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Saturday, 3 September 2016

Answering A Kadir Jasin's "Kewangan Kerajaan Pusat genting"

Yesterday, I had posted a reply to the irresponsible fake "Tun Daim" whatsapp message that is circulating. I had pointed out that the message sole purpose seems to be spreading lies to incite hatred and fears about the economy which would stop people from spending and investing - a self-fulfiling prophecy that if left unchecked, will cause damage to our economy.

Today, yet another stalwart of Mahathir has published an article in Sinar Harian that also seems to have the same purpose as the "Tun Daim" message.

A Kadir Jasin, a long-time Mahathir supporter, said that Malaysia's government debt had increased from RM250 billion in 2010 to RM656 billion in June this year.

Well, A Kadir is wrong. The govt debt in 2010 is RM407.1 billion or 53.15% of our GDP. How can Kadir make such a shocking mistake or was he trying to deceive?

Even at RM656 billion, our government debt is still within the 55% debt to GDP ratio limit as our economy has expanded since 2010.

Does Kadir also realize the size of Malaysia's GDP/economy today is almost 3 1/2 times the size of what it was when Mahathir retired in 2003?


As long as our ratio is within limits, the overall debt can grow as our yearly income and economy size will also grow.

A simple illustration to show this:

Who is more likely to go bankrupt first?

A person whose income is RM36k per year but  have debt of RM40k (Malaysia's GDP in 1987 is USD36 billion and govt debt was USD40 billion) or a person whose income is now RM350k per year and have debt of RM130k? 
Even though the actual debt amount is now 3 times more but the person whose income is RM36k per year will go bankrupt first.

Here is an excerpt from the 2012 book "Malaysia's Development Challenges: Graduating from the Middle". You can also google for Malaysia's debt-to-GDP in the 1980s and what Mahathir did in his first 7 years in charge.


We did not go bankrupt and our country crash and burn at more than 100% Debt-to-GDP so why should we go bankrupt now at 55%?

Here is a more comprehensive chart showing this relationship:


As mentioned yesterday, according to the CIA's world factbook, Malaysia at 54% is at 71st place in the countries with the highest debt to GDP ratio.

According to PakaTun logic, this means that these 70 countries will have to go bankrupt before Malaysia's turn.

JAPAN, ZIMBABWE, GREECE, LEBANON, ITALY, PORTUGAL, ERITREA, JAMAICA, CABO VERDE, GRENADA, CYPRUS, BELGIUM, SINGAPORE, PUERTO RICO, IRELAND, BARBADOS, SPAIN, BHUTAN, FRANCE, CANADA, UKRAINE, SAO TOME AND PRINCIPE, YEMEN, EGYPT, UNITED KINGDOM, CROATIA, ANTIGUA AND BARBUDA, EUROPEAN UNION, AUSTRIA, SAINT KITTS AND NEVIS, ICELAND, BELIZE, JORDAN, SAINT LUCIA, GHANA, HUNGARY, SERBIA, SRI LANKA, UNITED STATES, MOROCCO, ALBANIA, MALDIVES, SUDAN, MONGOLIA, GERMANY, DOMINICA, NETHERLANDS, URUGUAY, GUYANA, BRAZIL, SAINT VINCENT AND THE GRENADINES, ARUBA, BAHRAIN, EL SALVADOR, PAKISTAN, ISRAEL, SLOVENIA, FINLAND, MAURITIUS, MALAWI, MALTA, ZAMBIA, COSTA RICA, MONTENEGRO, MOZAMBIQUE, THE BAHAMAS, SYRIA, ANGOLA, SENEGAL, SEYCHELLES.

Those who hate our government and wishes for Malaysia will just simply have to wait in line behind those countries mentioned above.

Kadir also said that Malaysia is running a budget deficit but conceded that it has reduced from 6.7% in 2009 to 3.2% in 2015.

But does Kadir know that Najib ran a bigger deficit in 2009 and 2010 to save our economy from the Great Global Recession (the worst since the Great Depression in the 1930s) but since 2011, have run a deficit that is smaller (and getting increasingly smaller) compared to the last 5 years that Mahathir ran the country up to 2003?


As you can see, Malaysia's budget deficit is getting progressively smaller due to good management. This is why the World Bank and IMF praises Najib's government on economic management and the major international credit ratings agencies all have A- investment grade ratings and a stable outlook for Malaysia.

If Kadir really wants to warn someone regarding unrestrained government spending then I suggest he writes an open letter to Mahathir's allies in the DAP Penang Government as their state annual spending has jumped many folds since they took over in 2008. They are definitely more in need of an "A Kadir Jasin" warning.


Kadir ended his article with saying that the government should be truthful to the rakyat on the true state of the economy and that the "Ekonomi tidak berbohong" or "The economy doesn't lie".

I agree but he did not say that Mahathir's supporters won't lie when writing about the economy.

Mahathir supporters and the opposition are the ones who should be truthful on the true state of the economy instead of inciting fears based on false data or faulty interpretation.

Najib saved us from the Great Recession following the US Sub-prime crash in the 2007-2008. By all accounts and data (instead of air liur), the economy has been well managed despite a big slump in oil revenues amidst the commodities crash in second half 2014 until now.

Let's have confidence that Najib's government will continue to steer us well. He has not failed like Mahathir had.

Throughout Mahathir's 22 years in charge, he led us through two very severe recessions in the mid 1980s and in 1998 and three major slowdowns - the last of which was just before he retired.

In the face of the current BREXIT and the China slowdown, which are global issues, it is better for people like Kadir and their gang to support and instill confidence in the economy rather than trying to intentionally or inadvertently harm the economy.

I wrote this yesterday but will repeat it again:

The opposition frequently spread false, misleading lies such as this to destroy confidence in what is known as a "self-fulfilling prophecy". Imagine if everyone believe what is in this message then no one will spend and if no one will spend then all the shops will close down, he factories will also close down and then the banks will close down and et cetera. Somewhere along the line, you and I and everyone else will also lose their jobs or business.

Therefore, spreading such lies is not helpful to Malaysia but you are harming Malaysia and ourselves.

These people don't care what happens to Malaysia as long as they get what they want. They think that if the economy is bad then it is easier for them to win power. These people are despicable.

Do not fall for their lies and spread such negative messages to incite hate, create fear which will eventually end up hurting ourselves.

Stop it, you fake hateful people with hidden agenda.

Trying to destroy your own country's economy and bringing harm to tens of millions just for your political agenda is not only treachery but brings to mind the following saying.

"Don't cut off your nose to spite your face."

My Reply to "Tun Daim", msg from a friend from the financial sector....

(Versi Melayu ada di bawah)

DEAR "TUN DAIM",

This is my reply to you (your message in italics and mine in bold):

Just Sharing a msg from a friend from the financial sector....
Malaysian Currency is expected to depreciate further to RM 4.50 by end of September as Ringgit is not used as currency's for trading in world stock exchange. Ringgit will stumbled as the govt further cut on export of crude oil due to over over supply.


Currency go up and down. Right now we are at USD1 to RM4.00 but we were at USD1 to RM4.47 at the beginning of the year. Our lives did not change much when our ringgit depreciated from RM3:20 to RM4.00 over the past few years. Neither did we suddenly become richer when our currency appreciated from RM3.73 to RM3 from 2008 to 2012. Similarly, the United Kingdom also did not go bust when the UK pounds depreciated from £1 to RM6.75 in Oct 2015 to RM5.20 just recently.

In fact, a weaker Ringgit allows us to compete stronger as was evidence by our continued improvement in foreign trade and our trade surplus where our manufactured and services industry benefited strongly despite the weakness in GLOBAL oil prices, which is beyond the control of Malaysia. This will help Malaysia further diversify our economy so we will be less dependent on commodity exports.


