally told 1MDB it wouldn’t be making an interest payment to bondholders of about $50 million on Monday. Malaysia could make the payment but, the memo argued, doing so would harm its negotiating position with IPIC. Attempts to reach 1MDB for comment on Monday were unsuccessful. Attempts to reach IPIC weren’t successful.

The negotiations have high stakes: Under IPIC’s interpretation of their deal, 1MDB and Malaysia’s Ministry of Finance owe about $6.5 billion to lenders, which includes the $3.5 billion principal of the bonds, interest and other payments, said the memo.

Officials at 1MDB told the Ministry of Finance that if a default comes to pass it could cause investors to sell Malaysia’s currency and bonds and damage the country’s reputation in global financial markets. Malaysia is currently marketing a government bond to be denominated in U.S. dollars, the memo said.

Cross-default clauses in other 1MDB agreements would also likely be triggered, putting the fund in default on several billion dollars more of debt, according to the memo viewed by the Journal. The Malaysian finance ministry owns 1MDB and the fund’s debts are considered quasi-sovereign bonds, meaning investors treated them as if they had the same risk as Malaysian government debt.

IPIC could also face difficulties with its own bonds, according to a person familiar with the matter.

The 1MDB fund said in the memo it has fulfilled its obligations and IPIC is required to make the payment. IPIC’s decision to publicly say it didn’t receive money from 1MDB for the bond guarantees means the debt agreement between 1MDB and IPIC is no longer feasible, the memo added.

The memo said that IPIC also believes the Malaysian fund still hasn’t given it the assets it promised in exchange for IPIC to make the bond payments.

It is still unclear whether IPIC or 1MDB will ultimately make the payment, but 1MDB is preparing for a default, according to the memo reviewed by the Journal. It has already hired a law firm and investigative firm to assist it with a restructuring, the memo shows. 1MDB last week sought permission from the Ministry of Finance and the Prime Minister to decide what to do on Monday, the memo added.

The dispute marks a further unraveling of a close relationship between Malaysia and the United Arab Emirates, both Muslim countries. Besides guaranteeing the 1MDB bonds, Abu Dhabi, which is the capital of the U.A.E., agreed to pay for half of a $6 billion real-estate development project in the Malaysian capital led by 1MDB. That project never got off the ground and Abu Dhabi never sent any money.

Malaysia, like many emerging-market countries that are dependent on commodity exports, has struggled after prices of oil and other natural resources collapsed. Investors have pulled cash from these economies and sent currencies down. The Malaysian ringgit lost more than half its strength between July 2011 and September 2015, but since then has rallied about 12%.

The dispute between the two funds has been brewing for months as the 1MDB scandal grew. Abu Dhabi has been trying to get a handle on what happened and on its exposure to 1MDB, according to the person familiar with the matter. Last year, the government removed from office the two men who ran IPIC and its investment companies.

IPIC said in a statement to the London Stock Exchange last week that it was aware of media reports that 1MDB had sent money to a company called “Aabar Investments PJS Ltd.” IPIC said in the statement that it has a subsidiary called Aabar Investments PJS, but that the similarly named company “was not an entity within either corporate group.”

The Wall Street Journal, citing people familiar with the matter and bank-transfer documents, earlier reported how the 1MDB fund sent $2.4 billion to the imitation Aabar, which was set up in the British Virgin Islands and later closed.

A report released last week by a Malaysian parliamentary committee inquiry into 1MDB put the amount transferred to the imitation Aabar at $3.5 billion. About $681 million of this money later flowed via a circuitous route into the private account of Najib Razak, the Malaysian prime minister, the Journal has also reported, citing people familiar with the investigations.

Mr. Najib has denied wrongdoing or taking money for personal gain.

Malaysia’s attorney general said the money that entered his account was a legal donation from Saudi Arabia’s royal family and that most of it was returned, and he cleared Mr. Najib of wrongdoing.

The 1MDB fund says it never sent money to Mr. Najib’s accounts.

The standoff with Abu Dhabi puts a spotlight on Mr. Najib’s role in 1MDB and in the government. He founded the fund and is chairman of its board of advisers. He is also finance minister, meaning he will ultimately decide whether the payments are made or not.

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1MDB dispute intensifies as Abu Dhabi ends relationship

Jeevan Vasagar in Singapore

Financial Times

April 18, 2016

The dispute between an Abu Dhabi sovereign fund and Malaysia’s troubled state fund 1MDB over more than $1bn in missing payments intensified on Monday when the emirates investment vehicle said its Malaysian counterpart was “in default” on an agreement between the two and terminated the deal.

The Gulf emirate’s International Petroleum Investment Company (Ipic) ended its relationship with its Southeast Asian counterpart in a filing to the London Stock Exchange on Monday.The Abu Dhabi fund said 1MDB and Malaysia’s ministry of finance were in default on the deal, including an obligation to pay $1.1bn plus interest, and that 1MDB continued to be bound by its commitments under the agreement.

The dispute relates to a pair of 1MDB bond issues in 2012, which were guaranteed by Ipic. The two funds entered into an agreement last year in which Ipic provided a $1bn cash bailout and agreed to make interest payments on the bonds. In return 1MDB agreed to transfer assets to Ipic.

Ipic was now considering options to remedy the alleged default, including referring the matter to the appropriate dispute resolution forum, it added in its regulatory filing. The move is the latest twist in an affair that has buffeted Malaysia’s government and prompted investigations in at least five countries including the US and Switzerland.

Swiss authorities, who say they have found “serious indications” that about $4bn has been misappropriated from Malaysian state companies, widened their investigation last week to look at the roles of two former officials with responsibility for Abu Dhabi sovereign funds.

For its part, 1MDB said in a that interest was payable on Monday on its $1.75bn 2022 bonds. The Malaysian fund said that a “dispute has recently arisen” between the two funds and that Ipic had not paid the interest.

Malaysia’s leaders are battling severe international pressure over alleged large-scale corruption at the country’s state development fund

The 1MDB statement went on: “1MDB wishes to make clear that it and its group entities will meet all of their other obligations under any other financing arrangements and have ample liquidity to do so.”

Malaysia’s finance ministry said in a statement on Monday that it would “continue to honour all of its outstanding commitments in the financial markets”.

Christian de Guzman, a credit analyst at Moody’s in Singapore, said: “There’s a lot of uncertainty about what’s going on, but one thing is clear — progress on 1MDB’s debt rationalisation has been cast into doubt.”

Bankers in Kuala Lumpur say that while the alleged default is unlikely to threaten Malaysia’s sovereign rating, as the risk from 1MDB is already factored in, it will hamper efforts to contain the political scandal around the affair.

Najib Razak, Malaysia’s prime minister, who heads 1MDB’s advisory board, has battled allegations centred on $681m transferred to his personal bank account, which critics claim is linked to 1MDB. Both Mr Najib and 1MDB deny wrongdoing and the prime minister has been cleared by Malaysia’s attorney-general.

Nazir Razak, Mr Najib’s brother, announced on Monday that he was taking a voluntary leave of absence from his role as chairman of CIMB, Malaysia’s second-biggest bank by assets, while a review took place into transfers into his own personal account. The move follows reports that he received $7m ahead of the 2013 elections in Malaysia.

Probes into suspicious transactions at the Malaysian fund have threatened to expose loopholes in global finance

The bank chairman said at a press conference that he had done nothing illegal. “My brother asked for some help and I agreed after I assessed that it would not involve anything illegal or misusing my position at CIMB, or any inappropriate use of CIMB resources,” he said.

1MDB has said it has paid about $1.4bn to Ipic but this has not been recorded as having been received on Ipic’s financial statements.

Ipic and its Aabar subsidiary issued a London Stock Exchange statement last week in which they denied ownership of Aabar Investments PJS Ltd, a company that received billions of dollars in payments from 1MDB.

Ipic and Aabar said in the filing that they were aware of reports that “substantial payments” were made to that company, which is incorporated in the British Virgin Islands. They also said they had received no payments from the company and received no liabilities on its behalf.

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1MDB Expects Bondholders to Be Paid Amid Dispute With Partner

Shamim Adam

Bloomberg

April 19, 2016

Malaysia’s debt-ridden state investment fund, which is facing the risk of a bond default, said it expects an interest payment to be made as it enters the start of a five-day grace period. The ringgit extended gains.

1Malaysia Development Bhd. has a cash surplus of about $550 million, or 11 times the $50 million amount due on interest that was payable on April 18, President Arul Kanda said in a Bloomberg Television Malaysia interview on Tuesday. The company is in dispute with Abu Dhabi’s sovereign wealth fund, which earlier agreed to pay interest on the bonds, and Kanda said he expects an “amicable resolution.”

The threat of default is the latest episode in financial scandals that have rocked 1MDB, already a target of global investigations into allegations of money laundering and embezzlement. Prices on its dollar bonds plunged on Monday after Abu Dhabi’s International Petroleum Investment Co. or IPIC announced an end of its debt obligations to 1MDB after failure by the Malaysian fund to make payment of more than $1 billion in connection with a loan. IPIC declined further comment beyond its Monday statement.

“It is important to maintain a sense of perspective here,” Kanda said. “We are in direct contact with IPIC and we are seeking to work through these differences to come to a resolution.”

IPIC Agreement

IPIC entered an agreement with 1MDB in May 2015 where it would provide the Malaysian fund $1 billion to settle some liabilities in exchange for a transfer of assets, as well as assume interest obligations on $3.5 billion of debt. 1MDB and its shareholder, Malaysia’s finance ministry, “are in default” on the terms of the binding term sheet with IPIC and its unit, the Abu Dhabi fund said, adding that it had met all its obligations to date.

