Empty vessel makes the loudest noise
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New developments to share
- Thread starter wuqi256
- Start date
Empty vessel makes the loudest noise
Any of the mention countries can build super good track. But please I beg them, please don't give it to the fxxxing chinese.
http://news.xinhuanet.com/english2010/indepth/2011-07/24/c_131005633.htm
Follow the infrastructure: http://www.hochinsoon.com/dl/130704-FollowTheInfrastructure.pdf
Agreed. But they are driver error. Sadly to say the Chinese is lack of technology on train and track. Derail by a lighting strike, its 21st century lighting been around for a while isnt it.
Indeed, it would have been incredulous if no mishaps happened. China obtained world class train technology from German and Japanese and improved on it making it even more advanced and faster(not necessarily safer though unfortunately), built around 7000km of tracks under 5 years(that is closed to the rest of the world's combined high speed rail length. To add to that, the HSR programs are plagued with corruptions, ending with the minister responsible sentenced to death row.
In the Chinese HSR train crash, the reported reason was the traffic and emergency control systems failed to handle the scenario correctly.
Opposition leader anwar daughter launching ex BN PM badawi book in singapore. What the hell is happening?
Nurul Izzah to launch Pak Lah book in Singapore
A file picture of Nurul Izzah Anwar.
PETALING JAYA: Lembah Pantai MP Nurul Izzah Anwar has accepted an invitation to launch former Prime Minister Tun Abdullah Ahmad Badawi’s book in Singapore on Aug 30.
Nurul Izzah, the daughter of Opposition Leader Datuk Seri Anwar Ibrahim, said she had agreed to launch Awakening - the Abdullah Badawi Years in Malaysia.
The Malaysian launch of the book, set for later this month, will be launched by the former premier himself.
Abdullah, 73, was Prime Minister from 2003 to 2009.
He resigned from his posts as Prime Minister and Umno president after Barisan Nasional failed to retain its two-thirds majority in the 2008 general election.
The book is a compilation of essays jointly edited by political analysts Bridget Welsh and James Chin.
Nurul Izzah to launch Pak Lah book in Singapore
A file picture of Nurul Izzah Anwar.
PETALING JAYA: Lembah Pantai MP Nurul Izzah Anwar has accepted an invitation to launch former Prime Minister Tun Abdullah Ahmad Badawi’s book in Singapore on Aug 30.
Nurul Izzah, the daughter of Opposition Leader Datuk Seri Anwar Ibrahim, said she had agreed to launch Awakening - the Abdullah Badawi Years in Malaysia.
The Malaysian launch of the book, set for later this month, will be launched by the former premier himself.
Abdullah, 73, was Prime Minister from 2003 to 2009.
He resigned from his posts as Prime Minister and Umno president after Barisan Nasional failed to retain its two-thirds majority in the 2008 general election.
The book is a compilation of essays jointly edited by political analysts Bridget Welsh and James Chin.
LKY say Iskandar will FAIL. That is certainly going to affect sentiments now.
There are two sides to a coin, says Tok Pah about Pak Lah’s revelations in his book
PUTRAJAYA: It's a judgement call, said International Trade and Industry minister Datuk Seri Mustapha Mohamed when asked to comment on former Prime Minister Tun Abdullah Ahmad Badawi's claim in his book that the country would have gone bankrupt if he had followed through with some of Tun Dr Mahathir's projects.
"We have to understand that there are two sides to a coin. There is no such thing as a perfect programme or project. At the end of the day, it is a matter of judgement," he said Thursday.
It was reported that Abdullah had made the observation in his book titled Awakening.
In the excerpts of his book read out Tuesday, Abdullah also criticised the free rein given to the Malay daily Utusan Malaysia, saying that there was more control over the paper during his 2003-2009 tenure.
Mustapha commented that the emergence of social media made it harder to control all media.
"It is about press freedom and, with so many types of social media, it is tough to exert control," he said.
Mustapha also responded to Singapore's founding father Lee Kuan Yew's comment about Malaysia's brain drain in his book 'One man's view of the world' that was launched on Tuesday.
Mustapha said that Malaysia had a complicated society with major socio-economic differences and issues.
"If we do not address these issues, they can explode. Each of these issues has to be handled differently.