Everyone should take precaution as this is a economy disasters as a whole. Bank Negara held reserved is only RM101 billion at this moment. But Our debt has climbed to Rm 614,880,270 billion. Which means each tax paying citizen has a debt of Rm18,835. Current advice is Stop investing in any ventures , properties or car. Cash in hand is safe..as Disaster is on the way.
You have the amount of our BNM reserves correct but the currency is wrong. Our current BNM reserves is not RM101 billion but USD101 billion (or thereabouts as it fluctuates too), meaning RM400 billion. I am surprised that a "Tun Daim" would make such a silly mistake.

As for our govt debt, don't just look at the absolute amount but the debt to GDP ratio which means our debt compared to our yearly income. We are at about 54% right now. When Mahathir became PM in 1982, he ramped up this ratio from 40% to more than 100% within 5 years and we didn't go bankrupt then. Neither will we go bankrupt now at 54%.

In fact, according to the CIA's world factbook, Malaysia at 54% is at 71st place in the countries with the highest debt to GDP ratio - meaning 70 other countries have to go bankrupt first before reaching Malaysia's turn - and this includes countries such as Japan,, Singapore, UK, USA, Germany etc..

Penang has right now embarked on a Transport Masterplan project costing RM46 billion where the state govt said they will borrow to fund the project. Divided by 1.6 million people in Penang, this will mean RM28,750 per person And if you believe RM18,835 per person will make Malaysia bankrupt then RM28,750 per person would mean Penang will go bankrupt faster than the rest of the country.

World Economic Analyst predict within the next 3 months, Malaysia economy . will collapse. Stock market & currency value will take a nose dive in a drastic manner.
This is due to world negative economic outlook for the year 2017


I think we have heard this many times. Which "World Economic Analyst" are you talking about? Malaysia is still enjoying robust 4.1% GDP growth over the past 6 months, our stock market is still double of what it was in 2009 and our trade surplus and reserves are strong. So, how are we going to collapse?

Crude oil will crash due to oversupply. As Americans are pumping more crude oil. The reasons: i) to hurt Russian's economy and her currency as Russian is world's no1.ii) ISIS in order to finance their survival is also selling cheap smuggled crude oil from Syria & Iraq thus flooding the oil market..
Malaysia's oil production will be hit due to this...apart from the current political uncertainty and corruption which discourages foreign investments...

Our oil production and exports were already hurt - in 2009, oil represented 44% of our govt revenues and it is only 17% last year and 11% this year. And we still did not collapse. Even if it drops another 11% and it goes to zero oil revenues, we won't collapse as our other industries such as manufacturing and services and our domestic economy will continue to drive our growth.

The world has perceived Malaysia as ranking no.1 for : i) Corruption & Scandals and financial forgery in money laundering. .

Actually, Malaysia is ranked at 54th least corrupt out of 179 countries in the latest Transparency International Corruption Perception Index - certainly not number one. I am not sure who ranked us number one but it is certainly not any recognized bodies.

So my dear friends,please spend your money wisely. Keep your Money for rainy days. As we are heading towards difficult and bumpy days . The journey will be tough & unpredictable. This will hit hard on all of us, regardless whether you are rich or poor. All the best to All ..............Tun Daim
It is always good to spend where it is necessary but such fake whatsapp messages such as yours are frequently spread by sneaky opposition parties to destroy confidence in the Malaysian economy.

Therefore, the opposition frequently spread false, misleading lies such as this to destroy confidence in what is known as a "self-fulfilling prophecy". Imagine if everyone believe what is in this message then no one will spend and if no one will spend then all the shops will close down, he factories will also close down and then the banks will close down and et cetera. Somewhere along the line, you and I and everyone else will also lose their jobs or business.

Therefore, spreading such lies is not helpful to Malaysia but you are harming Malaysia and ourselves.

These people don't care what happens to Malaysia as long as they get what they want. They think that if the economy is bad then it is easier for them to win power. These people are despicable. Do not fall for their lies and spread such negative messages to incite hate, create fear which will eventually end up hurting ourselves.

Stop it, "Tun Daim" and the rest of you fake hateful people.

-------------------------------------------------------------------------------------
Malay version follows:

Kerapkali berlegar di kalangan pengguna aplikasi telefon pintar, mesej menggunakan nama ‘Tun Daim’ kononnya menceritakan mengenai ekonomi namun ditulis secara terpesong. Ia akan dikongsikan pelbagai pihak tanpa memeriksa kesahihannya. Terkini, mesej menggunakan nama 'Tun Daim itu mendakwa kononnya ekonomi Malaysia akan runtuh. Berikut dipaparkan jawapan kepada ‘Tun Daim’ mengenai ekonomi negara: DUHAI "TUN DAIM", Ini adalah jawapan saya kepada anda. ‘Tun Daim’ mendakwa: Hanya berkongsi satu mesej daripada seorang rakan daripada sektor kewangan.. Nilai matawang Ringgit dijangka akan menyusut kepada RM4.50 menjelang hujung September ini kerana Ringgit tidak digunakan sebagai matawang dagangan saham dunia. Ringgit akan runtuh kerana kerajaan menyekat eksport minyak mentah ekoran lebihan bekalan. JAWAPAN SAYA: Nilai matawang akan turun dan naik. Ketika ini, Ringgit adalah USD1 kepada RM4.00 dan kita pernah berada pada USD1 kepada RM4.47 awal tahun ini. Kehidupan kita tidak terjejas ketika ringgit menyusut daripada RM3.20 kepada RM4.00 pada beberapa tahun ini. Kita juga tidak tiba-tiba menjadi kaya apabila nilai matawang kita meningkat daripada RM3.73 pada 2008 kepada RM3 pada 2012. Begitu juga dengan United Kingdom yang tidak runtuh apabila Pound UK menyusut daripada £1 bersamaan RM6.75 Oktober lalu dan kepada RM5.20 just baru-baru ini. Malah, Ringgit yang lemah membolehkan kita bersaing lebih kukuh dan ini dibuktikan dengan peningkatan berterusan dalam dagangan asing dan lebihan dagangan di mana industri perkhidmatan dan pengeluaran menerima manfaat lebih baik disebalik kelemahan harga minyak dunia, yang di luar kawalan Malaysia. Ini akan membantu Malaysia untuk mempelbagaikan ekonomi negara agar kurang bergantung kepada eksport komoditi. ‘Tun Daim’ mendakwa: Semua perlu mengambil langkah berjaga-jaga kerana ia adalah keruntuhan ekonomi secara keseluruhan. Rizab Bank Negara pada ketika ini adalah RM101 bilion. Tetapi hutang kita telah melonjak kepada RM614,880,270 bilion. Ini bermakna setiap cukai dibayar rakyat menanggung hutang RM18.835. Nasihat pada ketika ini ialah berhenti melabur dalam apa juga pelaburan, hartanah dan kereta. Tunai dalam tangan adalah selamat kerana malapetaka bakal menimpa. JAWAPAN SAYA: Anda menulis jumlah rizab BNM dengan tepat sekali namun dalam matawang yang salah. RIzab BNM ketika ini bukanlah RM101 bilion tetapi USD101 bilion, bermakna berjumlah RM400 bilion. Saya terkejut kerana seorang bernama ‘Tun Daim’ boleh melakukan kesilapan yang mengarut seperti itu. Dan bagi hutang kerajaan pula, jangan melihat kepada jumlah semata-mata tetapi antara nisbah hutang berbanding Keluaran Dalam Negara Kasar (KDNK) di mana ia bermakna hutang berbanding perolehan tahunan negara. Kita adalah pada paras 54 peratus ketika ini. Ketika zaman Tun Dr Mahathir pada 1982, beliau telah meningkatkan nisbah hutang daripada 40 peratus kepada 100 peratus dalam tempoh 5 tahun namun kita tetap tidak bankrap. Kita juga tidak akan bankrap pada 54 peratus. Malah, berdasarkan kepada laporan fakta Agensi Perisikan Pusat (CIA) Amerika Syarikat, Malaysia dengan hutang 54 peratus berada di kedudukan 71 bagi negara mempunyai nisbah hutang tinggi berbanding KDNK, bermakna ia memerlukan 70 negara lain untuk bankrap terlebih dahulu sebelum tiba kepada giliran Malaysia, dan ini termasuk negara seperti Jepun, Singapura, UK, Amerika Syarikat, Jerman dan lain-lain. Pulau Pinang kini memulakan projek Pelan Pengangkutan melibatkan kos RM46 bilion di mana kerajaan negeri diterajui DAP itu mengesahkan akan membuat pinjaman bagi membiayai projek itu. Dibahagikan kepada 1.6 juta penduduk di Pulau Pinang, ia bermakna setiap rakyat Pulau Pinang menanggung RM28,750 setiap seorang. Jika anda percaya RM18,835 boleh membuatkan Malaysia bankrap, ia bermakna RM28,750 setiap seorang akan membuatkan Pulau Pinang bankrap lebih pantas daripada negara ini. ‘Tun Daim’ mendakwa: Penganlisa Ekonomi Global mengunjurkan bagi tempoh tiga bulan akan datang, ekonomi Malaysia akan runtuh. Pasaran saham dan nilai matawang akan menjunam dalam keadaan drastik. Ia lantaran unjuran ekonomi dunia yang negatif bagi tahun 2017. JAWAPAN SAYA: Saya rasa kita sudah mendengar dakwaan ini banyak kali. ‘Penganalisa Ekonomi Dunia’ manakah yang anda maksudkan? Malaysia masih lagi menikmati pertumbuhan menggalakkan sebanyak 4.1 peratus bagi tempoh 6 bulan ini, pasaran saham masih lagi berganda berbanding 2009 dan lebihan dagangan serta rizab masih lagi kukuh. Jadi, bagaimanakah agaknya kita akan ‘runtuh’? ‘Tun Daim’ mendakwa: Minyak mentah akan runtuh lantaran lebihan bekalan. Memandangkan Amerika Syarikat mengeluarkan lebih banyak minyak. Alasannya ialah: i) bagi menjejaskan ekonomi Russia dan matawangnya kerana Russia berada di kedudukan pertama dunia. Ii} ISIS dalam membiayai penjajahan mereka turut menjual minyak mentah seludup daripada Syria dan Iraq turut menjualnya pada harga murah hingga membanjiri pasaran minyak mentah. Pengeluaran minyak Malaysia akan terjejas berikutan keadaan ini, selain ketidaktentuan politik Malaysia dan rasuah yang mengekang pelaburan asing. JAWAPAN SAYA: Pengeluaran minyak dan eksport kita sudahpun terjejas, pada 2009, minyak mewakili 49 peratus daripada pendapatan kerajaan dan hanya 17 peratus pada tahun lalu manakala 11 peratus sahaja tahun ini. Namun kita masih tidak lagi runtuh. Jika ia jatuh kepada 11 peratus lagi sekalipun dan tiada pendapatan daripada minyak sekalipun, kita tidak akan runtuh kerana industry lain seperti pengeluaran dan perkhidmatan serta ekonomi domestik kita masih terus mengukuhkan pertumbuhan ekonomi negara. ‘Tun Daim’ mendakwa: Dunia telah menganggap Malaysia berada di kedudukan nombor 1 bagi i) Rasuah dan skandal serta penipuan kewangan dalam pengubahan wang. JAWAPAN SAYA: Sebenarnya, Malaysia berada di tempat 54 bagi negara yang paling kurang rasuah daripada jumlah 179 negara paling rasuah melalui Indeks Persepsi Transparency International, dan bukannya nombor satu. Saya tidak tahu siapa yang meletakkan kita di nombor satu, tetapi tentunya bukan sebuah badan yang dikenali. ‘Tun Daim’ mendakwa: Maka, sahabat sekalian, belanjalah wang dengan cermat. Simpan wang anda untuk waktu terdesak. Kerana kita menuju kea rah kesulitan dan kesusahan. Perjalanan ini akan lebih sukar dan tidak dapat dijangka. Ia akan menjejaskan kita semua, tak kira anda kaya atau miskin. Ucap selamat kepada anda semua.. Tun Daim. JAWAPAN SAYA: Adalah baik untuk berbelanja kepada keperluan tetapi mesej whatsapp palsu seperti daripada anda ini semakin kerap disebarkan oleh pihak pembangkang bagi memusnahkan keyakinan pada ekonomi Malaysia. Pembangkang kerap menyebarkan penipuan, cerita palsu bagi meruntuhkan keyakinan bagi memuaskan nafsu politik mereka. Bayangkan jika semua orang percaya penipuan dalam mesej ini dan tiada siapa pun akan berbelanja dan apabila tiada sesiapa berbelanja, maka tutuplah kesemua kedai, kilang juga akan tutup dan bank juga akan tutup. Pada masa yang sama, anda atau saya akan kehilangan pekerjaan atau perniagaan. Untuk itu, menyebarkan tipu daya seperti ini tidak akan membantu Malaysia tetapi anda sendiri akan merosakkan Malaysia dan diri kita. Manusia seperti itu tidak peduli apa akan jadi kepada Malaysia asalkan mereka mendapat apa yang mereka mahukan iaitu melihat Malaysia menjadi rosak. Mereka fikir, jika mereka dapat merosakkan ekonomi negara, ia akan lebih mudah untuk mereka merampas kuasa. Manusia seperti ini adalah manusia jijik. Jangan terperdaya kepada penipuan mereka dan menyebarkan mesej sarat dengan penipuan mereka bagi mencetuskan rasa benci, ketakutan yang akhirnya akan merosakkan kita semua. Hentikanlah duhai ‘Tun Daim’ serta anda semua yang palsu dan penuh kebencian.

Thursday, 18 August 2016

Domestic arrests: IPIC's ex-MD Khadem Al Qubasi taken into custody in Abu Dhabi

Quoting people familiar with the matter, WSJ had just reported that Abu Dhabi authorities have arrested Khadem Al Qubaisi,  the 14th most powerful man in the Arab world in 2015.

"The arrest last week was made in relation to an Abu Dhabi investigation into fraud and corruption, which includes Mr. Qubaisi’s alleged role in the 1MDB, affair," WSJ said.

But no charges have been filed against Khadem.

The part that I found most intriguing is that WSJ also said that "the U.S. investigators are also probing the financing of a mega yacht controlled by Sheikh Mansour called the Topaz, which at 482 feet is the world’s fifth largest, according to people familiar with the investigation."



This was the yacht that Jho Low and Leonardo Dicaprio had used to watch the World Cup Finals in Brazil in 2014. It is widely known that it belongs to Sheikh Mansour.

WSJ also alleges that the US Govt is investigating if funds from 1MDB was also used to fund the expansion of "night club" chain Hakkasan.

Founded in 2001 by Hong Kong born Alan Yau - a Hakka Chinese, Hakkasan became the two trendiest Chinese restaurants in England. Hakkasan could mean Mountains of Hakka in Cantonese.

The two Hakkasan restaurant was sold for US$60 million to the then reported Abu Dhabi state company of Tasameem in January 2008 - way before Najib became PM or 1MDB even existed.

It was rumoured to have been sold after Sheikh Mansour had a meal there and was so impressed. Later in that year, Sheikh Mansour bought the Manchester City Football Club.