“If IPIC doesn’t pay in terms of the binding term sheet, we will then have to assess our position because clearly it is originally our debt obligation,” Kanda said. “It is always open to us to settle that issue should we decide at the right time to do so. While there is concern around investor sentiment, I think the quantum and our ability to pay is not in question.”

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1MDB in default, declares Gulf fund

Leslie Lopez Regional Correspondent In Kuala Lumpur

Straits Times

19th April 2016

$4.7b bond raised by 1MDB thrown into limbo as KL-Abu Dhabi row escalates

The dispute between Abu Dhabi’s second-largest wealth fund and Malaysia’s state-owned 1Malaysia Development Berhad escalated yesterday after the Arab emirate group declared Kuala Lumpur’s fund was in default of a multibillion-dollar financial assistance arrangement.

The declaration by Abu Dhabi’s International Petroleum Investment Company, or IPIC, against 1MDB immediately throws into limbo a complex US$3.5 billion (S$4.7 billion) international bond the Malaysian fund raised in May 2012 with full, iron-clad guarantees from the tiny oil-rich emirate’s business entities.

And because of the protracted nature of the disagreement, financial executives tracking developments in the bitter feud say that international investors, who subscribed to the bonds that were arranged by international banking group Goldman Sachs, may have to wait a long time before they are compensated.

“This is going to be tied up (in legal fights). Neither party is going to step up to settle with bondholders because they are holding on to two very different interpretations of agreements and events,” said a senior chief executive of a Malaysian-based financial institution, who has had dealings with 1MDB and IPIC.

As reported by The Straits Times yesterday, the feud between the two state investors revolves around fund transfers of roughly US$3.54 billion that 1MDB says it made to units of IPIC under obligation of the May 2012 bond agreement.

But IPIC declared last week that it never received the money. That move quickly brought into focus a US$50 million instalment payment on the 1MDB bonds, which falls due at noon today and monies IPIC must honour under the bond agreement.

In a filing to the London Stock Exchange yesterday, IPIC made no mention of the US$50 million payment. It said that it had declared a default on grounds that 1MDB and the Malaysian government had failed to meet obligations under the financial assistance plan and honour payments of “US$1.1 billion plus interest” that were now in default.

The Abu Dhabi fund noted that it “was now considering all its options to remedy the default, including referring the matter to the appropriate dispute resolution forum”.

1MDB issued an equally forceful statement, declaring that under an agreement in early June last year, IPIC promised to honour all interest payments under the bond agreement in exchange “for certain undertakings to transfer assets and cash to IPIC”. 1MDB added that a “dispute has arisen” over obligations that both parties must honour under the agreement and “understands that IPIC has not paid the interest”.

In clear reference that it would be challenging IPIC’s declaration of default, 1MDB said it wished to “make clear that it and its group entities would meet all of their obligations under any other financing arrangements”. Just hours before IPIC’s default declaration today, 1MDB issued a separate statement claiming it stood on solid financial ground, noting that it had repaid all its bank debt and held cash surpluses of around RM2.3 billion (S$800 million).

But there are serious implications for the Malaysian government in the feud. 1MDB senior management had advised Prime Minister Najib Razak that a default on the US$3.5 billion bond issue was likely to trigger so-called cross-defaults on the fund’s other commitments, which stand at about US$5.1 billion.

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Confidant of Malaysia Prime Minister Najib Had Central Role at Troubled 1MDB Fund

By TOM WRIGHT and  BRADLEY HOPE

Wall Street Journal

April 18, 2016

Jho Low controlled hundreds of millions of dollars of money thanks to network of contacts, amassed riches himself

In March 2013, a young Malaysian financier sent a heads-up to an employee at a Kuala Lumpur bank that “681 American pies” would soon be arriving from overseas.

The sender, Jho Low, emphasized the need for secrecy, according to a transcript of BlackBerry instant messages reviewed by The Wall Street Journal. The employee, he wrote, should tell the bank’s chief executive that “PM” didn’t want his name, address or identity-card number to appear on the transaction.

Within days, $681 million arrived in two transfers at AmBank Bhd. to be deposited in the personal account of Malaysian Prime Minister Najib Razak, according to documents seen by the Journal.

Global investigators believe those transfers represent a portion of the money diverted from a Malaysian state economic-development fund called 1MDB over several years, according to people familiar with probes in two countries. As they dig deeper, investigators have increased their estimates of siphoned funds to as much as $6 billion, a sharp increase from a few months ago, said a person familiar with one country’s probe.

Mr. Low has been in Mr. Najib’s inner circle, a family friend, according to people who know the prime minister. At several pivotal moments, Mr. Low’s actions, influence and connections have been vital to the alleged diversion of 1MDB funds, a Journal examination found. Investigators describe Mr. Low as playing a central role, with the prime minister his “enabler,” according to the people familiar with probes in two countries.

In addition, according to these people and to investigative documents, Mr. Low himself was the recipient of 1MDB funds, with control over hundreds of millions of dollars.

Mr. Low has denied any wrongdoing. He also has said he was only an occasional and unofficial adviser to 1MDB, which stands for 1Malaysia Development Bhd. The fund has denied wrongdoing as well, and has said it didn’t pay any money to Mr. Najib’s accounts.

Mr. Najib has said he did nothing wrong and derived no personal gain from transfers into his account. Earlier this year, Malaysia’s attorney general said the $681 million deposited in the prime minister’s account was a legal donation from a member of the Saudi Arabian royal family, most of which was later returned, and cleared Mr. Najib of wrongdoing.

AmBank didn’t respond to a request for comment.

As 1MDB sought partners for its investments, Mr. Low provided business connections in Saudi Arabia and the United Arab Emirates, some of them cultivated in his student years. Global investigators believe that some of these contacts ultimately became part of the diversion of 1MDB money via a web of offshore companies registered in lightly regulated places such as the British Virgin Islands.

Along the way, Mr. Low, 34 years old, appears to have amassed riches as some 1MDB money landed in accounts held by him and members of his family, according to bank records and people familiar with investigations. He became a jet-setter, partying in Las Vegas nightclubs, buying luxury properties on both U.S. coasts, amassing a collection of modern art and befriending Hollywood celebrities.

One was Leonardo DiCaprio, whom Mr. Low introduced to a stepson of Prime Minister Najib, named Riza Aziz. The connection helped a film company the stepson co-owned produce the 2013 DiCaprio film “The Wolf of Wall Street,” which was financed with money that originated with 1MDB, according to documents and people familiar with investigations in two countries.

The production company has said it had no reason to believe the source of its financing was irregular and has said it is seeking to repay the financing. Mr. DiCaprio and his representatives didn’t respond to requests for comment.

Mr. Low, whose full name is Low Taek Jho, is soft-spoken, portly and charming, people who know him say. He grew up in the Malaysian state of Penang, where his businessman father was affluent enough to send him to the elite Harrow school in the U.K. and the undergraduate program at the University of Pennsylvania’s Wharton School.

At Wharton, the young Mr. Low cast himself as a kind of “prince,” said a person who studied with him. Once, to impress visiting friends, he borrowed a yacht berthed in Penang from a rich friend of his father’s and replaced the photos on board with those of his own family, said another acquaintance.

‘Win tons’ of money

While at Wharton, Mr. Low cut an ostentatious figure, renting a convertible Lexus and organizing an elaborate party at a nightclub, according to the fellow student at the time. There he set up his first company, Wynton Group. He called the name a play on “win tons” of money, one associate said.

Mr. Low drew on school connections from Abu Dhabi, Saudi Arabia and Kuwait to finance an initial $25 million of capital, he told The Star, a Malaysian newspaper, in 2010.

It was in London that he met Mr. Najib’s stepson, Mr. Aziz, who is a few years his senior. Their friendship developed after they spent time together among wealthy Malaysians in a gated complex in the exclusive Kensington neighborhood, where Mr. Najib’s family has a house, according to one of the people who know Mr. Low.

He became close to his friend’s mother, Rosmah Mansor. At the time, her second husband, Mr. Najib, was deputy prime minister of Malaysia. At a party at Mr. Najib’s official residence in Kuala Lumpur that included several Abu Dhabi officials, Ms. Rosmah thanked Mr. Low for bringing Middle Eastern investment to Malaysia, according to a person who was there. A lawyer for Ms. Rosmah declined to comment.

Mr. Najib became prime minister in 2009. That year, Mr. Low played a role in setting up a sovereign-wealth fund for the oil-rich state of Terengganu in northeastern Malaysia.

Soon after, the state’s sultan decided not to progress with the fund, which already had raised $1.7 billion through Islamic bonds. Mr. Najib turned the fund into a federal entity: 1MDB. He became chairman of its board of advisers, a perch from which he had extensive influence over the fund’s operations, according to 1MDB board minutes.

Mr. Najib announced the launch of 1MDB while on a state visit to Abu Dhabi in 2009, promising to lure foreign investment and create jobs for Malaysians. Mr. Low, not yet 30, also traveled to the United Arab Emirates at the time and projected the air of a “minister of investments,” said a Dubai-based banker who met him.

Mr. Low turned to his network of Middle Eastern contacts to find partners for the fund’s investment projects. One of 1MDB’s first joint ventures was with PetroSaudi International Ltd., an oil company part-owned by a Saudi prince.

Mr. Low facilitated the transaction and, although an informal adviser to 1MDB, represented the prince at a 1MDB board meeting in 2009 that voted on the formation of the joint venture, according to testimony by members of 1MDB’s management and board of directors to a Malaysian parliamentary committee.

The venture’s stated purpose was to invest in energy projects. The Malaysian parliamentary committee’s report found, however, that about $1 billion in 1MDB money meant for the joint venture was instead sent to the bank account of another company.

That company, Good Star Ltd., was set up by Mr. Low and registered in the Seychelles, said a person aware of 1MDB’s dealings. Then, between 2011 and 2013, a total of $529 million moved from Good Star into a corporate bank account Mr. Low controlled in Singapore, according to a Singapore police investigation.

