Bank Negara’s Land Buy Sparks Talk of 1MDB Bailout

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Questions are growing around the Malaysian central bank’s recent purchase of government land for RM2 billion (S$678 million), with observers saying it is unusual for the institution to pay market price for state land.

The hefty price tag has also sparked claims that the government is raiding Bank Negara Malaysia’s (BNM) coffers to bail out troubled state fund 1Malaysia Development Berhad (1MDB), which last December forked out US$602.7 million (S$802 million) to settle a debt with Abu Dhabi’s International Petroleum Investment Company (Ipic).

Straits Times

BNM’s response this week that the buy was an “arm’s length transaction” only fuelled further disquiet over whether the financial regulator should be making such deals at commercial prices.

“It was not the government that wanted to sell the land to us. We actually approached the government many months ago to buy the land,” BNM governor Muhammad Ibrahim was quoted as saying by The Edge Financial Daily on Feb 5.

Senior opposition lawmaker Tony Pua retorted that “Malaysians cannot be blamed for believing that Bank Negara allowed itself to be raided” with the “outrageous purchase” of some 23ha “in order to bail out 1MDB”.

“Why should it be arm’s length in the first place when the land was not intended for Bank Negara to make a profit?” he said, referring to BNM’s stated aim of using the land for an education hub.

The Edge

The government usually gives public universities land at a nominal rate, but the land purchased by BNM next to its existing Sasana Kijang complex in Kuala Lumpur’s green lung Bukit Perdana works out to approximately RM823 per sq ft.

Pua also pointed out that even 1MDB, which continues to struggle to clear debt that hit RM51 billion in 2016, secured about 202ha of land from the government at a discount.

“The transaction raises an eyebrow, but is loosely consistent with BNM’s 2015-2017 business plan of focusing on talent development for the financial industry,” independent financial analyst Ryan Soh told The Straits Times.

BNM had announced the land purchase on Jan 4, while Ipic confirmed receipt of the US$600 million payment from 1MDB on Dec 27. Despite speculation by critics and the media on how 1MDB sourced funds for the payment, the government and 1MDB have not clarified the matter.

The state firm has been mired in controversy, especially over claims up to US$4.5 billion was misappropriated by its senior officials and people linked to Prime Minister Najib Razak.

Najib has insisted the over US$700 million found in his personal accounts and allegedly linked to 1MDB was a donation from Saudi royals. He has been cleared in Malaysia of any wrongdoing.

According to Muhammad, BNM has “acquired many (tracts of) land over many decades, and when we acquire land, we acquire at market price”.

The central bank’s 2014 annual report states that it had spent a total of RM112 million on land holdings as of 2013. In 2014, it spent another RM1.25 billion on an undisclosed amount of land, but made no acquisitions since, until this recent deal.

Last month, opposition chief Mahathir Mohamad said: “I was prime minister for 22 years (up to 2003) but I have never known Bank Negara to spend so much to buy land.”

“Whenever Bank Negara wanted to expand, the government was ready to give it land. But this time, we hear Bank Negara bought land for RM2 billion. It has never happened before in our country. What is the reason? It is a way to steal Bank Negara’s money,” he said.

Bloomberg

BNM said last month the price tag is subject to a final survey of the land.

But when asked by The Edge to comment on speculation that proceeds from the sale were used to pay Ipic, Muhammad said “that is the government’s business”.

The central bank did not respond to The Straits Times when asked if payment has been made and if the land has been transferred to it. – Straits Times