Hakkasan then went on a large-scale international expansion to become a global lifestyle chain which included night clubs.
Hakkasan's famous nigh-club in Las Vegas MGM
H.H. Sheikh Mansour Bin Zayed Al Nahyan is the Deputy Prime Minister and Minister of Presidency Affairs in the United Arab Emirates Cabinet. He is also the Chairman of IPIC and is considered the second or third most powerful man in Abu Dhabi.

Sheikh Mansour, Deputy Prime Minister and Chairman of IPIC. Also owner of Man City.

He is the half brother of the current President of UAE, Khalifa bin Zayed Al Nahyan and Sheikh Mohammed bin Zayed al-Nahyan, the Crown Prince of Abu Dhabi,

President of UAE, Khalifa bin Zayed - half brother of Deputy President Sheikh Mansour 

The 2013 JV signing between Aabar and 1MDB - represented by the Crown Prince of Abu Dhabi and half-brother to Sheikh Mansour, Chairman of IPIC
Since suffering a stroke in 2014, the president of UAE Khalifa had rarely been seen in public with most of his official duties seems to taken over by the crown prince.

It is widely believed that Khadem Al Qubasi is a loyalist of Sheikh Mansour,

Even in the 2008-2009 as Euromoney had reported citing documents, Khadem held shares and options on behalf of Sheikh Mansour worth billions of pounds during the very profitable bail out of England's Barclay's Bank from the subprime crisis which they profited by about £3 billion within a couple of years.

As of 2011, according to the Guardian, Sheikh Mansour had a net worth of USD34 billion U.S. dollars and has owned Manchester City F.C. since 2008.

If it is true that the Abu Dhabi govt had arrested Khadem but strangely not charged him, then it adds an interesting domestic political angle to the 1MDB and IPIC story.

It would be interesting to see how this plays out as how it plays out will also affect 1MDB and the ongoing arbitration between IPIC and 1MDB in London. 

Friday, 29 July 2016

DAP Penang: If you repeat them enough times ...(PART I)

Last night, for the umpteenth time the DAP Secretary-General and Penang Chief Minister boasted yet again that Penang has the lowest debt and claimed credit for it.

MalaysiaKini reported this:

CM: Penang needs some debt so it can ask Najib for money 
Penang's RM1.5 billion in reserves outweigh its federal debt of just RM69 million, boasted chief minister Lim Guan Eng. 
But while the state can easily pay off what it owes Putrajaya, Lim said some debt is necessary. 
"I can call my financial officer right now and tell him, 'Datuk, go to the ATM machine and pay the federal government'. 
"But we have to keep some debt so that we can ask for money from Prime Minister Najib Abdul Razak," he said in jest at a fundraising dinner in Kuala Lumpur last night. 
He said that if Penang had no debt, the federal government would assume it was well off and did not need more money. 
Penang's federal debt is the lowest in Malaysia.
Propaganda is all about repeating a half-lies enough times until people start believing it is true.

And DAP is very good at this. They have repeatedly claimed credit for this half truth probably hundreds of times since the year 2011.

Unfortunately, it is a half-truth at best.

Misleading Propaganda 1: DAP Penang is great as it reduced State Debt by 95% due to good governance.


This propaganda has been repeated hundreds of times by DAP. It is a half-lie actually.

Let's look at page 38 of the Auditor-General's Audit Report 2012 on the Penang state finances.

Yes. The Penang state debt was increasing every year until the year 2011 when it mysteriously dropped 95% within a year.

This was because the Penang Government struck a deal with Najib's Federal Government where the Penang Govt gave state assets to the Federal Government and leased it back.

Essentially, the Penang Govt just changed an existing RM655 million loan into a 45 years annual lease where the Penang Govt must pay RM14.56 million to the Federal Govt every year for 45 years.

RM14.56 million X 45 years = RM655.2 million.

Which means, the Penang Govt is essentially PAYING THE SAME AMOUNT!

To the easily-cheated supporters of DAP and gullible Penang people, they would not know the difference - allowing DAP to keep repeating this shameless propaganda over and over again since the year 2011 to cheat the people.

I am not sure how thick-faced you need to be to keep repeating this in public.

If you don't believe me, listen to this fellow who thanked the Federal Govt in the year 2011 for doing this deal.

Chief Minister, YAB Lim Guan Eng said that the Federal Cabinet has approved the restructuring and migration exercises subject to the following terms and conditions:- 
• the state’s outstanding loan of RM655.24 million to the Federal government will be interest-free and rationalized by alienating state land related water assets to PAAB for a period 45 years. PAAB will lease back the water assets to PBAPP for 45 years. PBAPP shall pay PAAB a yearly lease rental of RM 14.56 million and upon settlement of the lease at the end of 45 years, the state land will automatically revert back to the state;
• the funding of Mengkuang Dam expansion project of RM 1.2 billion will be given as a grant by the Federal Government;
When Lim Guan Eng made the above press statement he has pretty much confirmed that it was the Federal Govt taking over Penang State assets and convert  the loan to a lease (which is the same thing as you end up paying the same amount) which has allowed DAP to keep claiming they have reduced 95% of the Penang State Debt due to "good governance".

Not only that, but that same press statement of his also betrayed another long-standing propaganda that the Federal Government does not help the Penang State Govt. Not only has the Federal Govt waived the 3% interest on the previous soft loan but it had also given RM1.2 billion free grant to the Penang Govt for a much-needed dam expansion.

What kind of persons who got helped by someone and then use this help to mislead others and repeatedly over 6 years to whack back the same persons who helped you?

Misleading Propaganda 2: Under DAP, Penang has outperformed Malaysia in economic growth due to DAP's "Good governance"

The following table was released by the Penang State Govt owned Penang Institute last year.


According to DAP MP Zairil Khir when he said Penang will bounce back after the recent mass factories closing , that table is not updated but the actual growth, instead of forecast growth for Penang is higher at 7.4% for 2014 and 6.2% for 2015.

Penang had benefited from the weak Ringgit in 2014 and 2015 as electronics manufacturers exports more - hence the better 2014 and 2015 figures.

Therefore, based on Penang Institute's figures and Zairil's clarification, I have come out with the following table

And these are the official figures from the Penang Govt's Penang Institute themselves here.

Despite DAP's continued propaganda that Penang has enjoyed much better economic growth compared to Malaysia,, the actual official figures do not suggest that.

According to the state-owned Penang institute itself, Penang's economy has under-performed the national average for the entire 2008-2015 period.

Correspondingly, the BN Penang Gov's last two years in charge showed that Penang grew faster than the national average - despite what DAP claims.

Misleading Propaganda 3: Penang govt spending is well-managed under DAP and our state reserves has increased due to our good governance

If you think that there is nothing wrong that Penang Govt now spends almost 4 times as much per year of Wang Rakyat compared to 2008 and that aggressively selling depleting state land and assets to fund this dramatic increase in spending is "good management" then you can stop reading here.

In fact, without selling state land, the Penang Govt would have been in BIG and INCREASINg DEFICITS for the past 5 years straight.

If you want to know more, please read my past article titled "Penang financial management: An unsustainable bloat?" for the details.

Misleading Propaganda 4: Penang is number one state for investment in the entire Malaysia

Lim Guan Eng and DAP used to repeatedly boast (and still do) that they are number one in investments among all the states in Malaysia.

That may be true twice - for the years 2010 and 2011 - but to a large extent was from the good work of the previous BN state government as it takes a few years before a large investment is committed.

At that time, Lim Guan Eng had quoted these figures from the Federal Govt agency MIDA and you can verify the table below from the same information from MIDA here.


Since 2011 though, Penang has not been number one for total investments in Malaysia for 4 years now.

It has lagged further behind other states.

According to MIDA, last year in 2015, Penang was the 5th highest state in new investments at RM6.72 billion and ranked just behind Melaka.

It pales in comparison to Johor which recorded RM31.1 billion or 5 times higher than Penang, and Sarawak at RM11.82 billion.