A lawyer for PetroSaudi said all joint-venture funds were properly accounted for, and all capital 1MDB invested in the venture has been returned.

From Good Star, according to global investigation documents, Mr. Low sent most of the $529 million to various accounts in Singapore, Luxembourg, Switzerland and Malaysia, several of them held by family members, including his father, Low Hock Peng. Attempts to reach the elder Mr. Low were unsuccessful.

Mr. Low, the son, went on a spending spree from those accounts, bank records indicate. For instance, they show that in a series of transactions in September 2012, he sent out millions of dollars in what appear to be payments to air-charter companies and casinos in the U.S., including $4 million in transfers to Las Vegas Sands.

By that time, Mr. Low’s name was popping up in tabloid reports. One said he laid out hundreds of thousands of dollars at a New York nightclub, including sending bottles of Cristal champagne to actress Lindsay Lohan’s table, and lived in a $100,000-a-month Manhattan apartment.

Mr. Low claimed his lifestyle was paid for by his rich friends from Harrow and Wharton. In the interview with The Star in Malaysia, he described himself as a “concierge service” for his associates.

Meanwhile, he continued pursuing business in the Middle East. In 2011, Mr. Low teamed up with an Abu Dhabi state-owned fund, Aabar Investments PJS, in an unsuccessful bid for a group of luxury hotels in London, including Claridge’s, according to documents from a subsequent U.K. court case.

A year later, Aabar and 1MDB entered into their own arrangement. Aabar’s parent, an Abu Dhabi sovereign-wealth fund, guaranteed bonds issued by 1MDB. In return, 1MDB agreed to make a payment to Aabar as collateral for the risk, according to 1MDB financial statements.

Rather than send money to Aabar, however, the 1MDB fund ended up transferring $3.5 billion to a different company with a name nearly identical to Aabar’s, according to the report by Malaysia’s parliamentary committee.

Some of that money in turn was transferred, via intermediaries, to a shell company called Tanore Finance Corp., registered in the British Virgin Islands, investigators in two countries believe.

The beneficial owner of Tanore when it was first set up was Tan Kim Loong, a young Malaysian business associate of Mr. Low’s, according to people familiar with the matter. Attempts to reach Mr. Tan were unsuccessful.

Global investigators believe it was from Tanore that $681 million was transferred to Malaysian Prime Minister Najib’s accounts at AmBank in March 2013, according to the people familiar with the investigations.

Restricted access

In all, more than $1 billion was deposited in the prime minister’s accounts over several years, including $200 million from a Saudi individual and the Saudi finance ministry, according to Malaysian investigative documents. Last week, the kingdom’s foreign minister told a TV interviewer he was aware of a Saudi donation, without giving details such as the donor, date or size.

Mr. Low, in his March 2013 instant messages to the AmBank employee in Kuala Lumpur, wrote that access to the account inside the bank “shld also be restricted n tracked so if someone took pic n access the a/c, we will know.”

He and the bank employee discussed moving the money in several transfers to lessen the impact such a large inflow of dollars might have on Malaysia’s currency, the ringgit. The AmBank employee didn’t respond to a request for comment.

Later, Mr. Najib sent millions of dollars from the account to local politicians ahead of national elections in the spring of 2013, which his party narrowly won. Mr. Low helped campaign in Penang, his home state, and directed how the political financing was spent, according to a politician in Malaysia’s ruling coalition.

The prime minister, over a few years, also spent at least $15 million of money linked to 1MDB on personal expenses, including jewelry and clothes, according to bank records reviewed by the Journal.

Mr. Low, too, continued to spend lavishly. He bought multimillion-dollar homes in New York and Los Angeles, using shell companies, and later resold them to a company controlled by the prime minister’s stepson, according to sales records reviewed by the Journal and people familiar with the matter.

In 2013, Mr. Low bought a 7,718-square-foot penthouse in Singapore for more than $30 million and a smaller apartment in the same complex, according to real-estate records.

He became a major collector of 20th-century art, amassing what dealers consider to be a collection worth $300 million.

He also donated millions of dollars to a panther conservation group, a cancer hospital and the United Nations.

In 2014, when Mr. Low expressed interest in purchasing Reebok from Adidas AG, he told the Journal in an interview that his family’s wealth stood at $1.75 billion, the result of a fortune built in Thailand in the 1960s and 1970s by his Chinese-born grandfather.

In recent months, Mr. Low has moved to liquidate some of his assets. Earlier this year, he sold a Picasso and Monet at a combined loss of millions of dollars, dealers say.

Singapore authorities have frozen millions of dollars Mr. Low held at the Singapore branch of Swiss private bank BSI SA, according to investigation documents. The bank declined to comment.

Global investigators have had a hard time tracking down the peripatetic Mr. Low. according to those familiar with the probes. He recently has traveled between Abu Dhabi, Hong Kong, Taipei and London, according to people familiar with the matter. At times he has traveled for several days on a 300-foot yacht called Equanimity, said people familiar with his movements. It isn’t clear who owns it.

Last summer, when the 1MDB scandal was just heating up, Mr. Low couldn’t be found for several days, said people who tried to reach him. They later learned he was on an Arctic expedition.

—Kelly Crow contributed to this article.

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Graft denials come under strain in Malaysia fund scandal

Yahoo7 News

AFP

April 19, 2016

Kuala Lumpur (AFP) – Malaysia’s prime minister and the company he founded, 1MDB, have weathered a year-long barrage of corruption allegations with nothing-to-see-here assurances, but a string of recent revelations is placing those denials under growing strain.

On Monday an Abu Dhabi sovereign-wealth fund which was helping 1MDB recover from massive debts abruptly withdrew its safety net, declaring the Malaysian state-owned company in default on a $1.1 billion loan.

The move centres on suspicions that 1MDB — rather than repay the loan to the Abu Dhabi fund, International Petroleum Investment Co (IPIC) — instead diverted the money, according to a Wall Street Journal report.

The dispute caps a string of recent revelations that have severely undermined claims by 1MDB — short for 1Malaysia Development Berhad — that its finances are in order and no graft occurred.

The scandal engulfing 1MDB and Prime Minister Najib Razak, who founded the company in 2009 to fund development projects, is staggering in its scale and complexity.

1MDB ran up debts of more than $12 billion to fund a series of questionable acquisitions.

But accusations began emerging last year that billions were looted from 1MDB in a vast campaign of international embezzlement and money-laundering that has triggered investigations by several countries stretching from Singapore to the United States.

Najib, who chairs 1MDB’s advisory board, and the company have repeatedly denied wrongdoing.

– Confirming suspicions –

But the IPIC row and other recent revelations have suggested otherwise and could offer foreign investigators fresh ammunition, said James Chin, a Malaysia analyst at the University of Tasmania.

“This all shows quite clearly that not only was 1MDB diverting money but that this was done clearly in the name of the prime minister. It’s very damaging,” he said.

1MDB’s denials began to unravel two weeks ago when a Malaysian parliamentary panel said the fund made more than $3 billion in unapproved payments to a now-dissolved British Virgin Islands company.

The report also indicated Najib’s close involvement in key 1MDB decisions.

IPIC had agreed in 2012 to guarantee $3.5 billion in 1MDB bonds, lend the company more than a billion dollars, and make interest payments on the bonds.

1MDB was supposed to repay the loan through an IPIC subsidiary, Aabar Investments PJS, but IPIC last week revealed for the first time that it never received the money.

“IPIC and Aabar… are considering their options in relation to this dispute, including referring the matter to the appropriate dispute resolution forum,” the Abu Dhabi fund said in a statement announcing the default.

1MDB insists that it paid the money to a British Virgin Islands entity with a nearly identical name to Aabar’s.

But a Wall Street Journal investigative report has alleged it was a fake shell company through which money was funnelled to Najib and others.

A series of Journal reports starting last year have said Najib received more than $1 billion in mysterious overseas payments from 2011-2013.

After initially denying the claims, Najib admitted receiving $681 million in 2013 but denies it came from 1MDB. He says it was a gift from the Saudi royal family, most of which he returned.

Saudi Arabia’s foreign minister confirmed last week the money came from his country, but only after weeks of silence as doubts over Najib’s claim grew.

– ‘Spectacular failure’ –

The scandals have triggered demands — including in massive Kuala Lumpur protests last August — for Najib’s resignation and transparent investigations.

Najib has stood firm, using his control of Malaysia’s powerful ruling party to purge critics in the government and scuttle domestic investigations.

Najib’s position is not seen as under imminent threat, but he could face renewed public pressure if the government is forced to step in and settle 1MDB’s massive debts.

The finance ministry, which owns 1MDB, said late Monday it would “continue to honour all of its outstanding commitments”, fuelling speculation of a 1MDB bailout that Najib had vowed would never happen.

“We now know clearly that with the spectacular failure of the (IPIC) deal, the Malaysian taxpayers will be called upon to foot 1MDB?s bills,” opposition lawmaker Tony Pua said.

Any bailout could further pressure Malaysian finances amid plummeting oil revenues, slowing growth and concerns over the country’s fiscal position which last year caused the ringgit currency to plunge.

“This definitely puts another dent in Malaysia’s reputation. It’s a bigger problem for Najib now because this is clearly in his hands now,” said political analyst Wan Saiful Wan Jan.

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Malaysia faces bailout question after $1 billion spat with Abu Dhabi fund

By Saeed Azhar and Umesh Desai

Reuters

EuroNews

19/04/2016

(Reuters) – The Malaysian government on Tuesday was facing the prospect of having to bail out the scandal-tainted state fund 1MDB, after a $4.6 billion (£3.2 billion) debt deal with an Abu Dhabi sovereign fund collapsed this week.

