10 questions for 1MDB – What Transformation? Najib, You’ve Failed!

P Gunasegaram (MKini)
12:28PM Apr 4, 2013

In a series of articles, KiniBiz has looked at 1Malaysia Development Bhd’s (1MDB) various deals and raised some real issues with respect to them, starting from their first RM5 billion bond issue to their joint-venture with PetroSaudi International Ltd, the subsequent withdrawal from that, further bond issues, acquisitions and proposals.

1MDB’s cloak-and-dagger style of operation with many unanswered questions and dubious dealings is very unbecoming of a sovereign fund which is supposed to to make strategic investments that will be of value to the country.

Following upon the articles that we have written, here are a list of 10 groups of questions over the various issues that have plagued the fund. They are arranged more or less in chronological order.
•Why was the first bond issue of RM5 billion done with so much secrecy? Was is it mispriced? Why was it necessary to have such a long tenure of 30 years? Who got the bonds? Why was it not offered to our institutions like the Employees Provident Fund (EPF)?
•The joint-venture with PetroSaudi International Ltd. How come PetroSaudi put in an oil reserve in the Caspian Sea as part of the deal? Wasn’t 1MDB’s strategic direction to get in investments into Malaysia? What was the JV supposed to do? Who is PetroSaudi?
•On the exit from the JV with PetroSaudi – Why accept debt papers from PetroSaudi as payment? Didn’t PetroSaudi have enough cash? Did it not effectively mean that 1MDB had basically raised funds only to fund PetroSaudi?
•Why increase the debt to PetroSaudi even more to the extent of RM5.71 billion – more than the RM4.4 billion raised via the bond? Isn’t it true that all of the money from the first bond and more went to PetroSaudi, meaning a government-guaranteed bond and more was simply on-lent to the company? Why? What kind of strategic merit was there is this deal?
•The second bond of US$1.75 billion was made at very favourable terms to buyers and described as a mysterious placement. Why the secrecy? Why was it considerably mispriced to the advantage of buyers? Who got the bonds? Again, why were government institutions such as EPF excluded? Why did a unit of the Abu Dhabi government guarantee this?
•Is there a plan to issue another US$3 billion bond as reported by Bloomberg? What are the terms? Will local institutions partake? What is 1MDB doing to ensure that the bonds are priced at favourable terms to 1MDB? What is 1MDB going to do with the funds raised?
•Why was there such a hurry to buy power assets? Is it to get some cash flow in? Why the overpayment? T Ananda Krishnan’s unit made a gain of an estimated RM2 billion from the sale of his assets while Genting Bhd made a gain of an incredible RM1.9 billion from the sale of its power assets to 1MDB for RM2.3 billion. Besides, Genting’s concession ends in February 2016. What justification is there to pay that much under the circumstances?
•Jimah Energy Ventures Holdings – is there a plan to acquire this power asset for RM1.7 billion as reported? The reported price looks way too high for a company which is still bleeding red ink at the moment. What is the justification?
•Why bring in foreign partners for the two main real estate developments – the RM27 billion Tun Razak Exchange (TRX) and the RM20 billion Sungai Besi airport land? This was on land obtained cheaply from the government. Why pass on benefits to a third party? Couldn’t 1MDB plan the development itself with reputable consultants? Isn’t there a worry that there will be oversupply, especially from the TRX Development?
•Who is directly responsible for this series of highly questionable decisions by 1MDB? Are the 1MDB board and its advisory panel all fully aware of what is going on? If they are, why have they agreed to these? What measures are they putting in place to to ensure that 1MDB’s interests are protected and bring to account anyone responsible for decisions detrimental to 1MDB?

If government companies and sovereign funds are to set an example for standards of corporate governance, transparency and accountability, it is very clear that 1MDB has failed on all accounts.

We can only hope that those responsible for these very questionable deals will at least be brought to account and all misdeeds corrected as much as it is possible to do so. But it is highly unlikely that all of it can be corrected. How do you recover billions in bond mispricing, for instance?
The evidence is there of gross wrongdoing at 1MDB for everyone to see. If those responsible are not brought to book, it will just encourage so much more misdeeds in future. And there is a need to ensure that no government body ever becomes as bad as 1MDB.