Meanwhile, Federal Territories Minister Datuk Seri Tengku Adnan Tengku Mansor also responded to Lee's brain drain comments.
"Mistakes have been made but steps are being taken to rectify matters under the prime minister. We are looking at the problem,
"No government is perfect. Even Singapore is not perfect," he said.
On Lee's comments that the Iskandar Malaysia project in Johor was unlikely to be successful, Tengku Adnan said that the project was on course and progressing well.
"Maybe, he (Lee) said that because he sees it as a threat to Singapore. I do not know. Singaporeans are also investing in Iskandar," he added.
There are two sides to a coin, says Tok Pah about Pak Lah’s revelations in his book
PUTRAJAYA: It's a judgement call, said International Trade and Industry minister Datuk Seri Mustapha Mohamed when asked to comment on former Prime Minister Tun Abdullah Ahmad Badawi's claim in his book that the country would have gone bankrupt if he had followed through with some of Tun Dr Mahathir's projects.
"We have to understand that there are two sides to a coin. There is no such thing as a perfect programme or project. At the end of the day, it is a matter of judgement," he said Thursday.
It was reported that Abdullah had made the observation in his book titled Awakening.
In the excerpts of his book read out Tuesday, Abdullah also criticised the free rein given to the Malay daily Utusan Malaysia, saying that there was more control over the paper during his 2003-2009 tenure.
Mustapha commented that the emergence of social media made it harder to control all media.
"It is about press freedom and, with so many types of social media, it is tough to exert control," he said.
Mustapha also responded to Singapore's founding father Lee Kuan Yew's comment about Malaysia's brain drain in his book 'One man's view of the world' that was launched on Tuesday.
Mustapha said that Malaysia had a complicated society with major socio-economic differences and issues.
"If we do not address these issues, they can explode. Each of these issues has to be handled differently.
Meanwhile, Federal Territories Minister Datuk Seri Tengku Adnan Tengku Mansor also responded to Lee's brain drain comments.
"Mistakes have been made but steps are being taken to rectify matters under the prime minister. We are looking at the problem,
"No government is perfect. Even Singapore is not perfect," he said.
On Lee's comments that the Iskandar Malaysia project in Johor was unlikely to be successful, Tengku Adnan said that the project was on course and progressing well.
"Maybe, he (Lee) said that because he sees it as a threat to Singapore. I do not know. Singaporeans are also investing in Iskandar," he added.
I thought the same thing! But that's the beauty of M'sian politics, so full of surprises! Looking fwd to the fireworks once Dr M starts responding...being out the popcorn!
Looks like he is worried that Iskandar will be a success and dilute SINGAPORE competitiveness. Hoe this will give the Malaysian gift more resolve to ensure Iskandar succeed.
Singapore's Lee Kuan Yew airs concern about Malaysian economic zone
By Kevin Lim
SINGAPORE, Aug 6 (Reuters) - Singapore's first prime minister, Lee Kuan Yew, warned against the risks in helping to develop an economic zone in neighbouring Malaysia, adding that the wealthy city-state he helped build might not be around in 100 years if it did not pick good leaders.
"I am absolutely sure that if Singapore gets a dumb government, we are done for," Lee, who turns 90 next month, wrote in "One Man's View of the World", a book launched on Tuesday.
Losing none of the candour that made him one of Asia's most influential leaders, Lee had sharp words for some of Singapore's neighbours, in particular Malaysia, from which Singapore split in 1965, amid ethnic tension between its Malay majority and the Chinese minority.
Lee also spoke about risks involved in the Iskandar economic zone that Malaysia is developing just north of Singapore, which has attracted large investments from the city-state.
Singapore Prime Minister Lee Hsien Loong, Lee's eldest son, and Malaysian Prime Minister Najib Razak have both promoted Iskandar, which many believe can complement Singapore, just as Shenzhen has helped Hong Kong overcome its space constraints.
"This is an economic field of co-operation in which, you must remember, we are putting investments on Malaysian soil," Lee said. "And at the stroke of a pen they can take it over."
Lee appeared alert but frail at the launch event, requiring assistance to stand and walk about. He did not take questions, but said his 400-page book recounted "90 years of various experiences" and included hard facts and hard truths.