The International Petroleum Investment Company (IPIC) said on Monday that 1Malaysia Development Berhad’s (1MDB) had failed to make a $1.1 billion payment, and so was terminating last June’s debt deal.

“The government wouldn’t want to risk having a default on its books, so if it came down to it, they would want to keep a clean record,” said Krystal Tan, a Singapore-based economist at research firm Capital Economics, talking about risk of a bailout for 1MDB.

Any government intervention would pile more pressure on Prime Minister Najib Razak, who founded 1MDB and is on its advisory board. He has faced calls to step down over allegations of graft and mismanagement at the fund.

“It’s (agreement with IPIC) failure not only now places 1MDB itself at risk, but now involves a bailout by the Ministry of Finance,” opposition leader Tony Pua said in a statement.

The Malaysian finance ministry is the sole shareholder of 1MDB.

“He (Najib) must explain how is 1MDB going to fund the immediate repayment of $1.1 billion demanded by IPIC.”

The credit market is pricing in the uncertainty.

Malaysia’s Credit Default Swaps, the cost of insuring against default, has been underperforming the broad market since Monday. The 5-year contract jumped by 10 basis points on Tuesday and has risen about 15 basis points since IPIC’s announcement.

CROSS-DEFAULT FEARS

The Malaysian government will have to come to 1MDB’s aid, said a senior politician with the ruling United Malays National Organisation (UMNO), who did not want to be identified.

The UAE’s termination of the $4.6 billion deal with 1MDB “poses an issue of cross-default”, he said. Cross-default is a provision in a bond or loan agreement that puts borrowers in default if they default on another obligation.

Malaysia has total overseas debts of $98 billion, of which $47 billion is held by the central bank and the government, according to Thomson Reuters data.

The Malaysian government is currently in the midst of raising a $1.2 billion sovereign Islamic bond.

The ministry of finance said in a statement it would “continue to honour all of its outstanding commitments”.

One of 1MDB’s last major outstanding liabilities is a $3 billion bond, arranged by Goldman Sachs, which carries a letter of support from the federal government.

The fund, launched by Prime Minister Najib Razak in 2009, amassed over 50 billion ringgit (£9 billion) in debt buying energy and real estate assets through projects with companies in Saudi Arabia, the UAE and other Gulf countries.

It sold off most off these assets to state-owned Chinese companies late last year.

“It is difficult to accurately ascertain the exact level of debt that 1MDB has now following the successful sale of various assets,” said Chia Shuhui, Asia Analyst for BMI Research.

Regardless of the amount, a government bailout of the fund “will have a negative impact on the government’s fiscal position”, he said.

Oil exporter Malaysia is aiming to keep its fiscal deficit, already under pressure from slower growth and lower crude prices, at 3.1 percent of gross domestic product.

OFFSHORE ACCOUNTS

1MDB is at the centre of money-laundering and criminal investigations in the United States, Switzerland, Singapore and Luxembourg.

A Malaysian parliament inquiry found that billions of dollars had been sent to offshore accounts without the approval of its board.

One of those offshore accounts was for a company called Aabar Investments PJS Ltd in the British Virgin Islands, which received payments of $3.5 billion from 1MDB that were meant for IPIC. The Abu Dhabi fund said Aabar Investments did not belong to it.

Najib has been under pressure to step down after reports claimed that $681 million, deposited into his personal bank account, came from 1MDB. A government-appointed Attorney General cleared Najib of any criminal offence or corruption, and said the money was a donation from the Saudi royal family.

Saudi Foreign Minister Adel Al-Jubeir said last week the funds wired into Najib’s personal bank account were a “genuine” donation originating from Saudi Arabia.

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Malaysia is big loser from Abu Dhabi fight

By Una Galani

Breakingviews

Reuters

April 19, 2016

Malaysia’s effort to contain the financial fallout from its wayward sovereign fund is unravelling. Scandal-hit 1Malaysia Development Berhad is embroiled in a scrap with a state-backed investor in Abu Dhabi over a $4.5 billion debt deal. The risk for the southeast Asian nation is that its finance ministry will have to bear the burden. That’s exactly the outcome the fund championed by Prime Minister Najib Razak has been trying to avoid.

To recap, 1MDB racked up massive debts on a string of questionable deals. After it ran into trouble, it negotiated a lifeline last year from International Petroleum Investment Company, which is backed by Abu Dhabi royal Sheikh Mansour bin Zayed al-Nahyan.

IPIC agreed to lend 1MDB $1 billion and assume responsibility for bonds worth $3.5 billion. The quid pro quo was that IPIC would receive assets of equivalent value from the Malaysian fund by the end of June this year.

Now IPIC has missed an interest payment on 1MDB’s bonds. The details are sketchy, but the Gulf fund says it doesn’t have to honour the debt agreement because 1MDB hasn’t fulfilled its side of the deal.

In the end, both parties look foolish. After all, 1MDB’s financial woes owe much to alleged high-level corruption involving former officials on both sides. The fight looks set to end up in the courts.

IPIC’s apparent decision to walk away from debt it jointly guaranteed with 1MDB – and the subsequent settlement – undermines the widely-held view that Abu Dhabi’s word is water-tight. That matters because IPIC and its subsidiaries rely on external funding.

Meanwhile, Malaysia should be able to cope with the financial consequences. Though 1MDB owed almost $11 billion at the height of its problems, it has repaid all its bank debt and sold assets to reduce the overall burden.

The fund and the government say they will honour their other commitments, which should remove doubts about 1MDB’s last big outstanding liability, a $3 billion bond which already carries a letter of state support.

Yet if the government ends up on the hook, Najib will no longer be able argue that the fund he championed managed to clean up after itself. That will give the Prime Minister’s many critics another stick with which to beat him.

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Malaysia’s 1MDB at Risk of Default as Partner Ends Bond Support

Shamim Adam

Bloomberg

April 18, 2016

Malaysia’s troubled state investment company faces the threat of default after a dispute with an Abu Dhabi sovereign wealth fund leaves bondholders waiting for an interest payment due Monday. 1MDB’s dollar bonds slumped.

Abu Dhabi’s International Petroleum Investment Co. said its obligations of financial support to 1Malaysia Development Bhd. have ended after the company and Malaysia’s finance ministry failed to pay it more than $1 billion, according to a stock exchange filing. IPIC, which agreed last year to pay interest for 1MDB bonds that it guaranteed, didn’t mention the Monday payment due.

1MDB said bondholders haven’t been paid, and didn’t say if it would do so. The Malaysian finance ministry said it had been informed by 1MDB of the dispute, and “wishes to make clear that it will continue to honor all of its outstanding commitments in the financial markets.”

Failure for either side to fulfill the debt obligation could result in the first default for 1MDB since its inception in 2009, deepening its troubles at a time when it’s the target of global investigations into allegations of money laundering and embezzlement. Authorities from the U.S. to Switzerland are trying to determine if some of the billions of dollars that 1MDB raised were siphoned out inappropriately.

‘In Default’

IPIC entered an agreement with 1MDB in May 2015 where it would provide the Malaysian fund $1 billion to settle some liabilities in exchange for a transfer of assets, as well as assume interest obligations on $3.5 billion of debt. 1MDB and its shareholder, Malaysia’s finance ministry, “are in default” on the terms of the binding term sheet with IPIC and its unit, the Abu Dhabi fund said, adding that it has met all its obligations to date.

“1MDB and MOF continue to be bound by their respective obligations under the terms of the Binding Term Sheet,” IPIC said Monday. That includes indemnifying IPIC and its unit Aabar Investments PJS for any claims against it over guarantees it gave for bonds issued by 1MDB, it said.

1MDB amassed more than 50 billion ringgit ($12.7 billion) of debt over six years, using some of it to buy energy assets, including joint ventures with companies in Saudi Arabia and Abu Dhabi. 1MDB said in a separate statement on Monday it has repaid all short-term and bank borrowings, and has a 2.3 billion ringgit surplus.

Ample Liquidity

“1MDB wishes to make clear that it and its group entities will meet all of their other obligations under any other financing arrangements and have ample liquidity to do so,” it said.

1MDB’s dollar bond prices slumped on Monday to the lowest since November, according to Bloomberg-compiled prices. The yield rose 252 basis points to 8.27 percent. It was trading around 5.7 percent last week from almost 10 percent in October as graft allegations intensified.

IPIC last week denied ownership of a company known as Aabar Investments PJS Limited or Aabar BVI, which 1MDB said it sent payments of $3.5 billion intended for the Abu Dhabi fund. That came after a report by a Malaysian parliamentary committee this month that identified at least $4.2 billion of questionable transactions by 1MDB including those that involved the Abu Dhabi companies.

1MDB, whose advisory board is chaired by Prime Minister Najib Razak, has consistently denied any wrongdoing.

Islamic Bonds

The conflict with IPIC comes as Malaysia plans to sell as much as $1.5 billion of global Islamic bonds. The marketing of the notes started last week and would likely have maturities of 10 and 30 years, according to two people familiar with the matter.

Malaysia’s central bank warned the government as early as 2014 of risks to the financial system from 1MDB, Governor Zeti Akhtar Aziz said in an interview in Washington on Saturday. Bank Negara Malaysia issued two memorandums to the finance ministry, the sole shareholder, flagging the dangers of the fund’s mounting debt, Zeti said. She didn’t say how the ministry responded.

$681 Million Donation

The probes come amid a separate political scandal over a $681 million donation from the Saudi royal family that appeared in Najib’s bank accounts before the general election in 2013. Najib has denied any wrongdoing over the donation and the attorney-general has cleared him of any graft.

1MDB’s woes, along with questions over the money in Najib’s account have created the biggest threat to the premier since he came to power in 2009, though he has retained the support of the bulk of senior officials in the ruling coalition.