If nothing – no answers, no action – is forthcoming, it will be sad indeed for governance, transparency and accountability in Malaysia and demonstrate yet again a blatant disregard for honest, decent, competent and ethical behaviour of those entrusted with billions of ringgit in public money.

P GUNASEGARAM is founding editor of KiniBiz.

9 thoughts on “10 questions for 1MDB – What Transformation? Najib, You’ve Failed!

  1. Najib, your days as P.M. of Malaysia are numbered !
    Regardless how much money, that you don’t have and have to borrow, will not change the inevitable as predicted you will and have hung on as P.M. of Malaysia for as long as the law allows. That is it, your days as P.M. has now come to an end, you should be very happy that it is helping you to end a very messy finale.
    That is Karma for calling Allah to be your witness to the crime you are involved and also the numerous impediments, like the deletion of the immigration records of the mongolian beauty and also the taking the C4 from the nation’s arsenal without any trace. But like I always say for every action it must be an equal opposite reaction, the pendulum is swinging back from where it started by you.

  2. Ha ha ha.

    U should investigated more on Petrosaudi..Is this company really operations, or just dormant company waiting to con people ..ha ha ha.

  3. Everyone knows that Saudi Arabia is United States Of Bankrupt America and Isreal’s no1 buddy(Prince Bandar is the rogue middleman).Everyone also knows United States Of Bankrupt America’s Financial Institutions(JP Morgan,Goldman Sachs) are dead vampire bank and are getting burned by the sun light($83billion of US tax payers money is given as a “grant” to those bankrupt zombie banks to keep them afloat).Saudi Arabia is also the no 1 “safe haven” for despots, and rogue politicians(Tunisia’s Ben Ali took assylum in that country).So,not surprisngly Najib went to Saudi ,made the necessary financial arrangements for his “exit strategy”.

  4. Here is an example of vampire financial institutions role in destabilising other countries by using financial instruments..

    8. Goldman Sachs offered to help GreeceCosmetic surgery that beautifies Greece’s finance statementsSecretive deal claimed to be “low-risky”
    9. OUT OF COUNTROLFinancial crisis hit Greek economy hardMisreporting is revealed to the publicCredit ranking downgrading to “junk” levelGreece is in big trouble!
    10. Feb 11, 2010Goldman Sachs faced federal inquiry over Greek CrisisWhat really happened?
    11. Part 2: the currency swap
    12. The Deal Issues 10 billion dollars of bondsSwap into 8.4 billionEuros of bondsThe Greek Government
    13. Currency Swap2011$1 more billion
    14. Benefits of the transactionNOT in the balance sheetNOT required to report to EU
    15. Part 2 Summary
    16. Bonds$10bnMarket€ 7.4bn€8.4bn$10bnGoldman Sachs
    17. Currency SwapLending TransactionNeed to ReportCurrency TransactionNo one Cares
    18. Part 3: CDSGoldman SachsCredit Default Swap: CDS
    19. The loan if defaultRiskLoanPremium
    20. CDS: no regulationNOT transparent1NOT traded on any exchange2NOT subject to securitiylaws3
    21. ConsequenceGreek Government DefaultsA large compensationGreek Government does not defaultAppreciation of CDS

  5. Is United Sates Of Bankrupt America assisting Najib to escape?Everyone knows the Federal reserve is printing infinite nomber of USD(the 21st century equivalent of wang pisang jepun),and this infiniti supply of wang pisang $$ is given to zombie banks like Goldman Sachs to “goreng” the money markets(janji top executives ada millions of bonus $$ untuk beli ferrari’s,lambroghinis,luxury yachts).So,Najib who is well connected with all things evil,probably has a double agenda .Bond money dicuri(but IOU receipts dipegang oleh rakyat!!) and launder the money via mcm mcm money laundering technics which will take a major forensic investigation to track them,and also a “signal” to Goldman,the financial terrorist to whack Malaysia via mcm mcm derivatives instruments(which are killing the zombie banks)