RISKS OF "DUMB GOVERNMENT"
Lee Kuan Yew is widely credited with building Singapore into one of the world's wealthiest nations with a strong, pervasive role for the state and little patience for dissent.
His influence extended beyond the tiny population of 5.3 million, as the city-state's economic success served as a model for many developing countries, including China under Deng Xiaoping, and he still garners respect from global leaders.
In his book, Lee says he met Chinese President Xi Jinping in November 2007 in the communist leader's first meeting with a foreign leader after he was promoted to the Politburo Standing Committee.
"He struck me as a man of great breadth," said Lee, praising the way Xi endured various trials and tribulations and worked his way up through the Communist party.
"I would put him in the Nelson Mandela class of persons."
Although China is becoming increasingly powerful, Lee said the United States' economic prowess was unlikely to wane, due to its innovation skills that lead to gadgets such as the iPad.
But it was worrying that President Barack Obama had recently lost several of his aides, Lee added. "That such experienced advisers have left him is not a good sign."
Lee stepped down as prime minister in 1990, handing power to Goh Chok Tong, but remaining influential as senior minister in Goh's cabinet and subsequently as "minister mentor" when Lee Hsien Loong became prime minister in 2004.
The elder Lee resigned from his cabinet position in 2011 after his long-ruling People's Action Party (PAP) stumbled to its worst electoral showing since independence in 1965.
On his fears for the future of Singapore, Lee, who once famously vowed to rise from his grave if something went wrong with the country, now seems ready to let fate run its course.
"I have done my job," he said. "I found a successor and handed over to another generation... I cannot live forever as a young, vigorous 40- or 50-year-old." (Additional reporting by Rachel Armstrong; Editing by Clarence Fernandez)
Singapore's Lee Kuan Yew airs concern about Malaysian economic zone
By Kevin Lim
SINGAPORE, Aug 6 (Reuters) - Singapore's first prime minister, Lee Kuan Yew, warned against the risks in helping to develop an economic zone in neighbouring Malaysia, adding that the wealthy city-state he helped build might not be around in 100 years if it did not pick good leaders.
"I am absolutely sure that if Singapore gets a dumb government, we are done for," Lee, who turns 90 next month, wrote in "One Man's View of the World", a book launched on Tuesday.
Losing none of the candour that made him one of Asia's most influential leaders, Lee had sharp words for some of Singapore's neighbours, in particular Malaysia, from which Singapore split in 1965, amid ethnic tension between its Malay majority and the Chinese minority.
Lee also spoke about risks involved in the Iskandar economic zone that Malaysia is developing just north of Singapore, which has attracted large investments from the city-state.
Singapore Prime Minister Lee Hsien Loong, Lee's eldest son, and Malaysian Prime Minister Najib Razak have both promoted Iskandar, which many believe can complement Singapore, just as Shenzhen has helped Hong Kong overcome its space constraints.
"This is an economic field of co-operation in which, you must remember, we are putting investments on Malaysian soil," Lee said. "And at the stroke of a pen they can take it over."
Lee appeared alert but frail at the launch event, requiring assistance to stand and walk about. He did not take questions, but said his 400-page book recounted "90 years of various experiences" and included hard facts and hard truths.
RISKS OF "DUMB GOVERNMENT"
Lee Kuan Yew is widely credited with building Singapore into one of the world's wealthiest nations with a strong, pervasive role for the state and little patience for dissent.
His influence extended beyond the tiny population of 5.3 million, as the city-state's economic success served as a model for many developing countries, including China under Deng Xiaoping, and he still garners respect from global leaders.
In his book, Lee says he met Chinese President Xi Jinping in November 2007 in the communist leader's first meeting with a foreign leader after he was promoted to the Politburo Standing Committee.
"He struck me as a man of great breadth," said Lee, praising the way Xi endured various trials and tribulations and worked his way up through the Communist party.
"I would put him in the Nelson Mandela class of persons."
Although China is becoming increasingly powerful, Lee said the United States' economic prowess was unlikely to wane, due to its innovation skills that lead to gadgets such as the iPad.
But it was worrying that President Barack Obama had recently lost several of his aides, Lee added. "That such experienced advisers have left him is not a good sign."
