1MDB Scandal: Know World’s Biggest Financial Scandal

The 1Malaysia Development Berhad Scandal is an ongoing political scandal occurring in Malaysia. In 2015, Malaysia’s Prime Minister Najib Tun Razak was accused of channelling over RM 2.67 billion (nearly USD 700 million) from 1MDB, a government-run strategic development company, to his personal bank accounts.The event triggered widespread criticisms among Malaysians, with many calling for Najib’s resignation – including former Malaysian Prime Minister Tun Dr. Mahathir Mohamad.

Opposition leader Anwar Ibrahim has openly questioned the credentials of 1MDB. He told Parliament that according to the records held by the companies commission, the company “has no business address and no appointed auditor.” According to its publicly filed accounts, 1MDB has nearly RM 42 billion (USD 11.73 billion) in debt. Some of this debt resulted from a $3 billion state-guaranteed 2013 bond issue led by Goldman Sachs, who is believed to have made as much as $300 million in fees from that deal alone, although it disputes this figure. Conference of Rulers in Malaysia has called for the investigations by the government to be completed as soon as possible, saying that the issue is causing a crisis of confidence in Malaysia.

What is 1MDB?

Formerly known as Terengganu Investment Authority, 1Malaysia Development Berhad (1MDB) is a strategic development company wholly owned by the government. Its aim is to drive economic growth through joint ventures that bring foreign direct investment into Malaysia, with focus on fields of energy, real estate, tourism and agribusiness. 1MDB has denied that it is a sovereign wealth fund but has been frequently labelled a sovereign wealth fund.

How did 1MDB raise its money?

1MDB claims that it received an initial investment of RM1 million from the government upon inception. According to 1MDB’s FAQs, the company generates its own income through international projects as well as raising capital on local and international debt markets.

Who runs 1MDB?

In January of this year, 1MDB appointed Arul Kanda Kandasamy as the new CEO, after the previous CEO Mohd Hazem Abdul Rahman resigned. The advisory board is chaired by the Prime Minister and Finance Minister, Datuk Seri Najib Razak.

What projects is 1MDB funding?

1MDB is currently funding large development projects such as the Tun Razak Exchange, set to be a financial hub, and the Bandar Malaysia project, a project to turn the old Sungai Besi airport into a development with education, entertainment and workplaces in sight. 1MDB has also bid RM8 million for Project Track 3B, a coal-fired power plant based in Negeri Sembilan. However, it is rumoured that 1MDB may withdraw from 3B. 1MDB owns 16 power and desalination plants in six countries.

Why did 1MDB suffer a huge loss at end of March 2014?

The financial year ending March 2014 saw 1MDB recording a loss of RM665.3 million reportedly due to higher finance costs used to grow its company’s asset base. This was a huge loss compared to the previous year, where a net profit of RM778.24 million was recorded.

Why is there 1MDB money in the Cayman Islands?

In 2009, 1MDB entered into a joint-venture company with PetroSaudi International of Al-Khobar, Saudi Arabia. However, after 1MDB pulled out of the venture, PetroSaudi returned its loan to 1MDB. The Malaysian funds were then transferred to the Cayman Monetary Authority, a company in the Cayman Islands. 1MDB CEO Arul Kanda Kandasamy stated that the company has now redeemed all of its investment in the Cayman Monetary Authority, racking up RM8.24 billion in total. However, not all the funds will be repatriated to Malaysia.

What is the value of 1MDB’s debts?

1MDB’s total debts are estimated to be around RM42 billion. The large debt, in addition to a perceived lack of transparency, has drawn criticism from diverse sources, ranging from the former Prime Minister Dr Tun Mahathir Mohamad to opposition politicians such as Rafizi Ramli. Former Finance Minister Tun Daim Zainuddin also cited the debts as a reason for the weakening value of the ringgit. However, the Prime Minister has defended 1MDB, saying that it has assets worth RM50 billion.

Will 1MDB default on its debts?

In a recent high profile case, 1MDB was at risk of defaulting on a loan of approximately RM2 billion from a group of Malaysian banks (the two banks with the largest share of the loan are Maybank and RHB). This loan was taken out by a subsidiary of 1MDB called Powertek Investment Holdings Sdn Bhd. The due date for repayment had been rolled over two times and the next due date was 18 February 2015. However, 1MDB managed to repay the loan earlier this week.

What is Ananda Krishnan’s role in 1MDB?

The Malaysian Insider reported that Ananda Krishnan guaranteed the RM2 billion debt to Malaysian banks, thereby saving 1MDB from the risk of defaulting just six days before the due date. Krishnan, who is Malaysia’s second richest man, had already been in talks as a potential investor in 1MDB’s power assets. The tycoon had, in fact, sold his own collection of power plants to 1MDB.

How is Jho Low involved in 1MDB?

The billionaire investment broker Jho Low is seen as being influential in 1MDB’s transactions but has said that he has no official role in 1MDB. However, he was an advisor to the Terengganu Investment Authority, the predecessor to 1MDB. Earlier this year, the Edge Media Group’s publisher Datuk Tong Kooi Ong accused Jho Low of being behind an online smear campaign against critics of 1MDB. Jho Low has, in turn, called these claims false and defamatory. The Malaysian Insider has reported that one 1MBD’s directors are a friend of Jho Low’s father.

 

Read: The Dawn of New ‘Hope’: Will Malaysia See Change in GE14?

Source: Malaya Mail Online, POSKOD

Report by Abdullah
The Kootneeti Team - South & South East Asia

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of The Kootneeti Team

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