  6. Introducing Jim Wlillie…

    Both Max keiser,Jim Willie any many otheres are aware of of Husam Musa’s gold coin experiment.IF fact they were very very enthusiastic about it

  7. Here is a report frm Zero Hedge regarding Kelantan’s “god experiment”…

    Malaysian Province Moves To Gold And Silver-Based Currency In “Main Islamic Event Of The Last 100 Years”
    Tyler Durden’s picture
    Submitted by Tyler Durden on 08/17/2010 23:36 -0400

    Central Banks
    Precious Metals
    Purchasing Power

    More world governments are “just saying no” to the ponzi. Last week, the Malaysian government of Kelantan “said it was introducing a new monetary system featuring standardised
    gold and silver coins based on the traditional dinar and dirham coins
    once used by the Ottoman Empire.” And as everyone who has taken game theory 101 knows, the first defector wins the most, while the last one is left with nothing. A small province in Malaysia just made the critical first defection. The question now is who will be next… and next…and next.

    The FT reports:

    Nik Abdul Aziz, the state’s chief minister, spoke in visionary terms of an economy in which state civil servants would be paid in the new sharia currency, and the poor would be protected against inflation by the intrinsic value of the precious metals used to produce it.

    About 1,000 shops and restaurants in the state have said they will accept the new currency, which follows an earlier issue of gold dinars in 2006. The coins comply with traditional Islamic teaching on the use of coins with intrinsic value as a medium of exchange, rather than paper money.

    While having prior experience with Sharia-compliant debt issuance, Zero Hedge staff was unaware that it is against Islamic beliefs to endlessly dilute linen “money” in the way every central bank is doing now. One learns something new every day.

    The coins, minted to a specified weight and purity, are available in a range of denominations from half a dinar to eight dinars, and from one dirham to 20. At the current price of gold, one dinar is worth M$581($183) and one dirham is valued at M$13 ($5).

    The launch was lauded by the Muamalah Council, a campaigning organisation that seeks the peaceful introduction of an Islamist social and economic system. The council said it was “the main Islamic event of the last 100 years”.

    This whole Sharia situation is troublesome: if the Islamic world, in retaliation for a possible Iran invasion or otherwise, decides to issue a fatwa against the usage of non-Sharia compliant forms of monetary exchange, watch what happens as the developed world wilts overnight. With the bulk of world commodity extraction arising from the Muslim crescent, and wholesale ban on using USD and EUR, a move already underway in Iran, would make for the second coming of von Havenstein very, very difficult.

    Yet the Kelantan move may have some stumbling blocks prior to full implementation:

    The chief minister also admitted that there were “many technicalities” to be overcome before the scheme could be significantly extended. He did not explain why a switch to gold and silver coins would protect against fluctuations in the value of money, given that the US dollar price of gold has risen more than five fold in a decade.

    In spite of its small scale, the scheme may pay political dividends for the state government, which is run by PAS, an Islamist party that is in opposition in the national parliament. PAS is locked in a ceaseless struggle for control of Kelantan with the United Malays National Organisation, the main party in the federal government coalition, which also claims to represent Malay Muslims, the largest population group in Malaysia.

    Burnishing its Islamic credentials is unlikely to do PAS any harm. The only certain winner, though, is the gold market. Although small, the scheme will help to increase demand, pushing up prices even further.

    And for those who think that the move is a regional hoax that is not being taken seriously by anyone, the Malaysian National News Agency Bernama notes that the repercussions of the “move to gold-standard” decision has reached the very top:

    Only Bank Negara Malaysia (BNM) can issue currency that is legal tender, said Prime Minister Datuk Seri Najib Tun Razak.

    Unlike the US, where the Coinage Act of 1965 gives citizens the right to use refuse the usage of cash in transactions (and thus opt in for a different form of currency), Malaysia is not quite as liberal:

    Commenting on the Kelantan government’s introduction of gold dinar and
    silver dirham as an alternative currency in the state, Najib said BNM
    would be looking into the matter to see if any laws had been broken.