Lee stepped down as prime minister in 1990, handing power to Goh Chok Tong, but remaining influential as senior minister in Goh's cabinet and subsequently as "minister mentor" when Lee Hsien Loong became prime minister in 2004.
The elder Lee resigned from his cabinet position in 2011 after his long-ruling People's Action Party (PAP) stumbled to its worst electoral showing since independence in 1965.
On his fears for the future of Singapore, Lee, who once famously vowed to rise from his grave if something went wrong with the country, now seems ready to let fate run its course.
"I have done my job," he said. "I found a successor and handed over to another generation... I cannot live forever as a young, vigorous 40- or 50-year-old." (Additional reporting by Rachel Armstrong; Editing by Clarence Fernandez)
Looks like ringgit will continue to weaken with this revelation. George may start shorting the myr. Rm3 = sgd$1?
Special Report: Debt-laden Malaysian fund stirs controversy
Your window to Malaysia
Friday, 9 August 2013
by Leslie Lopez on Wednesday, 07 August 2013 06:35
SOMETIME in September 2009, currency traders at Bank Negara Malaysia were jolted by huge purchases of US dollars in the domestic currency market and quickly decided to halt the selling pressure on the local currency. They were promptly told to stand down by their superiors.
The buildup of US dollar positions on that day paved the way for state-owned 1 Malaysia Development Bhd (1MDB) to move US$1 billion out of the country for an investment in a British Virgin Islands entity.
“At the time, no one knew where the money was headed or why such a large amount was being taken out,” said one senior Kuala Lumpur-based currency trader familiar with the episode.
“It was a company we needed to watch, because it came out of nowhere and showed clout,” said another chief dealer at a foreign bank in Kuala Lumpur.
These days, 1MDB isn’t just raising eyebrows. The secretive investment arm of the government is sending shockwaves through international bond markets and raising concern at home with its aggressive borrowings, opaque financial manoeuvres and risky bets. It is also becoming a hot political potato for Prime Minister Datuk Seri Najib Razak’s administration.
Opposition politicians insist that 1MDB is part strategic investment arm and part political slush fund for the Najib government, because of its generous financial handouts to key constituencies of the ruling Barisan Nasional (National Front) coalition.
In just over four years, 1MDB has racked up borrowings of more than US$11.97 billion (RM38.4 billion), corporate documents and published accounts reviewed by The Edge Review show. This huge accumulation of debt is against a backdrop of paltry profits, derived largely from the shuffling of assets on its Cayman Island investment and the revaluation of properties purchased at steep discounts from the government.
No Southeast Asian entity has accumulated so much debt in such a short time, and because the borrowings carry the implicit guarantee of the Malaysian government, bankers and economists say that 1MDB is emerging as a serious contingent liability for the Najib administration.
“1MDB doesn’t have strong cash flows and, at the rate it is borrowing, sooner or later the government will have to step in to take responsibility,” says a chief executive of a Malaysian bank, echoing a widely held view of 1MDB among the Kuala Lumpur business community.
For now, a government bailout may not appear imminent. But close scrutiny of 1MDB’s affairs reveal potential trouble spots that bankers and investment analysts say could suddenly spin out of control and plunge Malaysia into an explosive business scandal.
One potential flashpoint is 1MDB’s original US$1 billion investment in 2009 in 1MDB Petro*Saudi Ltd, an entity domiciled in the British Virgin Islands. 1MDB’s most recent accounts lodged with Malaysia’s Registrar of Companies show that the original investment has since more than doubled in value to US$2.3 billion, and is now “reinvested” in a company registered in the Cayman Islands. But bankers say that spectacular profits, derived from a series of financial flips with little-known entities, have raised concerns about the security of the venture.
1MDB’s dizzying buildup of debt is also drawing international attention because of the fund’s cosy relations with international banking powerhouse Goldman Sachs, which critics say has allowed the US firm to charge supernormal fees.
Over the last two years, Goldman has single-handedly structured and underwritten US$6.5 billion in bonds for 1MDB. Taken together with the US$1.6 billion the US firm raised for the state government of Sarawak on Borneo, Goldman ranks as the largest underwriter of bonds in Malaysia, outranking local powerhouses such as Malayan Banking and CIMB Group, which have long cornered the debt-raising business of state-owned entities.
