Najib’s upbeat take on 1MDB called into question – FT

Najib’s upbeat take on 1MDB called into question

In an ebullient New Year’s message, Najib Razak declared that 1MDB’s “major challenges” were behind it. But critics of the Malaysian prime minister have seized on two apparent reversals as evidence that efforts to clear the scandal-hit Malaysian state investment fund’s debts are in disarray.

A crucial part of Mr Najib’s claim was a $1.7bn deal to sell a stake in a Kuala Lumpur property project to a China-backed consortium. That deal has now collapsed, with questions raised about China’s role in vetoing the agreement.

Meanwhile, 1MDB made an agreement earlier this month to pay Ipic, Abu Dhabi’s sovereign wealth fund, $1.2bn to settle an embarrassing dispute in which Ipic was claiming about $6.5bn.

The Malaysian fund is at the centre of multiple global investigations into alleged grand corruption. Swiss investigators allege that up to $4.8bn was diverted from companies linked to 1MDB,which was set up by the Malaysian premier.

“With the latest collapse of the proposed [property project] sale, the entire ‘rationalisation’ exercise…hailed by the prime minister and cabinet has been completely unravelled,” said Tony Pua, an MP with the Democratic Action party, Malaysia’s main opposition group.

The setback for 1MDB’s debt restructuring came when a deal for a Chinese state-owned company to take a stake in the Bandar Malaysia property project fell apart.

The project, which involves transforming a former military airport near the capital into high-end housing and offices, was a centrepiece of 1MDB’s official aim of making strategic investments for long-term economic development.

TRX City, a former 1MDB division now owned by the finance ministry, said last week that the China-backed deal — agreed at the end of 2015 — had lapsed because the buyers “failed to meet the payment obligations”.

China Railway Engineering Corp, which was due to invest through a joint venture with a Malaysian partner, had not received the necessary high-level approval from the Chinese government, according to a person familiar with the matter.

But a crucial factor was the difficulty Iskandar Waterfront Holdings, the Malaysian partner, had in securing financing, according to two people with knowledge of the process. Mr Najib had lost patience and personally ordered the termination of the deal, one said.

Najib’s upbeat take on 1MDB called into question
by: Jeevan Vasagar in Singapore
7 May 2017 – Financial Times


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