Najib Razak / Socio-economy / Umno & Barisan Nasional

1MDB: Arul Kanda in the spotlight

It seems many are still not impressed with Arul Kanda’s effort to explain where the RM42 billion money had gone to.

We can still remember his embarrassing screw-up when in February this year where he had lied to public (and caught by the mainstream media) that the money ‘redeemed’ from the dubious investment vehicles in the Cayman Islands had indeed been remitted into their bank in Singapore.

1MDB CEO assuring (lying to) the public the cash is there

1MDB CEO assuring (lying to) the public the cash is there

As history have it, it turned out the money was not in cash but in units. How did a banker, with a supposedly good reputation had made this huge mistake is still a mystery to all of us Malaysians.

It made the CEO of 1MDB, who is in charge of billions of rakyat’s money looked incompetent and careless.

As we have told people so many times, those who are defending 1MDB will lose their credibility.

We could see what happened to Dato Seri Husni Hanadzlah and the people in Ministry of Finance. Whenever 1MDB made a mistake, it’s the people who are not directly involved that suffer the brunt.

Meanwhile people are getting annoyed and restless with Arul Kanda and his flimsy explanation. Even the mainstream media are picking up on it.

This is from The Malaysian Reserve today:

1MDB’s Bid To Explain RM42b Debt Backfires

The Finance Ministry-owned 1Malaysia Development Bhd’s (1MDB) attempt to explain its RM42 billion debt to silence detractors may have backfired.

Instead of putting to rest all the allegations about the “missing” money, the summary of 1MDB’s expenditure and debt released on Wednesday only raised more questions about the government development fund’s dealings.

“Companies don’t usually borrow funds for operating expenditure. It appears 1MDB may not have followed good business practices,” said Tan Sri Ramon Navaratnam, a former World Bank alternate ED and deputy treasury secretary general, referring to 1MDB’s RM5.8 billion borrowings for financial expenditure.

“The revelation by (1MDB president and CEO) Arul Kanda Kandasamy essentially revealed nothing that we don’t already know. The questions which we asked, however, remained completely unanswered,” said Public Accounts Committee (PAC) member and MP Tony Pua, who has emerged as an outspoken 1MDB critic over the last few years.

Most of the questions were aimed at 1MDB’s placement of a large percentage of its investment funds into overseas tax havens, said to be an unusual move.

1MDB had placed as much as RM15.4 billion of its borrowings into the largely enigmatic investment funds in the Cayman Islands (Brazen Sky, RM6.1 billion) and British Virgin Islands (1MDB Global Investments Ltd (1MDB GIL), RM5.1 billion), as well as RM4.2 billion into Abu Dhabi-based Aabar Investment PJS.

Aabar, a subsidiary of the International Petroleum Investment Co with links to the Abu Dhabi royal family, last reported total assets of US$10.15 billion (RM37.54 billion) after it had been delisted from the Abu Dhabi Securities Exchange and taken private in 2010.

According to its website, Aabar holds a 21.6% stake in RHB Capital Bhd, the owner of RHB Bank Bhd and RHB Investment Bank Bhd. Brazen Sky’s funds are reportedly managed by Hong Kong-based Bridge Partners.

Bridge Partners’ website does not contain information about its management team or track record, but it does list about 70 business deals (mostly with Chinese firms) it has conducted as a financial advisor.

“We don’t have much (of an) idea about these overseas fund managers,” said Phua Lee Kerk, chief strategist at fund manager Phillip Mutual Bhd.

Phua said it “was a little abnormal” that 1MDB would choose to put such significant portions of its investment funds into foreign funds in tax havens, based on his understanding of the company.

“Generally, funds in tax havens are perceived to have higher returns but also carry higher risks. What we see in these funds is usually low transparency in nature,” said Phua.

He said companies with similar structures to 1MDB, which he likens to a sovereign fund, would normally only invest 10%-20% of their excess profits into high risk funds, usually associated with overseas hedge accounts.

The bulk of funds under a sovereign fund manager would usually be invested directly into businesses, instead of into little-known funds such as Brazen Sky and 1MDB GIL.

“In my opinion, it would have been better to give such large amounts to local fund managers to nurture the industry,” said Phua.

“I would very much prefer to have taken a conservative approach and after all, it’s the rakyat’s hard-earned money,” he said. “What exactly was the RM6.1 billion of investment in Brazen Sky which was parked in Cayman Islands?

“Why is it that despite Arul Kanda announcing that all of Brazen Sky’s investments have been “redeemed”, there’s still no cash at all in the BSI Bank Singapore?” asked Phua, a former head of a firm listed in Singapore’s second bourse.

Despite earlier saying it would wait for the AuditorGeneral’s report on 1MDB, the PAC commenced an investigation in late May.

“The prime minister’s statements and public response made it necessary for the PAC to carry out (its own) inquiry as soon as possible,” Dr Tan Seng Giaw, deputy chairman of the committee, told The Malaysian Reserve yesterday.