1MDB declined to comment officially for this article but several government officials and financial executives involved in 1MDB’s investments spoke to The Edge Review on condition of anonymity and argued that the picture isn’t as tenuous as it appears.
Repayments on a portion of its loans in coming months will cut 1MDB’s debts to roughly RM34 billion, which is backed by assets valued at roughly RM38 billion, they say. These include liquid assets of cash and other securities valued at RM16 billion.
The officials insist that the Cayman Islands investment is safe and a planned listing of the group’s power-generation assets, set for sometime in the first half of next year, is expected to raise close to RM5 billion and strengthen its financial position.
“Viewed in a snapshot, there are some issues (that could be of concern). But the story going forward is positive,” says one senior government official, who acknowledges that the veil of secrecy surrounding 1MDB has fuelled controversy over the fund’s activities.
Private economists and bankers, however, aren’t so sanguine. They note that 1MDB’s huge borrowings are cause for concern for the Malaysian economy because of rising public sector debt.
Malaysia has consistently run budget deficits since the currency crisis that struck the region in mid-1997. That, in turn, has raised the nation’s accumulated public debt, which currently stands at 53% of the country’s gross domestic product — the highest among the 10-member Asean.
The ratio of debt-to-GDP is a broad measure of the health of an economy and Malaysia has a self-imposed ceiling of 55%. The problem, say private economists, is that the ratio doesn’t take into account liabilities of state-linked enterprises such as 1MDB, which have been on a borrowing binge to fund development activities.
The following account of 1MDB’s rise from a secretive state-owned strategic investment fund to one of Malaysia’s most debt-laden entities is based on documents reviewed by The Edge Review and interviews with dozens of bankers, financial consultants and government officials over the last four years.
Seeds of 1MDB were sown in early 2009, when businessman Low Taek Jho, who enjoys close relations with Prime Minister Najib, mooted the idea of creating a fund to manage the resources of the northeastern Terengganu state in Peninsular Malaysia.
Terengganu is a key oil-and-gas-producing state, but it has a high incidence of poverty because of poor management of its wealth over the last four decades. The plan called for the setting up of a RM10 billion fund, called the Terengganu Investment Authority, with capital raised equally by the state and federal governments through a bond issue.
The Terengganu government got cold feet, however, when it realised that the annual repayments for the bonds would prove too much for the state’s coffers. But Najib liked the idea of a strategic investment fund, and, shortly after assuming the premiership in April 2009, signed off on a government guarantee for the new fund to issue Islamic bonds to raise RM5 billion of seed capital. The money was quickly raised and the Terengganu Investment Authority was renamed 1Malaysia Development Bhd.
Almost immediately, the fund attracted controversy. Bankers attacked the maiden 30-year bond issue, because the coupon, which is the periodic interest payment a bond investor receives, was priced at an annual rate of 5.75%, a level considered high for a government guaranteed bond. While there are no perfect comparisons, bonds issued by Malaysia’s state oil corporation Petronas carry an annual coupon rate of around 3.6%.
1MDB didn’t waste any time spending the money it raised. Barely four months after the bond issue, the fund invested US$1 billion (roughly RM3.4 billion at the time) to acquire a 40% interest in a joint-venture concern with PetroSaudi International Ltd, a little-known concern incorporated in Saudi Arabia.
The fund’s move to plough 70% of its seed capital into a single venture was seen as reckless. By mid-2010, 1MDB was turning to Malaysian and foreign banks for more funding, triggering speculation that the fund’s aggressive bets had gone sour and would need fresh capital injections from the government.
At the time, 1MDB executives dismissed talk of financial trouble and insisted that the fund had turned a profit in its first year of operation. Audited accounts lodged with Malaysia’s Registrar of Companies show that the fund applied some fancy financial footwork to register a profit for the fiscal year ended March 2010. According to the accounts, 1MDB sold back its investment in the venture it controlled with PetroSaudi for a profit of roughly RM630 million barely six months after making the original investment. That deal helped 1MDB show a first-year profit of RM424.6 million.