CIMB Group Holdings Bhd. said its Chairman Nazir Razak, who’s the prime minister’s younger brother, is taking a leave of absence as the lender reviews his role in distributing funds to politicians before elections three years ago. Nazir confirmed to reporters on Monday a report in the Wall Street Journal that he helped his brother disburse $7 million of funds to ruling party politicians.

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Malaysia’s 1MDB defaults on US$1b loan, says Abu Dhabi fund

19 Apr 2016

Channel News Asia

An Abu Dhabi sovereign-wealth entity said on Monday that the Malaysian state fund 1MDB had defaulted on US$1.1 billion it owed in a new blow to the scandal-tainted company.

KUALA LUMPUR: An Abu Dhabi sovereign-wealth entity said on Monday (Apr 18) that the Malaysian state fund 1MDB had defaulted on US$1.1 billion it owed in a new blow to the scandal-tainted company.

The announcement, made in a filing to the London Stock Exchange by Abu Dhabi-based International Petroleum Investment Co (IPIC), raised the spectre of Malaysian market turmoil if 1MDB is unable to dig out from under its huge debts.

1MDB, or 1Malaysia Development Berhad, was founded by Malaysian Prime Minister Najib Razak in 2009 but is now teetering on the verge of default amid multiple investigations around the world into allegations that billions were looted from it.

IPIC had agreed in 2012 to guarantee US$3.5 billion in 1MDB bonds, lend it more than a billion dollars, and make interest payments on the bonds.

In its statement, IPIC said 1MDB and its owner, Malaysia’s Finance Ministry, had failed to pay back more than US$1.1 billion they owed. “As a result, 1MDB and MOF are in default,” IPIC said.

Najib has been under fierce pressure over 1MDB’s accumulation of more than US$11 billion in questionable debt, and his own acceptance of nearly US$700 million into his personal bank accounts in 2013.

Najib has denied that the money he received, first revealed last year, was siphoned from 1MDB, saying it was a gift from the Saudi royal family. Saudi Arabia’s foreign minister confirmed last week the money came from his country, but only after weeks of silence as doubts over Najib’s claim grew.

Following IPIC’s announcement, Malaysia’s Finance Ministry issued a statement curtly noting the “dispute” over the loan but sought to reassure markets. “The MOF wishes to make clear that it will continue to honour all of its outstanding commitments in the financial markets,” it said.

1MDB’s problems have riveted Malaysia for more than a year, ratcheting up pressure on Najib to resign and raising concerns that Malaysia financial markets could be hammered if the company were to default on its massive debts. The scandal had already contributed to a plunge in the value of Malaysia’s ringgit currency last year.

1MDB was supposed to pay IPIC back via payments to a subsidiary of the Abu Dhabi fund called Aabar Investments PJS. Contrary to 1MDB’s claims, IPIC said last week that Aabar never received the money.

A recent investigative report by the Wall Street Journal said 1MDB instead paid more than US$2 billion to a British Virgin Islands entity, an apparent shell company with a nearly identical name to Aabar’s. The British Virgin Islands entity has since been shut down, the Journal said.

“IPIC and Aabar … are considering their options in relation to this dispute, including referring the matter to the appropriate dispute resolution forum,” the statement said.

– AFP/de

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The story that is dividing Malaysia’s media

Listening Post | 19 Apr 2016

Al Jazeera

For much of the past year, the biggest news story in Malaysia has been the so-called  ‘1MDB’ corruption scandal – a story of millions of dollars of public money allegedly funnelled into the bank accounts of Prime Minister Najib Razak.

The online investigative magazine Sarawak Report broke the story last June and many in the mainstream media, who have links to the government, were slow to follow up.

Only a small number of online outlets, such as Malaysiakini, followed the corruption investigation closely. But the government is keen to keep this story out of the public eye. The Listening Post spoke to Malaysiakini editor Steven Gan about the 1MDB scandal, the limitations of Malaysia’s mainstream media and the growing threat to online freedom of the press.

Steven Gan, editor-in-chief of the Malaysiakini website, speaks about the 1MDB scandal, and the growing threat to online freedom press [Will Yong/ Al Jazeera]

The Listening Post:   The corruption scandal swirling around the prime minister has been a huge news story in Malaysia. What is the significance of this story? How much has it dominated the news and what impact is it having?

Steven Gan:
  It is a major story not just in Malaysia, but around the world. I mean, where do you have a prime minister found to have $700m in his private bank account? So it’s really, really unusual.

For us, it’s a major story, being an online publication. But I think if you compare us or the online media with the mainstream media, the traditional media, the TV stations, radio stations, and newspapers, you don’t see much of that reported.

The Listening Post:  We spoke with the editor of the broadsheet daily newspaper Utusan Malaysia to get an understanding of that paper’s approach to this story. How do you assess Utusan Malaysia’s  coverage?

Gan:
 Utusan Malaysia  is actually … directly owned by the ruling party UMNO, so they are more or less a mouthpiece of the party.

The editors actually being more or less appointed by party leaders. So whatever they report – and of course whatever they don’t report – largely reflects party positions. For instance, yesterday, former Prime Minister Mahathir Mohammed filed a lawsuit against Prime Minister Najib and that story was not reported today by  Utusan. And not just Utusan, but all of the mainstream media.

For us, it’s a major story and I think for everybody else around the world it would be a major story – but not for Utusan.

The Listening Post: There seems to be a clear divide between mainstream media and online outlets in Malaysia. Could you explain this divide to us and what it means for news consumers?

Gan:
 In Malaysia, for a number of decades, the mainstream media has been either directly or indirectly controlled by the government, and some of them are actually owned by the ruling party.

So it is a way for them to put all the mainstream media on a tight leash, not just through ownership but also through the licensing regime. If you want to launch a newspaper, you need to get a licence from the government and through that, the government is able to apply quite a bit of leverage over you because they can take away your licence.

They could make you illegal, meaning that you have a closed shop. Until recently, the licensing regime was so draconian that the government’s decision to suspend a newspaper could not be challenged in court. So through that, the government can actually  keep a lid on a lot of the traditional media. Online media is a bit different because we have a history of no censorship.

That’s partly because of a fight in the 1990s when former Prime Minister Mahathir came up with the idea that Malaysia could be the Asian Silicon Valley. He promised not to censor the internet, so we have that long tradition where there’s no censorship of the internet. But of course you know, lately you see the government trying to impose censorship on the internet media.

The Listening Post: How have foreign media outlets performed on this story? Would it be fair to say they have felt bolder to push the story since they do not suffer the same consequences as local media?

Gan:
 I think there is definitely a situation where if you are based outside the country you feel a bit safer. And therefore you do not have to worry so much about being arrested, for instance, being harassed or being shut down.

So I think the pressure that we face, they may not have to face so much. Though, of course, if they happen to send journalists here, say for instance what happened to the ABC journalist from Australia who asked questions at an event where Najib was attending. They were arrested and deported. That will be the kind of pressure that the government can put on you as journalist.

The Listening Post: How has the prime minister himself dealt with the waves of negative press he is getting? How has he sought to counter the corruption allegations?

Gan:
  He’s just maintaining a complete silence. For the past seven, eight months since the first revelation there has not been a single press conference by the prime minister on this matter or on other matters as well.

So there has been no opportunity to ask him to respond to these allegations. There were a number of press conferences but we were not invited. We were banned from attending. The intent is to ensure that no one is able to ask those questions, point blank, to the prime minister. And, of course, when the ABC journalists tried to do that, they got arrested.

The Listening Post: In February this year, the Malaysian Insider website was blocked by the state media regulator. What was it about Malaysian Insider’s coverage that put it on a collision course with the government? What’s next for online journalism in Malaysia?

Gan:
  That was again related to the investigation by the Anti-Corruption Commission on the money found in the prime minister’s bank account. We do not know exactly what to expect next. Like Malaysian Insider we could be blocked, we could be shut down.

It’s as if we are on a speeding bus with no brakes. And there are obstacles in front of us and we are trying very hard to avoid big ones, we swerve. Small ones we ram through but we have no clue what the government is going to throw at us next. You have a situation where there is really no option but for us to keep moving ahead. And that’s what we’re doing, pressing ahead.

We want to continue to do a good job as journalists, to report news, you know, that matters. But at the end of the day, if the government wants to shut you down they can.

We hope that we can fight back and with the support that we have after 16 years of Malaysiakini being in operation, I think we do have sizeable support out there, and if the Senate tries to shut us down, we hope that we’re able to resist it.

The Listening Post: An amendment to the 1998 Communication and Multi Media Act could, if passed, block online outlets from defaming national leaders. Why do you think this has been proposed now and how it will affect journalism?

Gan:
 I think definitely the government is on the back foot. They’re trying to do whatever they can to put a lid especially on the independent media. And most of the independent media are actually online. They already have the traditional media very much under control. So now the attempt is to shut out the other media. Had there been no internet, say, for instance, 15, 20 years ago, I don’t think a lot of people would know about the money in the PM’s bank account.

Even if it’s been reported by foreign media. So I think that times have changed in that sense. People are getting access to alternative information, information that has not been reported by the traditional media, by the government-controlled media. And the government is trying very hard to stop it. That would definitely involve shutting down websites or blogs that report or discuss all those issues.

The Listening Post: How significant is this present moment in the history of Malaysian media? What lessons are the media learning and how is it affecting the resolve of journalists to produce hard-hitting reporting?

Gan:
  I think we are going through very hard times for journalism in Malaysia. Never before did you have a news website being blocked even when Mahathir was in power.

And he was a strongman. We were around during those days. He never blocked Malaysiakini or other websites. So I think we are going through really uncharted territories.

The government is in survival mode and they are willing to do whatever they can to stop discussion on the issue of 1MDB. So I think we are going through really hard times.