Tan said the PAC’s investigation would concentrate on 1MDB’s financial governance, including “how, why, when and where 1MDB had acquired its funds, the ways these have been spent, the total amount of debts incurred and the interests”.

Meanwhile, the announcement of a formal inquiry by Malaysia’s central bank on Wednesday was welcomed but seen as overdue.

Bank Negara Malaysia (BNM) could have completed its enquiries easier if the authority had began its investigation earlier, said the head of leading anti-corruption watchdog Transparency International’s Malaysian (TI-Malaysia) affiliate.

TI-Malaysia president Datuk Akhbar Satar said action in the “earlier stages” of concern wou ld h ave facilitate d smoother evidence gathering by the authorities.

BNM now needs to perform the investigation without fear or favour, said Akhbar, who formerly led the Malaysian Anti-Corruption Agency’s training division as its director.

Try to have a good weekend Malaysians!

For further reading:

1) Arul Kanda and his explanation

2) Husni Hanadzlah and his explanation

3) People who are annoyed with 1MDB’s explanation 

13 thoughts on “1MDB: Arul Kanda in the spotlight

  1. Dear JMD,

    Lim Sian See wrote this is his FB posting. Also claiming, I quote “JMD obviously have very limited knowledge of finance or business or is deliberately trying to mislead others with more false accusations”.

    Do go to his posting at https://www.facebook.com/lim.siansee/posts/1678253412393446

    Well, I post it below for your ease. Do comment.

    To take a break from my disappointment at today’s handling of the forum, I now answer Jebat Must Die’s blog here: http://bit.ly/1MskDvy

    JMD obviously have very limited knowledge of finance or business or is deliberately trying to mislead others with more false accusations.

    In his blog post, he says “More people are asking newer questions like the following after 1MDB revealed where the RM42b (which is no longer lesap) is using the two diagrams:

    a) Why is there a surplus cash of RM900,000,000 in liabilities? Shouldn’t cash be in assets?

    LSS: Because it is NOT listed as liabilities. It is WHERE the money has gone to (aka the use of funds). The diagrams are not balance sheet. For that, please look at the actual Audited Financial Statements.

    What 1MDB is stating is that as at March 2014 when people said RM42b was missing, part of this money was in CASH holdings. It was never stated to be a liability.
    ———-
    b) Why should 1MDB asked for cash injection of USD1 billion from IPIC/Aabar last week when they could just withdraw the RM4.2 billion deposit with Aabar to pay off the bank?

    LSS: Because: 1) it was not a cash injection (nor even a loan). As 1MDB stated, it is initial payment for an asset-debt swap.

    2) Because the money with Aabar is not a current account and you cannot just withdraw like that as they may have the investment tied up in different maturing instruments or assets.

    This USD1b initial payment is to swap for the assets held by Aabar. Essentially, the effect is the same thing. Instead of you liquidating that asset with me, I keep it but I pay you cash to buy it instead. If the assets (including the units) are worth nothing, no one will buy it.

    These are other country’s sovereign funds you dealing with. Not banks.
    ———
    c) Why is there still RM6 billion inherited debts? Why are they still not being paid off by 2014? Is this legacy debt from TIA back in 2009?

    LSS: When you value a company, you value it based on the future cash-flow and profits and not based on how much debt or assets it has. You are buying a business with a proven track-record plus a concession agreement and not hard assets!

    As a simplified example, a IPP may have revenue of RM2b but have project debt of RM6b which was used to build the plant for RM6b (and hence asset is RM6b).

    After deducting interest payments and debt payments of RM400m per year, the IPP may have profit of RM500m per year.

    let’s assume the Price-To-Earnings ratio of 10 was used to calculate the acquisition price of this asset: 10 times RM500m = RM5b

    Thus 1MDB buys the company for RM5b and takes control of the assets worth RM6b and assumes RM6b of project debt.

    Essentially, 1MDB paid RM11b (RM5b cash plus assuming RM6b of debt) for a company that has got assets of RM6b and project debt of RM6b but earns a steady RM500m per year even after all the interest and debt payment.

    Thus the RM6b is inherited debt and does not need to be paid off by 1MDB straight-away as these debt is serviced by the cashflow and profits of the company that they have bought.

    If 1MDB sells the company to others, they will also get RM5b but a total of RM6b is then assumed by the buyer – hence the net effect to 1MDB balance sheet is also RM11b.
    —-
    Note: “Jebat Must Die” should change to “Jebat Must Go To Business School”

    Like

    • Very reluctant to comment on random people who are not the official spokesperson of 1MDB. We want to pressure the government to explain themselves about this fiasco without getting some self appointed smart alecks talking on behalf of the government. Thank you and have a great weekend Hilal!

      Like

    • I find it amusing that people like Lim Sian See who has absolutely no knowledge of the inner workings of 1MDB, can claim to understand it enough to explain it. How could an external “expert” like Lim explain something which even the Finance Minister II has trouble explaining? If it were as straightforward as they claim, how is it that numerous people have been unable to articulate the simplest questions? Never mind the 27b — where is that 6b cash from the Caymans which Arul said he saw in the statement?