And in 2014, Penang came in 3rd and drew RM8.16 billion in investments - behind Johor's RM21.18 billion and Sarawak's RM9.64 billion.

Even as Penang's annual state government spending has almost quadrupled, their investments performance has lagged the other states which have surged ahead.

In fact, Johor's combined investment for the two years of 2014 and 2015 totaling RM53 billion is more than the entire combined investments in Penang for the past 6 years of RM42.6 billion.

So far this year, Penang still lags in investments and is 3rd. for the January to March quarter.

Misleading Propaganda 5: The previous BN Penang Govt sold 35 times more land and collected less money compared to DAP

This is one of the most often repeated lies by DAP to justify their continued selling of state land to fund their 4 times increased in yearly state spending. Again this is a lie which you can read about and examine the evidence here in my previous blog post titled "BN sold more land than Pakatan in Penang and collected less' ??

Misleading Propaganda 6: Lim Guan Eng went to jail for defending a Malay girl

Probably the longest repeated allegation despite being corrected dozens of times but DAP don't care and continue repeating this since it sounds nice. In fact, DAP actually apologized in court once for repeating this lie.

You can read more about it and examine the evidence in my previous post titled "Did Lim Guan Eng really go to jail for defending a Malay girl?"
.

Misleading Propaganda 7: The Bungalow seller Miss Phang made a RM300,000 profit and has no business dealings with the Penang State Govt

This is a new piece of propaganda which is being used to pretend that Lim Guan Eng was falsely charged for corruption. He himself is repeating this in nationwide ceramahs and numerous recent press statements - despite this being subjudice and contempt of court to talk about the case as it is already in the courts which may lead to more court charges against Lim Guan Eng.

This is an outright blatant lie. Examine the evidence, watch the videos and read about this in my previous blog post titled "SSSLGE: Lim Guan Eng Explains Why He Is Not Guilty."

[Updates to come as I expand this blog post to include other much repeated propaganda]

If DAP is unhappy with my blog post above. they can dispute and point out where it is wrong or they are welcome to sue me.

Other propaganda like DAP's famed "40 years of flooding solved within 9 months" or "we can solve floods within one term".is made to look stupid due to ever increasing flooding in Penang in recent years.

Titles such as "UNESCO Heritage City", "Penang Top Ten most Liveable City" and "Penang being a top electronics manufacturing hub known as Silicon island" which DAP keeps claiming credit for are also something not new.

The Heritage City status was granted in June 2008 - just 3 months after DAP took power in March 8, 2008 and is really the result of efforts by the previous GERAKAN Govt over many years.

It takes many years before such a heritage status is approved, which it was (together with Malacca) in 2008, which Dr Koh Tsu Koon rightly claimed credit for.

Penang has also made it into the list of Most Liveable City for more than a decade before DAP took over,, which you can see in articles such as this when Penang was number six most liveable in 2001.



As for Silicon Island, the late Dr Lim Chong Eu and the past BN Government takes the credit as even in the 1990s, Penang was already among the top 3 electronics exporting region in the world. You can read about this in this year 2000 Bloomberg article titled "Penang's Secret".

Lim Guan Eng would also try to claim credit when a new factory is set-up in Penang but will he also take the blame when Nine major foreign factories in Penang shut down and retrench workers “Silicon Valley in the East” in critical situation as is happening now?



Even the Lonely Planet stating Penang is a top tourist destination last year in 2015 was much trumpeted by Lim Guan Eng but he remained strangely silent about Lonely Planet latest 2016 list which had Ipoh at number 6 of top 10 places to visit while Penang had dropped off the list.



But Lim Guan Eng and DAP do deserve some credit too.

For one, Penang has street murals now. And the streets are cleaner (not hard since they sold so many billions of ringgit worth of land and can easily afford the additional RM10 million per year extra to clean the streets).

Also, the local food Char Kuey Teow and Penang Laksa still remains delicious and was recently endorsed as world's best food destination by a renowned food writer.

If DAP or Lim Guan Eng can prove that they invented these then we can similarly praise them for the food too.

Tuesday, 26 July 2016

The RM60 billion rail link bailout that wasn't

Today, the Sarawak Report has accused the government of inflating the cost of the East Coast rail project from RM30 billion to RM60 billion in order to "bail-out" Jho Low and 1MDB - complete with dodgy looking documents.

This is what they wrote:

The PM’s ‘cunning plan’ is to get the Malaysian Government to agree to inflate the actual cost of the East Coast Rail Project from only RM30 billion to RM60 billion, all to be borrowed from the Chinese Government, in order to disguise the payment of 1MDB’s (and Jho Low’s) company debts!

The East Coast Rail Link (ECRL) is a long-planned project that was put under the 11th Malaysian plan which will link Kuala Lumpur and three east coast states in Peninsular Malaysia. It is 620km long involve a “significant amount of underground tunnelling”. The East Coast Economic Region Development Council has established that a rail route connecting the major ports, business centres and towns in Pahang, Terengganu and Kelantan was vital to achieve growth in the region.

It is expected to take 15 to 20 years to develop as it will involve a lot of underground work and building tunnels across Banjaran Titiwangsa. It is not a trivial project. Here is the proposed route from SPAD website.


There are multiple problems with Sarawak Report's "expose" though. They are:

1. The project was already projected to cost RM60 billion (not RM30 billion as alleged by Sarawak Report) many years ago.


Here are some links over the years:

18 April 2013 East Coast Rail Line May Cost RM60 Billion
9 October 2013 Rail-related projects to create oasis of opportunities
16th May 2016 ECRL MAY COST RM70 BILLION

This project was already discussed heavily in the popular Malaysian forums in LowYat and Skyscraper City in the year 2013 with the RM60 billion cost prominently discussed.

And this RM60 billion estimated cost were as far back as in the year 2013 too - when USD1 = RM3.00 to RM3.30. Now it is more expensive.

Even if it was RM30 billion in 2013, costs  would certainly have risen substantially by now.

Another problem is that this project is a Privately Funded Initiative (PFI) and is to be funded by the private-sector, not by the govt. So, is the private sector expected to go along and bail out 1MDB?



Surprisingly though, Sarawak Report did not similarly do a report on the Penang Govt's Transport plan that was recently confirmed by the state govt that has increased RM19 billion within a year from RM27 billion to RM46 billion.

2. The RM60 billion price tag does not seem to be over-priced

At RM 60 billion, this 620km long project - rail and rolling stock - which cut through peninsular Malaysia's Titiwangsa mountain range will include much hard-rock tunneling and bridges, cost about RM96,7 million per KM.

This would be a real bargain compared to the Penang Tunnel project where the Penang Government had signed to pay RM3.5 billion to build a 6.3km undersea tunnel - meaning a cost of RM555 million per KM. 

Tunnelling undersea where the earth is mostly sedimentary based actually cost less than tunnelling hard mountain ranges thus making RM96.7 million a bargain compared to the RM555 million per KM.

In fact, the Penang Govt had even awarded feasibility and detailed design reports for that tunnel and 3 associated roads of about 20.3km long costing RM305 million and already paid for about half of that.

And even more strange is that on top of paying the full cost of the construction of the tunnel, the Penang Govt also signed to allow 30 years toll to be given to the same company awarded and paid to build that tunnel. Probably the weirdest privatized concession agreement in the world.

If there is any project to be investigated for jacking up the cost, then it would be those who approved and signed the Penang Tunnel project - certainly not the ECRL.

Another project that gives us a guide on the pricing is the the Gotthard Base Tunnel which is a railway base tunnel through the Alps in Switzerland. It opened on 1 June 2016 with full service to begin in December 2016. With a route length of 57.09 km, this rail tunnel was completed at a cost of more than USD12 billion (RM48 billion).