    “Follow the laws of the country, only Bank Negara is authorised to
    issue currency that is legal tender,” he told reporters after handing
    over Ramadan aid to mosque and surau from the Pekan parliamentary
    constituency here Saturday.

    On Thursday, when launching the Syariah currency, Kelantan Menteri
    Besar Datuk Nik Abdul Aziz Nik Mat had said the state would strive to
    expand the use of the gold dinar and silver dirham in all transactions,
    including paying civil servants’ remuneration.

    However, he said there were still many technicalities that had to be
    addressed by the state government over the use of the currency.

    The New Straits Times in its front page today said BNM had stated that
    only it had the right under the law to issue currency in Malaysia.

    If there is one thing we are sure about, is that any time the government steps in before a decision that has been taken by a clear majority, with the purpose of making life easier, the outcome is usually lethal, especially in volatile Islamic countries. Whether the transition from paper to a hard-backed currency will be the first spark in social upheavals as government slowly realize all their printer-induced leverage is slipping away, is still unknown. What is, however, is that many more will soon follow Kelantan’s lead to abolish an endlessly dilutable thought experiment, which has no intrinsic value, and whose purchasing power is decimated by the minute, as hundreds of billions in new money are printed every month by the world’s central banks. Yet perhaps, this is precisely the example that is needed for the world to realize that someone is actually willing to do more than just talk pointlessly about the transition to a gold standard, and actually is willing to risk enough by following through with it. What happens next is Ben Bernanke’s worst nightmare.

  8. From JS KIm..

    Buying Gold is One Way to Resist Bankster Tyranny
    smartknowledgeu’s picture
    Submitted by smartknowledgeu on 03/23/2012 07:16 -0400

    Below is a very informal video I made this morning in one rambling short take with no production value in response to the Turkish government asking Turkish citizens to hand over their gold to the Turkish banks in order to help stabilize the economy. The reason I made this video is that I wanted to send a quick message out not only to Turkish citizens, but to all citizens everywhere to warn them not to be duped by the “false-patriotic, do it for your love of your country” message that banksters love to use in order to goad people into doing the worst thing possible for our survival during the accelerating second phase of this globlal monetary crisis. Such initiatives, if you listen to the puppet-masters, only serve to transfer your real wealth to the banksters. If you really wish to protect your wealth, citizens of Turkey, convert MORE of your Turkish Liras into physical gold and silver, especially at these prices today at a time when banksters have attacked the price in their fraudulent paper markets and there is opportunity to stack more physical PMs at artificially low prices.

    As far as those that remain ignorant of the fact that gold’s best use is as money, and that while not a perfect medium of exchange for goods and services, it still has many diverse qualities that make it a far superior form of money than the worthless pieces of paper whose differing value is only determined by the different numbers printed on them, please do a little homework. You have more than several thousands years of history to study to understand why so many different cultures have chosen gold as the best form of money they could use, including the Malaysian State of Kelantan today. Lastly, for those that foolishly state that private owners of physical gold “are the problem [for promoting ownership of a worthless piece of metal]”, I imagine that many of you have at one time opted to buy a radically overpriced gem like a diamond for your girlfriend or wife, and that you either (1) do not understand how the monetary system works; or (2) do not understand the game of poker. If you complete your homework assignment, you will discover that ownership of physical gold (and silver) allows one to call the bluff of the banksters’ fraudulent monetary system, and that without ownership of physical PMs, one is without a mechanism to ever call the banksters’ bluff and will have to fold every single hand.

    About the author: JS Kim is the Founder & Chief Investment Strategist of SmartKnowledgeU, a fiercely independent investment research & consulting firm dedicated to exposing the fraud of the global banking cartel and to the provision of strategies that have protected clients in 33+ countries around the world from the deepening global monetary crisis. Follow us on twitter @smartknowledgeu.

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