I don’t think we should allow ourselves to be beaten by the government because we have enjoyed press freedom, to some extent, over the past 15 years since the advent of the internet. And I think Malaysians have learned to appreciate the free flow of information that they can find online. It would be very hard for the government to roll back.

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Winter in Bumi Kenyalang

Dyana Sofya

Malay Mail Online

Tuesday April 19, 2016

APRIL 19 ― It was a bright cold day in April and the clocks were striking thirteen. Looking out the window of my London apartment, the sky promised warm sunshine and a fresh breeze.

After a typically long and cold English winter, I could not wait to soak in some heat. Putting on my sunglasses, I left my heavy jacket at home as I strolled to the local supermarket.

However, as I finished stocking up on groceries, I noticed that the bright sun had been replaced by menacing clouds and rain began to pour. I regretted that I had not worn my heavy jacket, but I was even more annoyed that I had fallen for the same trick that so many others in this world fall for: When winters are dark, it is easy to trust the first decent prospect of a better future.

However, the gullible person always pays in the end for improvidence, as the world is full of treachery and false promises.

Later on the same day, I met up with my Turkish friend Zehra at university and told her what had happened. She smiled wryly and said, “You merely underestimated the rain. Imagine if you had underestimated your country’s leader.”

Curious, I prodded her on the topic and in return received a condensed lesson in Turkish history. Modern Turkey was founded in 1923 following the fall of the Ottoman Empire. Spearheaded by the willful Mustafa Kemal Atatürk, a nation-state based on republicanism, nationalism and a belligerent form of secularism was established.

Under the sweeping reforms of what has been dubbed “Kemalism”, Turkey was brought into the 20th century as the citizenry were introduced to free education, gender equality, basic institutions of democracy, the separation of religion from state, and a modernization philosophy that was led by the drive for science and technology.

In the following decades, Turkey faced many crises, but through it all it never wavered on its new modern identity. By 1993, Turkey had one of the highest literacy rates in the region, had become the most industrialised country in the Middle East and was pursuing self-confident international politics.

Then winter came.

The region was thrown into chaos as wars erupted between neighbouring states. September 11 happened, and the global War on Terror brought on a renewed wave of Islamophobia. As a result, Turkey was shunned by Europe in its bid to enter the Union, and an economic downturn threatened to undo all its progress.

However, from the rubble rose a charismatic mayor of Istanbul named Recep Tayyip Erdoğan. An Islamist who threatened to shake the foundations of modern Turkey, he was jailed and banned from politics. Nevertheless, the tide he started could not be stopped and his party swept into power after adopting a more moderate position and abandoning Erdoğan’s more fundamental Islamist policies.

Now espousing democratisation and liberal economics, the new prime minister promised to restore Turkey’s glory by all means necessary. And all means necessary it was indeed.

A promising start soon turned into disaster as Erdoğan became more and more authoritarian amidst allegations of corruption.Crackdowns against protestors began to take place, the critical newspaper Zaman was seized, and even an attempt to ban Twitter, Facebook and YouTube was made.

In 2014, a 16-year-old boy was arrested for criticising Erdoğan on Facebook. More sinisterly, Erdoğan, who has since become an Executive President after concentrating powers into the presidency following his mandatory retirement as prime minister, also launched military operations against Turkey’s Kurdish minority.

“So you see”, my friend sighed, “it is easy to give in to the temptation of great-looking promises. But the truth is that every beast will show its true face ultimately. You were betrayed by the rain, I was betrayed by my own leader.”

Back home, the Chief Minister of Sarawak Tan Sri Adenan Satem is a hugely popular figure. In February 2016, his popularity increased to 84 per cent from 74 per cent when he took over the largest state in the country from Tun Abdul Taib Mahmud in 2014.

He appeared to be doing the right things, from calling for more autonomy for Sarawak and abolishing toll collections on bridges. Based on a survey by Merdeka Center, the top three reasons for his high rating were his good administration, welfare concern and positive leadership quality.

At the height of popular dissatisfaction with the federal government and the prime minister following the implementation of the GST and the unravelling of the 1MDB mega-scandal, Adenan Satem’s popularity beat the odds.

I was personally impressed with the way he handled the usage of the word Allah for non-Muslims in Sarawak and how he made English the second official language in the state. He promised hope and reason, two things that had all but disappeared from the vocabulary of Sarawakians and Malaysians.

However, like the promising glimpse of sun in winter, Adenan disappoints.

Kusangkakan panas hingga ke petang

A true democratic leader would allow the exercise of democratic rights, which includes freedom of speech and the right to dissent. Unfortunately, the state of Sarawak under Adenan has decided to bar rightfully elected Members of Parliament from the opposition and its leaders from entering the state for the upcoming state elections. The flimsy reason given was to “safeguard the state’s harmony.”

How can the entry of opposition leaders jeopardize the state’s harmony, when all they intend to do is to partake in the legitimate political process of campaigning for an election? Surely, it is not difficult to arrest these leaders if they cause disharmony after their entry.

If that is the case, then by all means take action against them. Barring them from entry without the benefit of the doubt is akin to delivering punishment before a wrongful act is committed.

As much as I respect Sarawak’s immigration autonomy, I disagree with its use to perpetuate state paternalism at the expense of every Sarawakian’s personal autonomy to exercise their democratic rights.

A true democratic leader would allow the people to listen from both sides and make decisions for themselves.

Such a leader would allow equal treatment, exposure and airtime to both sides of the divide. If Adenan was indeed the type of leader he is portraying himself to be, then he should lift the ban immediately. By doing so, he would stand taller than other Barisan Nasional leaders and earn the respect of all Malaysians for valuing his people’s democratic rights and going into battle with fairness and impartiality.

Janganlah panas hingga ke petang, rupanya hujan di tengahhari.

                This entry was posted on Tuesday, 19 April 2016, 10:31 am and is filed under
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With the sudden RM14 billion 1MDB bailout crisis, time to have a new  Prime Minister and a new  Finance Minister to clean up the Augean Stables caused by Najib’s twin mega global scandals

The past fortnight had been a disastrous two weeks for the Prime Minister Datuk Seri Najib  Razak and his close ally Penang billionaire Jho Low’s brainchild, the 1MDB Malaysia sovereign fund but it has been downright nightmarish for Malaysia in confirming the country as among the world’s top scandal-ridden nations.

The Public Accounts Committee (PAC) Report on 1MDB, meant to be the centerpiece of a media scam by Najib’s strategists to create the myth that it had exonerated Najib from any wrongdoing in the RM50 billion 1MDB and RM4.2 billion “donation” twin mega scandals proved to be a dud.

In a matter of four days, the media scam was thoroughly exposed and discredited when firstly, detailed reading showed that the PAC Report had not made any such conclusion or finding to exonerate Najib, and secondly, when the Abu Dhabi-state owned International Petroleum Investment Company (IPIC) in a statement to London Stock Exchange on 11th April stated that neither it nor or its subsidiary Aabar Investments PJS had any links or  received US$3.5 billion which 1MDB had paid to the phoney British Virgin Islands-incorporated Aabar Investments PJS Limited (Aabar BVI) .

This was followed by the desperate attempt to salvage the situation by enlisting the Saudi Foreign Minister Adel Al-Jubeir to declare that  the billions of ringgit deposited into Najib’s personal banking accounts were “a genuine donation” from Saudi Arabia “with nothing expected in return”.

This ploy  did not have a long life-span either, especially when  there was no explanation  for Al-Jubeir U-turn statement only two months earlier that  he did not think the RM2.6 billion deposited in Najib’s personal bank accounts was a political donation, or that it originated from the Saudi government. Al-Jubeir had then said  the money was from an unspecified “investment”, saying that it was from “a private Saudi citizen”.

What is worse, a video then surfaced which demonstrated that Al-Jubeir never admitted that Saudi Arabia government was the “donor” whether RM2.6 billion or RM4.2 billion in Najib’s personal banking accounts.

I had seen the video of Al-Jubeir Q & A several times.

He was asked: “Your Excellency, are you aware of the background and details about the issue on the donation to the Prime Minister of Malaysia?”

Al-Jubeir answered: “We are aware of the donation and it is a genuine donation with nothing expected in return and we are also fully aware that the Attorney General of Malaysia had thoroughly investigated the matter and found no wrongdoing so as far as we are concerned the matter is closed.”

What a distortion in this second media scam! Al-Jubeir never made any admission or declaration  that the donation came from Saudi Arabia government, only that he is aware of Najib’s claims that they were  donations which came from Saudi Arabia –  which is a world of a difference from declaring that the billions in Najib’s personal bank accounts were donations from Saudi Arabian government.

But these media scam faux pas pale into insignificant when IPIC made a second statement to London Stock Exchange yesterday that 1MDB had defaulted on US$1.1 billion it owed, raising the spectre of Malaysian market turmoil if 1MDB is unable to dig out from under its huge debts.

IPIC had agreed in 2012 to guarantee US$3.5 billion in 1MDB bonds, lend it more than a billion dollars, and make interest payments on the bonds.

In its statement, IPIC said 1MDB and its owner, Malaysia’s Finance Ministry, had failed to pay back more than US$1.1 billion they owed. “As a result, 1MDB and MOF are in default.”

Following IPIC’s announcement, Malaysia’s Finance Ministry issued a statement noting the “dispute” over the loan but sought to reassure markets.

“The MOF wishes to make clear that it will continue to honour all of its outstanding commitments in the financial markets,” it said.

The long and short of IPIC’s second statement to London Stock Exchange and the MOF statement  is that Malaysians are presented with a sudden financial crisis which would involve a RM14 billion bail-out by the Finance Ministry following 1MDB’s default of a multi-billion-dollar financial assistance arrangement.