Assuming that just 10% of the 620km is going to be tunneling through Banjaran Titiwangsa, or 62km then the RM60 billion price seems reasonable.

And here is another one funded by the Chinese too - the railway line for passengers and cargo transportation between Mombasa, the largest port in East Africa, and Nairobi, the capital city of Kenya.

The 609km-long line began in October 2013 and is scheduled to be completed by December 2017 cost USD13.9 billion (RM56 billion). Not only was work started earlier hence lower construction cost but there is little tunneling work due to the flat African plain lands.

So, do you think RM60 billion for our 620km ECRL spanning 15 to 20 years going thru mountain ranges is inflated?

Also, following from multiple feasibility studies over the years - as the year 2005, SPAD had also issued a market consultation RFI in March this year.


With an open RFI like this, it means that it is very hard to so-called inflate the price by double as alleged by Sarawak Report.

3. The so-called bailout payments by Sarawak Report does not make sense. 

Chief among this is the so-called buyouts of Putrajaya Perdana Berhad (PPB) and Loh and Loh Corp (LLCB) as indicated by Sarawak Report here:



I am not sure what kind of bail-out this would be if the Chinese were expected to buy-out the previously-listed companies LLCB and PPB for the price of 13.5 times and 7.5 times Price-Earnings Ratio (PE Ratio).

Even the listed Gamuda is trading at 18 times PE ratio while Binapuri is trading at 28 times PE ratio.

If this was a bail-out then the price to bail-out two profitable companies with a long track-record is ridiculously cheap and below market value.

The other point that does not make sense is that Sarawak Report also said that the Chinese are supposed to buy out the Air Itam land in Penang for USD850 million (RM3.4 billion).


Another problem is that this Air Itam land is not considered a "missing" asset thus any sales proceeds would go to 1MDB and not to IPIC where assets are alleged to be "missing".

Thus how is money going to 1MDB going to be used to cover "missing" assets in IPIC?

Perhaps Sarawak Report can explain this.

Conclusion

I am sorry, but this Sarawak Report allegation is totally off-base and makes no sense at all.  It does however seem to be an attempt to scuttle a legitimate infrastructure project by China in Malaysia which will provide much needed economic development in the east peninsular Malaysia states.

Why do you want to sabotage Malaysia-China relations and our economic development?

As far as 1MDB is concerned, their focus if on resolving the dispute with IPIC which if resolved, will mean 1MDB has no missing money as described in my previous post.

[UPDATE]
Works Minister Fadillah Yusof denies the cost was doubled to RM60 billion to pay off 1MDB debts. 
July 27, 2016 PETALING JAYA: Works Minister Fadillah Yusof denied today Sarawak Report’s claim that Putrajaya wants to double the cost of the East Coast Rail Line (ECRL) project from RM30 billion to RM60 billion to pay off 1MDB debts.
“I don’t give a damn about Sarawak Report,” Fadillah told Malay Mail Online.
“It was never discussed in Cabinet.”
The whistleblower site, citing several documents, claimed that the ECRL project would be awarded to the Chinese state-owned company China Communications Construction Company.Sarawak Report claimed that the deal was due to be approved by Cabinet tomorrow at its regular meeting.
The site claimed the deal would allow paying off the debts of companies related to businessman Low Taek Jho (Jho Low).
The East Coast Railway project hopes to develop the East Coast Economic Region.
The 600km rail line will connect Kuala Lumpur with Bentong in Pahang. It will also link Terengganu and Kelantan.




China firm denies 1MDB bailout plot

The China Communications Construction Company (CCCC) has denied involvement in any plot to cover up the alleged multi-billion-dollar corruption scandal at 1MDB by inflating a railway contract. 
The CCCC told The Australian it had “no knowledge of the claims” made in the Sarawak Report about the alleged plot. 
“We will continue to follow those false accusations made by certain media and will take necessary steps to defend our lawful rights,” the CCCC said. 

Saturday, 23 July 2016

US DOJ says "YES" but 1MDB says "NO". Why?

The USA's Department of Justice (DOJ) had alleged that billions were stolen from 1MDB and initiated asset seizures to recover this but 1MDB insist that it had not lost any money and that all its assets are accounted for. 

Essentially, the DOJ says someone stole your money and I will get some of it back for you while 1MDB is saying "No. That one is not my money".

Why is this peculiar situation happening?

Let's follow the money trail - particular the 3 sources of funds that the DOJ explicitly said the alleged stolen money came from.

Alleged source of funds 1: Good Star, as part of the PetroSaudi-1MDB Joint Venture.


What did 1MDB pay:

USD1.83 billion of which USD1.03 billion was transferred to Good Star and USD800 million to PetroSaudi. The ownership and the responsibility of the funds in question had changed when 1MDB paid the money as per the agreements

What happened to the money:

JV was converted to a loan. Loan was repaid by PetroSaudi to 1MDB via USD2.32 billion worth of investment units (Principle + interest/dividends).

What happened to the investment units?

USD1.4 billion was redeemed and used for 1MDB working capital purposes with remaining USD940 million in investment units.

When the Govt Auditor General special Audit report on 1MDB was leaked and published by Sarawak Report, this document also surfaced. It is a 3rd party document between Abu Dhabi and Bridge Capital - meaning it is not under Official Secrets Act (OSA). You can view the full 4 pages here.

This is the Deed of Capital Guarantee where Aabar Investments PJS of the Abu Dhabi explicitly guarantees all the value of the fund units of the Cayman funds run by Bridge Capital.


This guarantee is not by the disputed Aabar in the British Virgin Island but the actual sovereign fund itself owned by IPIC and the Abu Dhabi Govt.

This proves that the USD2.33 billion of payment returned to 1MDB based on 1MDB's total investment of USD1.8 billion in PetroSaudi by Good Star and PetroSaudi is real and has real value.

This also means that it is simply not legally possible for any of 1MDB money to be "stolen" by Good Star/PetroSaudi as 1MDB got back all their money plus a decent profit from the PetroSaudi JV.

This is a significant document and I am surprised that the US DOJ did not highlight this document or perhaps they are not aware of this document during their investigation since they did not bother to meet up with the Abu Dhabi or Malaysian Govt when they did their investigations.

If this document is genuine that means that 1MDB's chances in the arbritration with IPIC is much stronger.

What happened to the remaining USD940 million in investment units?

The entire USD2.33 billion units including the remaining USD940 million units is guaranteed by the disputed Aabar Investments PJS ofin Abu Dhabi (not the disputed one in British Virgin Island (BVI)) and was earmarked for the asset-debt swap arrangement between 1MDB and IPIC which is now in arbitration.

The bottom line:

1MDB cannot say or claim that Good Star or PetroSaudi funds is their money.

What happens next? :

Nothing. 

As far as 1MDB is concerned, PetroSaudi has paid back all of 1MDB's investment  plus USD481 million of profits and dividends. There is no money to recover from either Good Star or PetroSaudi.

An interesting nugget here is that if Jho Low and Riza have been named and accused of wrong-doing here for receiving funds from Good Star then it is surprising why both the then Riyadh Governor Prince Turki, who is the 7th son of the then King Abdullah and fellow PetroSaudi founder Tarek Obaid are not similarly reprimanded even though the FBI also stated they received money from Good Star.

Alleged source of funds 2: The disputed Aabar-BVI as part of the Abu Dhabi-1MDB joint-venture

What did 1MDB pay?

USD3.51 billion to Aabar-BVI for collateral, joint investment ventures and options termination agreements. Additionally, there is a USD940 million guarantee of the Cayman investment units and guarantee for the USD1.5 billion GIL fund units recommended by the Swiss-based BSI bank.

What happened to the guaranteed assets and money given by 1MDB.

