1MDB RESTRUCTURE

As posted by Dr. Mahathir Mohamad at Che Det on June 04, 2015

1. The 2nd Finance Minister has presented Cabinet with a restructuring plan for 1MDB which will solve all it’s problems. I would like once again to repeat that repayment of the debt does not absolve the borrowers from responsibility for losing the money in the first place. The money is not lost through bad businesses but has simply disappeared. Somebody knows how the money disappeared and who has the money now. But that somebody is not telling.

2. Now the restructuring process.

3. IPIC is said to have invested 1 billion U.S. dollar in 1MDB. It is not a loan as claimed by the 2nd Finance Minister. Certainly it is not a free gift. What does IPIC get for its 1 billion dollars from 1MDB. It must be the assets of 1MDB.

4. IPIC may be putting in another 3 billion USD. The money which 1MDB gets will be used to repay the German Bank which had lent approximately 1 billion USD The additional 3 billion USD will be for transferring the landed assets of 1MDB.

5. 1MDB had acquired Government land worth between RM4000/- toRM7000/- psf at RM60/- to RM90/- psf. Actually the price paid by1MDB for Government land represents or reflects an abuse of authority. The right thing to do is to pay the market price of the land before it is developed or disposed of.

6. If IPIC pays 4 billion USD to 1MDB, effectively IPIC become owner of the assets of 1MDB.

7. 1MDB actually gets nothing as the money from IPIC will go towards paying the interest and loans of 1MDB to reduce the total loans of RM42 billion to a smaller amount.

8. On this smaller loan 1MDB would still have to pay interest until money is found to pay off the principal.

9. So how does this restructuring benefit 1MDB. It would:

• Lose control of 1MDB to IPIC.
• Any development of the land would accede to IPIC.
• The deal would result in the Malaysian Government losing billions of Ringgit unless market price is paid for TRX and Bandar Malaysian land.
• 1MDB would still have to pay interest on the balance of the loan and eventually billions of Ringgit to settle the loans. Having lost the most valuable part of its assets, how does it raise money.
• 1MDB would still have to sell off the power plants. Since it paid higher than market value for the plants it will not be able to list it or sell at the purchase price. It will have to lose at least 3 billion Ringgit simply to get rid of the plants.

10. So far there is no evidence that money amounting to 4 billion dollars (14 billion Ringgit) from Cayman Islands is in Singapore. That money has disappeared unless 1MDB can show there are “units” with value in money in Singapore. The units must be converted to real money to be credible.

11. The restructuring plan presented by the 2nd Minister of Finance cannot erase the problem of 1MDB, cannot erase the fact that money borrowed by 1MDB has disappeared, that the Government of Malaysia will lose billions of Ringgit. Part of the loan may be redeemed but a very substantial amount will remain. Certainly the restructuring will not result in the lost money being recovered.

12. There are too many evidence of cover-ups by politician and civil servants. When Najib is defeated and I believe he will, in the next election, there will be no stopping the legal actions which must follow.

13. I hope the restructuring will help but unless the lost money is returned, paying off debts will absolve no one.

REPAYMENT OF DEBTS

As posted by Dr. Mahathir Mohamad at Che Det on May 29, 2015

1. There seems to be some confusion over repayment of debts and the loss of money by 1MDB.

2. Even if the debts are fully paid up through the sale of assets bought by 1MDB, that does not mean that 1MDB is free from the charge that it cannot account for the billions it had lost.

3. In business, money can be lost through bad investments or bad management. That is acceptable though the CEO and Managers would be sacked.

4. But when money is lost and the management cannot explain where it went and how it disappeared then management would still be responsible even if there is a bailout or the debts paid.

5. Thus with money claimed to have been invested in Cayman Islands and despite claims that it had been brought back and is now in Singapore, the money cannot be demonstrated to be there in tangible form, then management will be held responsible for its loss. The assumption must be that management had misappropriated the money unless otherwise proven.

6. As for the GST, the additional fund raised through it is at the expense of the people. They have to pay more for everything they buy, which means their purchasing power is reduced. In other words they have become poorer, in order to enrich the Government.

7. Even if what they buy is not subject to GST, but the wholesalers who supply the retailers have to increase their price because they have to pay GST. The retailers in turn have to recover the higher cost by charging their customers more. In the end the people have to bear the GST cost.

8. The Government can avoid this additional tax on the people by reducing its own cost. Giving out money to all and sundry may be popular but in most cases the recipients do not really need the money. It is far better to educate and train people for higher-paying jobs when incomes would increase substantially in return for work done. Raising wages without increases in productivity, increasing the number of holidays, substituting those falling on weekends, fixing high minimum wages, wasting money on luxuries – all these increase Government expenditure, resulting in increased deficits. With better financial management the GST need not be imposed on the people.

9. Of course adventures such as the 1MDB and Pembinaan PFI only result in unsustainable borrowings. And when these adventures lose money, the financial burden of the Government is increased. By introducing the GST, Government is actually asking the people, including those who are not in the income tax bracket to bail out the Government.

10. An elected leader is not impervious to removal before his term is out. The previous PM was also elected, in fact with a bigger majority. But he was persuaded to step down by the current PM.

11. So what is wrong with asking the current PM to step down. He has obviously made a bigger mess of the country than the previous PM.

12. Before this, there was no talk of PM’s lavish spending, of purchases of expensive things, of a life of luxury. Some of these talks may not be true. But such talks were not heard during the tenure of the previous Prime Ministers. That there are such talks must be the result of a way of life that is different from what is expected of Prime Ministers.

13. For these and many other reasons, Najib should step down.

14. As to the big crowd in support, we all saw such demonstrations before the 13th General Election. The result was worst than the 12th GE. Those demonstrations do not translate into support for Najib. They come because of various incentives.