      Like

    • Also of note: for the longest time, this Lim Sian See had been passing itself as a “her”. Only recently when his true identity was accidentally (?) divulged by another blogger, does he acknowledge that actually, she is a he. Why the duplicity? Saja nak buat sensasi?

      Like

  2. Teringat pasal movie dumb and dumber. PM is the dumb and Arul is the dumber! Belakang, yang sokong 1MDB are the dumbest.

    Jebat,

    We must do something. Tak larat nak tampung hidup dengan harga barang naik, duit rakyat habis sbab kementerian kewangan kena bayarkan loan interest depa yang berbilion tu. Negara boleh jadi miskin. Dah tak larat lagi dah!

    Like

  3. So painful to watch crooks trying to pose as saviours in this 1MDB. mark my words JDM, they will try to siphone more money from this rationalisation.

    Like

  4. Lim Sian See hv a point. Do those who r typing the keyboard hv sufficient accounting background to digest corporate balance sheet? I am pretty confident tat most can hardly bakance their cheque books atvthe end of the month and probably 3 paycheques away from bankcruptcy.

    Penyu

    Like

    • “hardly bakance their cheque books atvthe end” – such errors reflect a careless mind. Are we supposed to accept your reasoning then?

      Like

    • You don’t need an accounting background to tell when people are either lying or being shifty. They reveal it themselves through their bumbling.

      Like

  5. .

    .

    .

    .
    .
    .
    My take is that all who are pro or believers of the

    1Mdb a/c are a geng of ‘penulis sundal’ paid to

    defend a heinous act.

    Rm 11 billion for an IPP ?

    And one that is nearing its shelf life. Ridiculous.

    Look a 747 is a powerhouse with 4 turbines. And can get them

    new around usd 200 million. An IPP only requires 2 turbines

    of the same size. How much would that be ?

    USD 100 million? A likely ball park figure which is on the generous side.

    And how many IPP can one get for ringgit 11 billion?

    Surely the 1Mdb actors were not in the IPP business. What they really

    want is just a ruse to ‘launder’ the loans so that the money could be

    re channel into something that ‘the No 1’ wants to acquire.

    Having gone thru your writing I am struck that no one noticed that

    the actors /decision makers are in foul of the Malaysian Law. If the

    fund is deemed sovereign fund than the actors are by definition

    ‘constructed trustees’ of public funds subject to the Trustee Investment Act

    which specifies where the fund can be invested in. Putting the funds willy nilly

    in some dubious entity is a breach of the Act. And that is clearly a CBT on all

    the actors!

    This is just scratching at the surface only. Later when the accounts are analysed

    and fraud is proven other criminal charges will be put to the actors.

    Of course there will be no prosecution under najib’s regime. Should Najib

    loose the 14 th GE a dozen of the actors will end in jail!

    .

    .

    .

    Like

  6. Sistem Perniagaan – Manipulasi – Ponzi Skim – Di Dasar Jurang Krisis Kewangan & Ekonomi
    Sistem Pernigaan
    Kita adalah sebahagian daripada Sistem Perniagaan. Sistem ini bagai arus yang mengalir dalam kehidupan manusia. Di dalam arus ini mengandungi unsur Tanah , Air , Api & Angin.
    Setiap unsur perlu seimbang agar mendatangkan faedah kepada umat manusia. Agar Check & Balance berlaku Audit Forensic wajib di laksanakan ke atas 1MDB ( Kalau bahasa orang melayu tua lagi dahulukala : ” di tilik dengan sebenar-benar tilik)
    Manipulasi
    Sistem menguraikan berlaku manipulasi berterusan ke atas sistem itu sendiri oleh orang-orang yang di lantik sebagai pembuat keputusan. Sekiranya ini tidak di hentikan , keseluruhan sistem akan mengalami “kecacatan keka” atau kita katakana berlaku fenomena seakan El-Nino yang akhirnya akan merubah lanskap kewangan & ekonomi Malaysia. Seterusnya mengakibatkan mengeluarkan perbelanjaan lebih mahal bagi merawat kemusnahan lanskap.
    Ponzi Skim
    Sistem memantau 1MDB beroperasi menggunakan platform Skim Ponzi Berstruktur bukan perniagaan berstruktur.
    Kita boleh melihat bekas pengurus Backstreet Boys , kita boleh lihat sejarah Bernie Madoff , bekas penasihat NASDAQ berakhir dengan 150 tahun di penjara & besar kemungkinanya Anak-anak Bangsa Melayu melakar sejarah pengajaran kewangan.. yang sama seperti di kenakan ke atas Bernie Madoff , kerana derhaka sekiranya membela petualang bangsa.
    Di Dasar Jurang Kewangan & Ekonomi
    Sebelum Bangsa bergelar Bangsat ,
    Lisan yang lembut berkata kesat
    Tahanlàh baik-baik , mungkin terpaan , mungkin tikaman
    Bukan jurus para pahlawan.

    Like

  7. Pingback: 1MDB: Arul Kanda in the spotlight | ajai62

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