The entire USD6 billion of payments and guarantees was identified as assets for the 1MDB-IPIC asset swap agreement in exchange with IPIC based on the following:

Assets from 1MDB:
  • USD 3.5 billion cash deposits paid to Aabar BVI.
  • USD 1.5 billion GIL funds (Fund Manager introduced by BSI and guaranteed by Aabar BVI)
  • USD 940 million Brazen Sky fund units (Guaranteed by Aabar Investments ABU DHABI - not the disputed Aabar BVI - this is in the AG report and the PAC report)

Assets from IPIC:
  • Assume 1MDB's USD 3.5 billion bond principal
  • Assume 1MDB's USD 1.5 billion future bond interest
  • USD 1 billion in cash (paid to 1MDB in June 2015)

IPIC is now disputing that Aabar-BVI is their company and has cancelled the Asset swap agreement but 1MDB insist that the Aabar-BVI is an IPIC company. Therefore, it is now in dispute.

The case is now in the London Court of International Arbitration where initial proceedings had started last month.

Why did 1MDB even transfer or deal with Aabar-BVI in the first place when according to IPIC and Aabar Abu Dhabi, it is not owned by them?

When 1MDB signed the Joint-Venture agreement with Aabar Investments PJS in Abu Dhabi. The discussions was with Aabar's duly-authorized Chairman, Khadem Abdullah al-Qubaisi and their Managing Director Mohamed Badawy Al-Husseiny - both of whom are also indicted by the FBI together with Jho Low.

During the agreement signing, 1MDB also engaged their internal and external lawyers to certify that Aabar Investments PJS Ltd in the BVI is owned by the Aabar Investments PJS in Abu Dhabi.

The attached document which came from here, is the Certificate of Incumbency issued by the incorporation of the disputed Aabar in BVI. This certificate is issued by Hong Kong based Offshore Incorporations Limited (OIL)- he leader in international incorporations and corporate services.



The Certificate of Incumbency states the two directors of Aabar Investments PJS Ltd in the BVI to be the Chairman and Managing Director of Aabar Investments PJS and the sole shareholder to be the Abu Dhabi based Aabar Investments PJS.

Headquartered in Hong Kong, OIL has offices in the BVI, Singapore, Taiwan, Shanghai, Beijing, Shenzhen, Guangzhou, UK, Cyprus and Dubai and has around 220 employees.

OIL is a group company of Vistra Group, which has 2,300 employees in 40 jurisdictions; its global headquarters are in Hong Kong.

If the official incorporation documents, the Chairman of the parent company, the Managing Director of the parent company and both the internal and external lawyers engaged in the joint-venture due diligence tells 1MDB that Aabar Investments PJS Ltd in the BVI is legitimately owned by Aabar Investments PJS in Abu Dhabi, then what else could 1MDB have done differently to certify that this is not a fake company?

The ownership of Aabar-BVI and the associated transfers were also verified through successive audits by external auditors KPMG and Deloitte's over the next few years and no alarms were raised then. Both auditors would have certainly met or contacted Aabar in Abu Dhabi to verify the transactions too.

However, for reasons still unknown, IPIC agreed to the swap deal, paid USD1 billion, paid the interests on the USD3.5 billion bonds,and then only said in April 2016 - an amazing 10 months after the swap deal was signed and years after 1MDB had stated they had paid all those money to Aabar in publicly available financial statements.

But whatever the case, when 1MDB paid those money to Aabar-BVI or Aabar PJS in Abu Dhabi, the ownership and responsibility of the money has transferred to Aabar.

The bottom line:

1MDB cannot say or claim that the money that was transferred from Aabar BVI to Jho Low, Red Granite, Khadem et al as alleged by the US DOJ is theirs. As far as 1MDB is concerned, Aabar BVI is legitimate and owned by IPIC. If money from here was stolen then it was stolen from IPIC and not 1MDB.

For 1MDB to claim that the money is theirs would mean that the entire London arbitration case between IPIC and 1MDB will collapse and 1MDB will end up losing billions while Abu Dhabi's IPIC will get away blameless - despite both of IPIC's most senior executives, their former Managing Director Khadem from 2007 to 2015 and Aabar PJS's Managing Director Mohamed Badawy Al-Husseiny being named as part of the DOJ case and asset seizures.

What happens next? :


1MDB will need to focus on winning their arbitration case by proving that the two senior executives of Aabar and IPIC had acted with full authority of the board and that all checks had shown that Aabar-BVI had legally belonged to Aaabar Investments PJS Abu Dhabi and IPIC.

1MDB believes it has enough evidence and a strong case in winning this case since it deliberately refused to pay for the scheduled interest payments on the bonds despite having RM3 billion in the bank then and allowed the two 1MDB bonds guaranteed by IPIC to default thus triggering the guarantee by IPIC, which forced IPIC to pay up.

If 1MDB wins this case then USD4.5 billion in assets can be recovered from IPIC. If this is the case, it is likely that IPIC will take-over the USD3.5b bonds and allow 1MDB to keep the USD1 billion which they had paid earlier. IPIC will then be the party responsible for reclaiming the USD4.5 assets in Aabar-BVI.

Alleged source of funds 3: The USD1.5 billion invested by 1MDB in BSI Bank investment funds.

What did 1MDB pay?

USD1.5 billion invested in registered investment funds recommended by the Swiss-based BSI Bank. This USD1.5 billion was part of the proceeds of the 2013 USD3 billion bond (also known as the 1MDB GIL money) that was raised as part of the proposed joint-venture with Aabar to develop Bandar Malaysia in the year 2013. The remaining USD1.5 billion was used by 1MDB as part of their working capital towards development of TRX, Bandar Malaysia and the power plants business.



Crown Prince of Abu Dhabi, General Sheikh Mohammed Zayed Al Nahyan, witnessed the signing ceremony in 2013.
The proposed Bandar Malaysia JV signed in March 2013 was planned to be an arrangement where 1MDB would raise USD3 billion and Aabar would raise USD3 billion and both parties would contribute to the 1MDB-GIL company to develop Bandar Malaysia.

As Aabar failed to raise their USD3 billion in time and the JV eventually did not take off, 1MDB then decided to use half of their money as working capital while investing the unused portion in an investment fund to avoid negative carry (or paying interest on unused funds raised from a loan).

What happened to the money in the investment funds?

The money is still invested in the funds and was originally also planned to be used as part of the asset swap with IPIC since it is guaranteed by Aabar-BVI.

What happens next? :

Since the asset swap is now in termination, this fund is already in the redemption phase. However, redeeming a unit of USD1.5 billion is not like withdrawing money from a bank. The fund itself would have to sell their investments before paying 1MDB. It is believed that this process is close to completion.

How much of actual "Wang Rakyat" was used by 1MDB so far?

The paid-up capital is RM1 million paid for by the Malaysian Govt. The rest of the funding that went up to RM42 billion at one time was raised from bonds and bank borrowings.

How much in loans does 1MDB still have?

Other than 3 bonds, all the remaining borrowings, lines of credit and other bonds have been paid off by 1MDB during the debt rationalization exercise started in the year 2015.

Since the beginning of 2015, 1MDB has cleared and removed all the following loans from its book:

  • fully paid RM3.5 billion Powertek loan from a consortium of banks
  • fully paid RM1 billion standby credit from the govt
  • fully paid USD150m EXIM bank loan
  • RM2.4 billion Bandar Malaysia sukuk taken over by 60% buyer of 1MDB.
  • transferred RM800 million Socso loan into project financing for TRX. This loan is self-amortizing and is already significantly repaid.
  • removed RM6 billion of legacy power debts previously assumed, as part of the Edra sale
  • fully paid RM2 billion Marstan loan arranged by Ananda Krishnan which was used to repay the RM2 billion Maybank bridging loan
  • fully paid USD975m Deutsche Bank loan

After all these other loans had been paid of, 1MDB is still left with RM2.3 billion in cash but has the following renaming bonds.
  1. RM5 billion 2009 long-term bonds that matures in the year 2039- these bonds are tied to the continued development of TRX and is matched to the cashflows of this development.
  2. USD3.5 billion 2012 bonds guaranteed by IPIC that matures in the year 2022. (if 1MDB wins the arbitration then these bonds will likely be taken up by IPIC)
  3.  USD3 billion 2013 bonds that matures in the year 2023. - these bonds are tied to the continued development of Bandar Malaysia, which 1MDB still owns 40% of, and is matched to the cashflows of this development.