There are serious implications for the Malaysian government in the 1MDB-IPIC feud, as a default on the US$3.5 billion bond issue was likely to trigger so-called cross-defaults on the 1MDB’s other commitments, which stand at about US$5.1 billion.

In countries where accountability, integrity and good governance practices are taken seriously in public life, the Prime Minister and Finance Minister presiding over such a mega financial scandal would have resigned.

It is time for Malaysia to  have a new  Prime Minister and a new  Finance Minister to clean up the Augean Stables in the government treasury caused by Najib’s twin mega global scandals.

                This entry was posted on Tuesday, 19 April 2016, 9:55 am and is filed under
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1MDB board outrage as US$700m goes to Good Star

Aidila Razak

Malaysiakini

10 Apr 2016

Slightly over half a year since its conception as Terengganu Investment Authority, the now Finance Ministry-owned 1MDB made its first deal – and blunder.

On Sep 30, 2009, it parted with a massive US$1 billion after less than two weeks of due diligence – a whopping US$700 million of which went to an unrelated firm, Jho Low-linked Good Star Limited.

On social media that day, Li Lin Seet, an associate of Low whom Sarawak Report linked to the deal, mentioned feeling “the earth moving”. Eleven days later Li was in Las Vegas, guzzling world’s expensive champagne, Cristal.

Over in Kuala Lumpur, however, the 1MDB board was in a less celebratory mood.

“Visibly upset” was how then Felda Holdings managing director and 1MDB board member Bakke Mohd Salleh (photo) described the 1MDB board when it found out US$700 million went to Good Star.

It also had other reasons to be “shocked and angry” – it had okayed a deal with PetroSaudi only if terms like independent valuation of assets were complied to. They were not.

“Flabbergasted”, Bakke decided he wanted nothing to do with 1MDB anymore. He resigned.

But the US$700 million – which then 1MDB CEO Shahrol Azral Halmi said actually went to PetroSaudi through its subsidiary Good Star – was not the end of 1MDB’s generosity to the little known Saudi firm.

Oct 3, 2009 – 1MDB board is “shocked and angry” over the Good Star transfer and issues a stern warning to management for flouting their advice.

Among others, it wants the US$700 million returned and banked into the proper accounts, a written confirmation of the value of the asset, a presentation by Edward L Morse and for another independent valuation.

“Flabbergasted” and “annoyed” with management’s non-compliance, Bakke informs the board he does not want to be associated with 1MDB anymore.

Oct 10, 2009 – 1MDB board instructs the management to produce a shortlist of 10 independent valuers to be approved by the board of advisors, so PetroSaudi Caymans can agree upon a second valuation.

Oct 19, 2009 – Bakke resigns from the board

Nov 7, 2009 – Shahrol tells the board that the board of advisers chairperson, Prime Minister Najib Abdul Razak, says there is no need for a second valuation.

Najib, however, instructs the board to appoint a consultant to do a valuation of joint assets.

(The auditor-general’s department found no evidence to back Shahrol’s claim)

December 2009 – The agreement between PetroSaudi and owner of the oil fields is terminated.

March 31, 2010 – 1MDB sells its 40 percent stake in the joint venture for US$1.2 billion in murabahah (loan) notes, essentially lending the cash to the PetroSaudi.

Sept 14, 2010 – 1MDB takes up a US$500 million loan so it can buy murabahah notes from PetroSaudi for the same amount. But 1MDB’s loan is due in 2013, while its murabahah notes will only mature in 2015.

The murabahah fundraising is said to be to buy a stake in oil and gas firm GDF Suez, but auditors KPMG did not check if the funds were used to buy this firm.

Shahrol says it was done with board approval, but the Auditor-General’s Department says the approval was for transfer to PetroSaudi International.

(PAC asks if the audit firm was aware of US$160 million of that, as well as a subsequent murabahah subscription of US$330 million which went to Good Star. The audit firm says it was not.)

Sept 15, 2010 – KPMG takes over from Ernst & Young as auditors.

KPMG obtains a letter from the Saudi ambassador in Kuala Lumpur, international consulting firm Helvetica and Banque Saudi Fransi vouching that PetroSaudi’s shareholders Tarek and Prince Tukri have good financial standing.

It is forced to do so as Saudi firms are not compelled to publish their financial statements.

March 2011: 1MDB lends another US$330 million to Petrosaudi.

September 2012 – 1MDB redeems all its murabahah notes totalling US$2.318 billion which becomes investment “units” in the Cayman Islands, through an investment with BSI Bank Singapore.

The Auditor-General’s Department notes the initial US$1 billion investment changed forms four times from 2009 to 2012, finally held as a portfolio in the Cayman Islands.

Shahrol tells PAC this shows the PetroSaudi venture succeeded – total outlay US$1.83 billion in cash, total recovered US$2.318 billion in investment units.

Part 1: 1MDB’s ‘original sin’ and Jho Low

Part 2: PetroSaudi’s US$1 billion ruse

                This entry was posted on Wednesday, 20 April 2016, 9:27 pm and is filed under
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1MDB’s ‘original sin’ and Jho Low

by Aidila Razak

Malaysiakini

8 Apr 2016

The story of 1MDB begins in 2009, in the oil-rich east coast state of Terengganu. Flushed with this black gold, the state decides to start a sovereign wealth fund so its riches could last for generations and more.

But what transpired between the formation of Terengganu Investment Authority (TIA) on Feb 27, 2009 and the day it was rebranded 1MDB on July 31, 2009 is not the stuff of fairy tales.

Instead, it was a tale of boardroom tussles, menteri besar intervention, royal outrage and a special adviser named Jho Low.

Below is the chronology of events, according to the Public Accounts Committee’s (PAC) report on 1MDB tabled at the Dewan Rakyat yesterday.

Feb 27, 2009 – TIA set up

April 1, 2009 – Cabinet approves government guarantee for TIA to raise RM5 billion through a 30-year Islamic Medium Term Notes.

May 13, 2009 – Menteri Besar Incorporated Terengganu (MBI Terengganu) sends a letter to the Finance Ministry supporting the issuance of the notes according to several terms.

May 15, 2009 – TIA signs agreement with AmInvestment Bank Bhd to raise RM5 billion, but MBI Terengganu opposes, claiming the agreement did not adhere to MBI’s terms. The menteri besar is Ahmad Said.

(TIA chief executive Shahrol Azral Mohd Halmi told PAC later that it was a “bought deal”, where Ambank had a secondary market for the notes.)

May 22, 2009 – TIA board decides to suspend the bond issuance on an urgent basis and revoke all authority given to Shahrol or any director on the Islamic notes issuance.

(Board members are Terengganu princess and sultan’s sister, Tengku Rahimah Puteri, Tabung Haji managing director Ismee Ismail and Shahrol.)

However, the marketing process for the Islamic notes commences on this very day.

May 25, 2009 – Shahrol signs deal with Ambank to issue the Islamic notes.

May 27, 2009 – Shahrol dropped as chief executive through TIA shareholders resolution and Tengku Rahimah resigns from the board.

Shahrol and Ismee use their powers as remaining board members to reinstate Shahrol as chief executive.

The Terengganu government sends a letter instructing a halt on the Islamic notes issuance.

(Shahrol later tells PAC he adhered to TIA Memorandum of Articles of Association, but PAC disagrees. He tells PAC “the train had left the station” and there was no way to stop the Islamic notes issuance.)

May 29, 2009 – Menteri Besar Incorporated Terengganu (MBI Terengganu) sends a letter to Finance Ministry supporting Shahrol’s sacking as chief executive.

It also sends a warning letter to Ambank alleging the bank’s culpability in wrongdoing.

TIA Islamic Medium Term Notes subscription period expires and RM4.835 billion is raised. Ambank pockets RM11.25 million as arranger fee plus RM7.14 million in trustee and agency fee, payable at RM238,000 a year for 30 years.

June 3, 2009 – Cabinet is told that the Terengganu sultan wants a report on “unauthorised issuance of Islamic Medium Term Notes by TIA”.

June 30, 2009 – Shahrol tells a meeting chaired by the Treasury secretary the letter by MBI Terengganu to halt the bond issuance arrived after marketing for the notes started. He says the process went on despite the letter to protect TIA’s credibility.

July 25, 2009 – TIA is rebranded 1Malaysia Development Bhd, with RM1,000,002 paid up capital and allowable capital of RM1 billion. It is fully-owned by the Ministry of Finance Incorporated.

Aug 28, 2009 – Prime Minister Najib Abdul Razak, who is also finance minister and chairperson of 1MDB advisory board, receives a letter from one “Prince Turki”. Along with the letter is an introduction to PetroSaudi International by its chief executive Tarek Obaid.

Tarek proposes a 40 percent stake worth US$1 billion in a joint venture worth US$2.5 billion. PetroSaudi offers a discount on its assets, supposedly valued at US$1.5 billion.

(Incidentally, Prince Faisal Turki Bandar al Saud of Riyadh was among those named in documents obtained by ABC’s Four Corners who made hundreds of millions of ringgit deposits to Najib.)

Oct 10, 2009 – Shahrol tells the 1MDB board the TIA notes were issued urgently on advice of TIA’s “special adviser” for the purpose of developing Pulau Bidong with the Abu Dhabi firm Mudabala.

This despite Mudabala in a press statement in May 2009 denying involvement in any other Malaysian project besides the Iskandar development in Johor.

TIA’s special advisers are Abdul Aziz Mohd Akhir and Jho Low.

Tomorrow: The tale continues – the PetroSaudi ruse

                This entry was posted on Wednesday, 20 April 2016, 9:16 pm and is filed under
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Cost of Insuring Malaysian Bonds Climbs on 1MDB Worries

by Jake Maxwell Watts

Wall Street Journal

April 19, 2016

The cost of insuring five-year Malaysian government bonds rose to $164.20 on Tuesday

SINGAPORE—The cost of insuring against losses on Malaysian government bonds rose Tuesday on concerns that the national government could be on the hook for billions of dollars of debt owed by state development fund 1Malaysia Development Bhd.

