Wrong to call it a bail out of 1MDB
1. The new Minister of Finance has made allegations that under the previous government, MOF, Khazanah and Bank Negara Malaysia had to “bail-out” 1MDB debts, to the tune of RM 7 billion. Not only is this misleading, it is a politically-motivated attempt to obscure the facts.
2. In accordance with the recommendations of the Public Accounts Committee (PAC) Report on 1MDB, all of 1MDB’s valuable and strategic real estate assets have been transferred to other companies owned by MOF Inc. Over time, these prime real estate assets can be worth up more than RM 30 billion.
3. However, although MOF Inc took over the assets, the debt or liabilities of 1MDB remained in the company. Accordingly, the arrangement, as I can confirm, is for MOF Inc to service 1MDB debts, but in return for taking over the assets.
4. Put another way, had those assets remained in 1MDB, it could have developed and sold the assets on its own, and used the proceeds to pay its debt.
5. To fulfil its obligations, MOF can use various methods, including sale of land (eg to Bank Negara Malaysia) or by collecting debt repayments (eg from Khazanah).
There is nothing wrong with such transactions, as each was approved per the relevant governance frameworks, were conducted on an ‘arms length’ basis and followed the correct laws and procedures.
6. Therefore, the question of MOF or BNM or Khazanah bailing out 1MDB does not arise at all. It is in fact downright misleading to make such allegations. MOF Inc took over assets and it must be responsible for the liabilities- that is the only correct way, legally and accounting-wise.
7. It is therefore wrong of the Minister of Finance to only highlight the debts of 1MDB. By right, the Minister of Finance must also inform the public about the assets of 1MDB that have been taken over.
8. The Minister of Finance must ‘walk the talk’ on CAT. He has to be transparent to tell the full story and not just half a story in order to deceive.