How much of actual "Wang Rakyat" has actually been lost so far due to the DOJ civil suit?


None so far. Since the amounts alleged "stolen" are from the loans that 1MDB took above and the loans are not due, no actual Malaysian money has been lost as yet. This is assuming that the IPIC dispute can be settled in 1MDB's favour and the USD1.5 billion GIL bonds is redeemed.

It is also important to note that other than the USD3.5 billion bonds which are in dispute with IPIC, 1MDB have not defaulted on any loans or bonds. In fact as pointed out above, many loans have been completely repaid or settled. 

The final bottom line. 

It must be noted that all 3 sources of funds which the DOJ report listed were all direct dealings with the governments and royal families of two different Arab countries and 1MDB paid directly to accounts instructed by them. If 1MDB was to be scammed, then these countries would have helped to scam 1MDB.

Or if 1MDB itself was a scam then those countries pakat with 1MDB to help scam.

But the real bottom line is this:

If 1MDB manages to win the IPIC arbitration and also redeem the USD1.5 billion GIL funds then 1MDB can truly say that none of their money was missing or stolen.

This means that it is impossible for  Jho Low, Riza, Khadem, Malaysia Official 1 (ie PM) or anyone else for that matter to have stolen any money from 1MDB to buy or invest all those assets that the FBI now wants to seize.

But it could mean that someone else would have been cheated instead. It could be Abu Dhabi's IPIC or it could be legitimate profits made from fund investment ventures.

But whose money would that be then that was used to buy art, gamble, buy properties?. It could be Abu Dhabi's IPIC money, Saudi Arabia money or it could be legitimate profits made from fund investment ventures.

---

Much have been talked about Jho Low and Riza being named in the DOJ civil suit to seize assets. Also named as their so-called co-conspirators to seize assets are IPIC and Aabar's Khadem Al-Qubaisi and Mohamed Ahmed Badawy.

Given the recent revelations that 1MDB holds documentation showing that Aabar (which among many other investments, was the largest single shareholder of Daimler-Benz) guaranteed the Cayman investment units held by 1MDB from the PetroSaudi profits and also that the two directors of the Aabar-BVI which IPIC now disputes, let's learn a bit more about these two persons:

H.E Khadem Abdulla Kadem Butti Al-Qubaisi served as Managing Director, Chief Executive, and Director at International Petroleum Investment Company PJSC, since May 2007.

He is a close confidante of IPIC Chairman Sheikh Mansour, who is the deputy prime minister of the United Arab Emirates, minister of presidential affairs and member of the ruling family of Abu Dhabi. He is the half brother of the current President of UAE, Khalifa bin Zayed Al Nahyan.

Khadem was named at number 14th spot in Gulf Magazine’s 2014 list of the Top 100 World’s Most Influential Arabs, and included in the Oil & Gas Power Middle East top 50 in 2011.

He received the Arabian Businessman of the Year for 2009 in the UAE, and also received the coveted #1 Award as the ICIS Power Player of the Year 2009.

He served as the Managing Director of IPIC from 2007 to 2015 and served as the Chairman of Aabar Investments PJSC from 2012 to 2015..

H.E. Al-Qubaisi served as Managing Director at National Central Cooling Company PJSC since May 2011.

He serves as Chairman of Compania Espanola de Petroleos S.A. and Aabar Properties LLC. H.E. Al-Qubaisi serves as Co-Chairman of First Energy Bank. He serves as the Chairman of First Gulf Bank PJSC.

He has been the Chairman of Supervisory Board of NOVA Chemicals Corporation since January 1, 2011. He served as the Chairman of Supervisory Board of Arabtec Holding P.J.S.C., since May 2012.

He served as the Chairman of First Energy Bank B.S.C.(c) until March 2016. He served as the Chairman of Arabtec Holding P.J.S.C. from May 08, 2012 to May 2015. He served as the Chairman of the Board at NOVA Chemicals Inc.

He served as the Chairman of the Board at NOVA Chemicals Corporation since January 01, 2011 and served as its Director from January 01, 2011 to April 22, 2015.

He served as the Chairman of Hakkasan Limited until April 14, 2016. He served as the Chairman of Supervisory Board at Borealis AG from March 5, 2010 to April 2015.

He served as the Chairman of National Central Cooling Company PJSC and Falcon Private Bank Ltd. He served as Chairman of Abu Dhabi National Takaful Company P.S.C. until August 5, 2014.

He served as the Chairman of Gulf Energy Maritime PJSC until June 2008. He has been a Deputy Chairman of Supervisory Board at OMV Bulgaria OOD since May 2010. He has been a Vice Chairman of Duqm Refinery and Petrochemical Industries LLC since July 2012.

He served as Deputy Chairman of the Board of Supervisory Board of OMV Aktiengesellschaft from May 26, 2010 to May 10, 2012 and served as its Member of Supervisory Board. He served as Vice Chairman of Supervisory Board at Borealis AG.

He served as Vice Chairman of UniCredit S.p.A. from May 2012 to October 2012 and served as its Director until October 2012. He served as a Member of Supervisory Board at Borealis AG from March 5, 2010 to April 2015.

He served as a Member of Supervisory Board of AMI Agrolinz Melamine International GmbH and Borealis Agrolinz Melamine GmbH. H.E. Al-Qubaisi serves as a Director of ChemaWEyaat and Board Member of Emirates Investment Authority.

He serves as a Director of Abu Dhabi National Chemicals Company. He served as a Director of Arabtec Holding P.J.S.C., from April 28, 2012 to May 2015. H.E. Al-Qubaisi served as a Director of First Gulf Bank PJSC, National Central Cooling Company PJSC and Hyundai Oilbank Co., Ltd.

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Mr. Mohamed Ahmed Badawy Al-Husseiny, CPA, served as the Director of Falcon Private Bank Ltd. Previously, Mr. Al-Husseiny served as the Chairman of Falcon Private Bank Ltd.

He served as the Chief Executive Officer and Director of Aabar Investments PJS from March 2010 to April 2015. Mr. Al-Husseiny served as its Chief Financial Officer since April 2007 and previously served at the firm since its inception in April 2005.

Mr. Al-Husseiny serves as the Member of the Board of Directors at Powertek Energy Sdn Bhd, EDRA Global Energy Berhad and Equity Group Foundation International (EGFI). He served as Chief Financial Officer at Dalma Energy.

Mr. Al-Husseiny served as a Director of Dalma Energy LLC. Mr. Al-Husseiny served as Chief Financial Officer at MB Petroleum Group for six years since 1997.

Mr. Al-Husseiny served as a Board Member of First Energy Bank B.S.C.(c) until March 2016.

He served as Deputy Chairman of alizz islamic bank SAOG from November 20, 2011 to April 4, 2013. Mr. Al-Husseiny served as a Director of NOVA Chemicals Corporation since September 7, 2012.

He served as an Independent Director of Arabtec Holding P.J.S.C. since April 28, 2012. He served as a Director of UniCredit S.p.A. until October 15, 2015. He served as Director of Compañía Española de Petróleos, S.A.U. since August 2011.

The two persons above are certainly no light-weight and came with impeccable reputation at the time when 1MDB met them in the year 2011.