1MDB should not have been formed at all

The cardinal sin of 1MDB

There was just one big mistake about 1MDB. It should not have been formed at all.

That alone was the cardinal sin that has rocked the country and cost the jobs of an attorney general, two ministers and a menteri besar.

1MDB also earned cabinet posts for several newbies for defending the indefensible. What’s more, it earned the people at a business weekly and related online portals temporary stay in government ‘hotels’.

What was the purpose and intention in forming 1MDB, in the first place? There was no obvious purpose in fulfilling any national agenda.

Sovereign funds are set up to invest surpluses from government revenue/budget so that these surpluses are managed for the future of the country, saving for a rainy day and not wasted during good times. Look at how much of Petronas revenue has been wasted in good times rather than investing for the future like how Norway’s oil wealth is prudently managed through the Norwegian Government Pension Fund Global.

In Malaysia we already have Khazanah Nasional Berhad for managing the country’s assets; we did not need another one. KNB is doing a reasonably good job of it as well; so why set up another?

A comparison to GIC of Singapore is like comparing a BMW to a skateboard. GIC is not fully funded by debts. It was started with government surpluses, and there is a marked and distinct difference between its role and Temasek’s role in Singapore.

In Malaysia, we do not have extra money. We were borrowing for everything to meet budget deficits; so there was no need for 1MDB.

Let’s run through this list:

For managing bumiputera equity participation, we have PNB.
For managing haj participation, we have Tabung Haji.
For looking after the welfare of armed forces personnel, we have LTAT.
For taking care of rural planters, we have Felda.
For taking care of bumiputera economic participation, we have Mara.
For ‘unlocking’ the value; of small listed bumiputera companies, we have ValueCap.
For looking after non-listed bumiputera businesses that need a helping hand, we have Ekuinas.
For looking after franchise development, we have PNS.
For looking after bumiputera land-related investments, we have PHB.
For looking after technological matters, we have MTDC.
For looking after multimedia matters, we have MDEC.
For state development activities, we have all the state economic development corporations.

The list goes on and on. For any area you can think of, Malaysia already has an entity for it, complete with overflowing, excessive boards of directors and management teams, all benchmarking themselves among themselves, not with the industry’s best.

We have numerous special purpose banks to look after special purpose interests such as Bank Rakyat, Agrobank, SME Bank and Bank Pembangunan.

A common feature of all these entities is that some of the chairmen and board members are invariably retired politicians who have little if any knowledge of the subject matter of what they are supposed to be overseeing. Their appointments double up as sweet retirement benefits from the ruling government.

So, in summary, there was no justification for setting up 1MDB, which then clocked up huge debts to buy assets to justify its existence. It then got into trouble due to certain overvalued purchases and mysterious transfers of funds.

This was then partly met by the government’s sale of prime public land to 1MDB at a pittance – which was then revalued or sold by 1MDB at market value. A random calculation puts the loss to the public from the cheap sale of these lands (as opposed to outright tender) at about RM12bn.

The cardinal sin of 1MDB
8 Apr 2016 – Aliran


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All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?



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