While the headline number appeared impressive, the nature of the deal only stoked more questions, because it was a cashless transaction. After investing RM3.4 billion in cash for the venture, the state-owned fund accepted an 11-year repayment scheme structured like an Islamic bond, which included commitments from a private concern incorporated in tax havens such as the British Virgin Islands.
The deal was also red-flagged in 1MDB’s account for the year ended March 2010 by its external auditors KPMG, which suggested that the transaction was of potential concern. In its report to shareholders of the company, KPMG flagged the transaction under the heading “Emphasis of Matter”. It noted that the valuation of the transaction was undertaken by a third party and that 1MDB’s management “believes that PSI (PetroSaudi International) is in good standing” and has the ability to meet all obligations. (An “Emphasis of Matter” is an item that is typically included in an independent auditor’s report to highlight fundamental uncertainties that could have an adverse impact on a company in the future.)
1MDB’s latest published accounts show that it disposed of its PetroSaudi investment in September last year to an undisclosed external party for US$2.318 billion. But bankers and analysts question why the state-owned fund has yet to bring the money back to help finance its other ventures.
Government officials and financial executives involved in 1MDB say that these concerns are misplaced and the funds will be used to take advantage of new overseas investment opportunities.
“Bringing the money back would also result in some hefty forex (foreign exchange) losses,” argues one government official. The original investment was made when the Malaysian currency stood at just under RM3.4 to the US dollar. It is now at RM3.187 to the greenback.
While questions around the PetroSaudi venture aren’t likely to go away anytime soon, attention is now focused on 1MDB’s build-up of debt through the issuance of bonds in the international markets in order to invest in the property and electricity-generation sectors.
Over the last 18 months, 1MDB has raised close to US$9.37 billion in new debt. A big chunk of the debt — US$5.47 billion — was raised to acquire power generation assets in Malaysia and plants in Bangladesh, Egypt and the United Arab Emirates. The fund also raised another US$3 billion in late April to finance its equity interest in a 50:50 joint venture with the Abu Dhabi government.
The bond issues, which together represent one of the biggest privately placed issuance of US dollar debt in Asia in recent years, were structured singlehandedly by Goldman Sachs, and rival bankers argue that 1MDB and the Malaysian government overpaid for the deal.
Just like 1MDB’s first bond issue of RM5 billion, the coupon rate attached to the bonds that Goldman structured was well above prices for the debt of state-owned entities. “Bonds typically carry a premium of between 10 to 20 basis points over the sovereign debt. The close to 300 basis point is really pricey,” says one international bond trader.
Special Report: Debt-laden Malaysian fund stirs controversy
Your window to Malaysia
Friday, 9 August 2013
by Leslie Lopez on Wednesday, 07 August 2013 06:35
SOMETIME in September 2009, currency traders at Bank Negara Malaysia were jolted by huge purchases of US dollars in the domestic currency market and quickly decided to halt the selling pressure on the local currency. They were promptly told to stand down by their superiors.
The buildup of US dollar positions on that day paved the way for state-owned 1 Malaysia Development Bhd (1MDB) to move US$1 billion out of the country for an investment in a British Virgin Islands entity.
“At the time, no one knew where the money was headed or why such a large amount was being taken out,” said one senior Kuala Lumpur-based currency trader familiar with the episode.
“It was a company we needed to watch, because it came out of nowhere and showed clout,” said another chief dealer at a foreign bank in Kuala Lumpur.
These days, 1MDB isn’t just raising eyebrows. The secretive investment arm of the government is sending shockwaves through international bond markets and raising concern at home with its aggressive borrowings, opaque financial manoeuvres and risky bets. It is also becoming a hot political potato for Prime Minister Datuk Seri Najib Razak’s administration.
Opposition politicians insist that 1MDB is part strategic investment arm and part political slush fund for the Najib government, because of its generous financial handouts to key constituencies of the ruling Barisan Nasional (National Front) coalition.
In just over four years, 1MDB has racked up borrowings of more than US$11.97 billion (RM38.4 billion), corporate documents and published accounts reviewed by The Edge Review show. This huge accumulation of debt is against a backdrop of paltry profits, derived largely from the shuffling of assets on its Cayman Island investment and the revaluation of properties purchased at steep discounts from the government.