The state fund, which is the focus of corruption probes in at least seven countries, has almost $13 billion in debt it is struggling to repay. 1MDB has denied wrongdoing and says it is cooperating with investigations.

A dispute made public this week between 1MDB and the Abu Dhabi guarantor of some of its debt, International Petroleum Investment Company, has put the future of a debt-workout agreement in doubt and in turn has shaken investors who fear the Malaysian government may need to step in.

The cost of insuring five-year Malaysian government bonds rose to $164.20 on Tuesday, up from $160.18 at Monday’s close and 9.7% more expensive than at Friday’s close before the dispute became public. The bond prices themselves were little changed, with the five-year yield at 3.42% on Tuesday, from 3.41% a day earlier.

Japanese brokerage Nomura said Tuesday it was turning negative on Malaysian credit, lowering its recommendation to below the market average from “neutral,” partly due to “further concerns around the finances of 1MDB.”

The dispute between 1MDB and IPIC is over a 2012 debt-restructuring agreement struck between the two sovereign funds in which IPIC guaranteed $3.5 billion of 1MDB’s bonds. It later also granted an emergency billion-dollar loan to 1MDB and pledged to continue making interest payments on the same bonds it had guaranteed. In return for IPIC taking over the debt, 1MDB agreed to transfer undisclosed assets to the Abu Dhabi fund, according to stock-exchange filings.

On Monday, IPIC said 1MDB had broken the terms of its arrangement by failing to pay $1.1 billion due to it by the end of last year in return for IPIC taking on 1MDB’s debt. It said the debt deal between the two entities had been terminated, and that it considers both 1MDB and Malaysia’s Finance Ministry to be in default and it is considering options including referring the matter to the “appropriate dispute resolution forum.”

In response, 1MDB said Monday it had met the terms of the deal. It said it had offered to make the transfer of assets stipulated in the agreement in the form of fund units in an offshore company it controlled. 1MDB also said a $50 million interest payment due Monday from IPIC on the $3.5 billion of debt it had guaranteed wasn’t paid.

The Wall Street Journal reported Monday, citing a memo sent last week from 1MDB to the Malaysian Ministry of Finance, that Malaysia could make the payment on behalf of 1MDB, but doing so would harm its negotiating position with IPIC.

1MDB didn’t respond to an emailed request for comment on Tuesday. In a statement made on Bloomberg television, the fund’s president, Arul Kanda, said the company expected an “amicable resolution” to the dispute with IPIC and that 1MDB would be able to cover short-term interest payments on its bonds even if IPIC didn’t.

As part of the 2012 agreement, 1MDB and Malaysia’s Finance Ministry agreed to indemnify IPIC for any nonperformance of the debt it took on, meaning that if 1MDB failed to make repayments of the debt principal, the government would need to step in. The statement on the debt-settlement arrangement, made to the London Stock Exchange, didn’t elaborate on how this indemnity may work.

Analysts said they still expected IPIC to honor its guarantee of the 1MDB bonds.

“We still believe that the original guarantee provided by IPIC for this obligation is still intact,” said Christian de Guzman, vice president and senior analyst at Moody’s Investors Service, which rated $1.75 billion of the $3.5 billion dollars involved in the restructuring agreement. But, he added, “there is much uncertainty about what that entails.”

He said there was a grace period of five days from Tuesday, during which time the $50 million overdue interest payment could still be paid.

In January, Moody’s maintained its A3 rating on Malaysia’s government bonds but lowered its rating to “stable” from “positive” due to deteriorating economic growth, high leverage across Malaysian markets and an expectation that the government’s debt burden will improve, though slowly, in the longer term.

Malaysia’s ringgit surged in Tuesday’s session, contrary to moves in the cost of insuring Malaysian government bonds. The U.S. dollar weakened 1.2%, with one dollar buying 3.88 ringgit, from as many as 3.95 ringgit at Monday’s close.

“The Malaysian ringgit, and markets in general, seem to be operating on something other than logic right now. However, I can’t see how this [disagreement between IPIC and 1MDB] is anything but negative for it, and for sentiment towards Malaysia,” said Michael Every, head of financial markets research for Asia at Rabobank in Hong Kong.

To be sure, some investors say the market has become numb to negative news on 1MDB, after a long-running saga that dates back well over a year. “We think the market will give Malaysia the benefit of doubt and this will not affect Malaysia’s sovereign debt,” said Edmund Goh, an investment manager for Aberdeen Asset Management. “It’s a serious issue, but we investors [think] so long as [Malaysian Prime Minister] Najib [Razak] can keep power he will resolve this,” he said.

—Jasper Moiseiwitsch contributed to this article.

                This entry was posted on Wednesday, 20 April 2016, 12:28 am and is filed under
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Do Malaysians Want To See Proton Go Bankrupt?

Koon Yew Yin

18th April 2016

I am not surprised to see The Edge front page article ”SAVING PROTON” on 18th April 2016. Dr Mahathir, the founder of Proton was interviewed last week by The Edge. You can read the whole interview on page 65.

Among several other questions, Dr Mahathir was asked
“Do you think the Rm 1.5 billion soft loan can turn Proton around? “

Answer quote “Well, under the present condition, yes, but we would have been able to turn around earlier. Proton car sales today have plummeted unusually because normally, we sell about 4,000 cars a week. It came down to 2,000 cars a week, which we can still survive on. We don’t understand why. This month, it came down to 200 cars a week. We don’t understand why”.

I am sure all Malaysians can understand why if you read on.

The founding of Proton National Bhd. in1983 was a big expensive mistake to begin with. Billions of ringgit from tax payers have been lost in the process.

The hemorrhage seems to have continued forever. Malaysians have been wondering – is this the end to this unhappy saga of the government’s foray into the production of a so-called ‘national car’ or will the burden on tax payers and car owners be continued in other new ways?

A revisit of this white elephant project could generate a larger public discourse especially amongst tax payers who should be more concerned as to where all the tax money they are paying have gone to.

One simplistic assumption which appears to have been made by Dr. Mahathir, the initiator of the national car project, is that an industry that is growing yearly should be profitable.  It is not. In fact, industry data shows that the total profits of all the car companies in the world over the last few decades amount to only a modest return, and that only for the fittest in the industry.

The British Experience

Consider the case of British Leyland a vehicle-manufacturing company formed in the United Kingdom in 1968. It was partly nationalised in 1975 with the government creating a new holding company. The company incorporated much of the British owned motor vehicle industry, and held 40% of the UK car market.

Despite containing profitable marques such as Jaguar, Rover and Land Rover, as well as the best-selling Mini, British Leyland had a troubled history. In 1986 it was renamed as the Rover Group, later to become MG Rover Group, which went into administration in 2005.  This ended mass car production by British-owned manufacturers.

Today, many British car marques have become owned by foreign companies. For example MG and the Austin, Morris and Wolseley marques have all become part of China’s SAIC Motor Corporation Limited.

We should have avoided this expensive mistake

Why did Dr. Mahathir not learn anything from the disastrous British car industry experience is something that completely escapes many Malaysians? Surely any good leader would have got his officers to do due diligence.  If they had done so, they would have found that the industry even with year on year rises in sales is not guaranteed to generate good returns to shareholders, even in a highly developed economy with a long tradition of successful car manufacture such as Britain?

This is because one of the forces that limit profitability is the intensity of rivalry between car companies from around the world. This leads to oversupply and pressure on prices. This is exacerbated by a high degree of freedom for new competitors to enter the industry.

Unless there is an enormous internal market such as China’s or the United States and we can take advantage of the economies of scale, small producers such as Malaysia are forever doomed to a minor placing or bankruptcy in the market place.

Played Out by Mitsubishi

As far as Proton is concerned, Mahathir’s mistake in ignoring the economic fundamentals of the industry was compounded by our lack of expertise or comparative advantage to produce cars. The anticipated technology transfer from Mitsubishi did not take place. This should have been anticipated. Why should Mitsubishi transfer their knowhow to Malaysia when it can control the pace of transfer to maximize its profits? In fact, the top management of Proton should ask Mitsubishi to open their books to see how much profit they have made from Proton since it began operation. Mitsubishi knew that Proton could not do without them and they were quite happy to continue making money from Proton while the company here continued to bleed to death.

To encourage people to buy Proton, the Government increased the import duty for other cars and car parts. As a result, the consumers have suffered. For over 30 years we have had to pay higher prices for all cars including Proton. Even this has not been sufficient to save Proton.

Another question to ask is why few car manufacturers, until recently, seem to get into bankruptcy? Then prices can rise relative to cost and shareholders can get a fair return.

There are two main reasons.  In some countries there is always the perennial optimism of managers and shareholders. In Malaysia, the reason is different. Here, our Government has been changing rules and regulations to obstruct other cars from entering our market whilst providing special favours including an ever ready supply of financial assistance to keep Proton afloat.

The end result is that some Malaysians have ended up with more expensive cars of other brands whilst most Malaysians have had little choice but to buy Proton – a poor substitute !

This is the price we have to pay for brainless patriotism.

Honouring Dr. Mahathir

Ours is a sorry saga which is a classic case study on how not to set up a car industry. As with the national airline, I propose that a special course on our experience with Proton be offered in the Institute of Tun Dr. Mahathir Mohamad’s Thoughts.

What better way to honour Dr. Mahathir than a post graduate course on his pet project – the National Car – and inviting him to be a guest lecturer!  I am sure he will have lots to share and many people to blame as to why the project has failed.

                This entry was posted on Wednesday, 20 April 2016, 1:03 pm and is filed under
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