PAC: To pay 1MDB debt, MoF may have pressed Bank Negara to buy land

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Bank Negara Malaysia (BNM) may have been pressured by the Finance Ministry (MoF) to buy a RM2.07 billion piece of government land in Kuala Lumpur to pay off 1Malaysia Development Bhd’s debts, a report by the Public Accounts Committee (PAC) said.

The report, tabled in Parliament today and posted on its website, said MoF had raised RM2.07 billion to pay 1MDB’s debts on December 31, 2017.

“BNM had no plans to buy Lot 41 (Section 51, Kuala Lumpur) and it was not part of the central bank’s strategic plan for 2015 to 2017,” the select committee said in the report.

BNM, which did buy the land, later said it was purchased to develop a financial education hub. PAC, however, said there were doubts about the purchase.

“Firstly, BNM did not do sufficient due diligence for the purchase and curiously, it only took the BNM board of directors just nine days after discussions with MoF on August 15, 2017.”

The board then gave its approval for the purchase on August 24, three days after MoF’s letter of offer.

“The whole transaction was completed in four months, raising questions on whether the government had pressured BNM to buy the land,” said PAC.

Additionally, PAC said that the land valuation by Suleiman & Co was overpriced at RM2.07 billion, as the government’s Valuation and Property Services Department had only valued it at RM1.42 billion.

The purchase followed 1MDB’s announcement on April 24, 2017, that it had reached a settlement with Abu Dhabi fund International Petroleum Investment Company (IPIC).

According to the terms, 1MDB will pay US$602.7 million (RM2.54 billion) by July 31, 2017, and a further amount of US$602.7 million by December 31, 2017.

On August 1, The Edge reported that 1MDB had missed its first payment of US$602.7 million.

The relationship between IPIC and 1MDB began in 2012 when the former guaranteed two bonds worth US$1.75 billion each for 1MDB to raise funds for the purchase of power-generation assets. In return, 1MDB was to make collateral payments to IPIC.

However, by the end of 2015, problems arose when IPIC/Aabar and 1MDB could not agree over a sum of missing funds owed to IPIC, and the Malaysian state investor failed to settle a US$1.2 billion loan from Abu Dhabi.

Both sides were unable to reconcile the missing monies, with Malaysia insisting it had repaid US$3.5 billion to IPIC subsidiaries while the latter maintained that it did not receive most of the funds.

In May 2016, the government of Abu Dhabi and Malaysia agreed to take the dispute for private arbitration in London. – TMI