No Southeast Asian entity has accumulated so much debt in such a short time, and because the borrowings carry the implicit guarantee of the Malaysian government, bankers and economists say that 1MDB is emerging as a serious contingent liability for the Najib administration.
“1MDB doesn’t have strong cash flows and, at the rate it is borrowing, sooner or later the government will have to step in to take responsibility,” says a chief executive of a Malaysian bank, echoing a widely held view of 1MDB among the Kuala Lumpur business community.
For now, a government bailout may not appear imminent. But close scrutiny of 1MDB’s affairs reveal potential trouble spots that bankers and investment analysts say could suddenly spin out of control and plunge Malaysia into an explosive business scandal.
One potential flashpoint is 1MDB’s original US$1 billion investment in 2009 in 1MDB Petro*Saudi Ltd, an entity domiciled in the British Virgin Islands. 1MDB’s most recent accounts lodged with Malaysia’s Registrar of Companies show that the original investment has since more than doubled in value to US$2.3 billion, and is now “reinvested” in a company registered in the Cayman Islands. But bankers say that spectacular profits, derived from a series of financial flips with little-known entities, have raised concerns about the security of the venture.
1MDB’s dizzying buildup of debt is also drawing international attention because of the fund’s cosy relations with international banking powerhouse Goldman Sachs, which critics say has allowed the US firm to charge supernormal fees.
Over the last two years, Goldman has single-handedly structured and underwritten US$6.5 billion in bonds for 1MDB. Taken together with the US$1.6 billion the US firm raised for the state government of Sarawak on Borneo, Goldman ranks as the largest underwriter of bonds in Malaysia, outranking local powerhouses such as Malayan Banking and CIMB Group, which have long cornered the debt-raising business of state-owned entities.
1MDB declined to comment officially for this article but several government officials and financial executives involved in 1MDB’s investments spoke to The Edge Review on condition of anonymity and argued that the picture isn’t as tenuous as it appears.
Repayments on a portion of its loans in coming months will cut 1MDB’s debts to roughly RM34 billion, which is backed by assets valued at roughly RM38 billion, they say. These include liquid assets of cash and other securities valued at RM16 billion.
The officials insist that the Cayman Islands investment is safe and a planned listing of the group’s power-generation assets, set for sometime in the first half of next year, is expected to raise close to RM5 billion and strengthen its financial position.
“Viewed in a snapshot, there are some issues (that could be of concern). But the story going forward is positive,” says one senior government official, who acknowledges that the veil of secrecy surrounding 1MDB has fuelled controversy over the fund’s activities.
Private economists and bankers, however, aren’t so sanguine. They note that 1MDB’s huge borrowings are cause for concern for the Malaysian economy because of rising public sector debt.
Malaysia has consistently run budget deficits since the currency crisis that struck the region in mid-1997. That, in turn, has raised the nation’s accumulated public debt, which currently stands at 53% of the country’s gross domestic product — the highest among the 10-member Asean.
The ratio of debt-to-GDP is a broad measure of the health of an economy and Malaysia has a self-imposed ceiling of 55%. The problem, say private economists, is that the ratio doesn’t take into account liabilities of state-linked enterprises such as 1MDB, which have been on a borrowing binge to fund development activities.
The following account of 1MDB’s rise from a secretive state-owned strategic investment fund to one of Malaysia’s most debt-laden entities is based on documents reviewed by The Edge Review and interviews with dozens of bankers, financial consultants and government officials over the last four years.
Seeds of 1MDB were sown in early 2009, when businessman Low Taek Jho, who enjoys close relations with Prime Minister Najib, mooted the idea of creating a fund to manage the resources of the northeastern Terengganu state in Peninsular Malaysia.
Terengganu is a key oil-and-gas-producing state, but it has a high incidence of poverty because of poor management of its wealth over the last four decades. The plan called for the setting up of a RM10 billion fund, called the Terengganu Investment Authority, with capital raised equally by the state and federal governments through a bond issue.
The Terengganu government got cold feet, however, when it realised that the annual repayments for the bonds would prove too much for the state’s coffers. But Najib liked the idea of a strategic investment fund, and, shortly after assuming the premiership in April 2009, signed off on a government guarantee for the new fund to issue Islamic bonds to raise RM5 billion of seed capital. The money was quickly raised and the Terengganu Investment Authority was renamed 1Malaysia Development Bhd.
Almost immediately, the fund attracted controversy. Bankers attacked the maiden 30-year bond issue, because the coupon, which is the periodic interest payment a bond investor receives, was priced at an annual rate of 5.75%, a level considered high for a government guaranteed bond. While there are no perfect comparisons, bonds issued by Malaysia’s state oil corporation Petronas carry an annual coupon rate of around 3.6%.
1MDB didn’t waste any time spending the money it raised. Barely four months after the bond issue, the fund invested US$1 billion (roughly RM3.4 billion at the time) to acquire a 40% interest in a joint-venture concern with PetroSaudi International Ltd, a little-known concern incorporated in Saudi Arabia.
The fund’s move to plough 70% of its seed capital into a single venture was seen as reckless. By mid-2010, 1MDB was turning to Malaysian and foreign banks for more funding, triggering speculation that the fund’s aggressive bets had gone sour and would need fresh capital injections from the government.
At the time, 1MDB executives dismissed talk of financial trouble and insisted that the fund had turned a profit in its first year of operation. Audited accounts lodged with Malaysia’s Registrar of Companies show that the fund applied some fancy financial footwork to register a profit for the fiscal year ended March 2010. According to the accounts, 1MDB sold back its investment in the venture it controlled with PetroSaudi for a profit of roughly RM630 million barely six months after making the original investment. That deal helped 1MDB show a first-year profit of RM424.6 million.
While the headline number appeared impressive, the nature of the deal only stoked more questions, because it was a cashless transaction. After investing RM3.4 billion in cash for the venture, the state-owned fund accepted an 11-year repayment scheme structured like an Islamic bond, which included commitments from a private concern incorporated in tax havens such as the British Virgin Islands.
The deal was also red-flagged in 1MDB’s account for the year ended March 2010 by its external auditors KPMG, which suggested that the transaction was of potential concern. In its report to shareholders of the company, KPMG flagged the transaction under the heading “Emphasis of Matter”. It noted that the valuation of the transaction was undertaken by a third party and that 1MDB’s management “believes that PSI (PetroSaudi International) is in good standing” and has the ability to meet all obligations. (An “Emphasis of Matter” is an item that is typically included in an independent auditor’s report to highlight fundamental uncertainties that could have an adverse impact on a company in the future.)
1MDB’s latest published accounts show that it disposed of its PetroSaudi investment in September last year to an undisclosed external party for US$2.318 billion. But bankers and analysts question why the state-owned fund has yet to bring the money back to help finance its other ventures.
Government officials and financial executives involved in 1MDB say that these concerns are misplaced and the funds will be used to take advantage of new overseas investment opportunities.
“Bringing the money back would also result in some hefty forex (foreign exchange) losses,” argues one government official. The original investment was made when the Malaysian currency stood at just under RM3.4 to the US dollar. It is now at RM3.187 to the greenback.
While questions around the PetroSaudi venture aren’t likely to go away anytime soon, attention is now focused on 1MDB’s build-up of debt through the issuance of bonds in the international markets in order to invest in the property and electricity-generation sectors.
Over the last 18 months, 1MDB has raised close to US$9.37 billion in new debt. A big chunk of the debt — US$5.47 billion — was raised to acquire power generation assets in Malaysia and plants in Bangladesh, Egypt and the United Arab Emirates. The fund also raised another US$3 billion in late April to finance its equity interest in a 50:50 joint venture with the Abu Dhabi government.
The bond issues, which together represent one of the biggest privately placed issuance of US dollar debt in Asia in recent years, were structured singlehandedly by Goldman Sachs, and rival bankers argue that 1MDB and the Malaysian government overpaid for the deal.
Just like 1MDB’s first bond issue of RM5 billion, the coupon rate attached to the bonds that Goldman structured was well above prices for the debt of state-owned entities. “Bonds typically carry a premium of between 10 to 20 basis points over the sovereign debt. The close to 300 basis point is really pricey,” says one international bond trader.
Yup, you are right. Iskandar is sucking singaporean money. let's see if this can make iskandar into the new jurong & jb into the new woodland. caveat emptor.
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