Money from Khazanah shares, BNM land deal used for 1MDB

Finance minister says Khazanah and BNM will be queried about their involvement in the bailout

By ALIFAH ZAINUDDIN / Graphic By TMR

Finance Minister Lim Guan Eng said money raised from two state entities were used to service debts of 1Malaysia Development Bhd (1MDB) to Abu Dhabi’s International Petroleum Investment Co (IPIC) last year.

Lim said the previous administration used proceeds from the redemption of preference shares by Khazanah Nasional Bhd amounting to RM1.199 billion and the sale of a plot of land in Kuala Lumpur to Bank Negara Malaysia (BNM) worth RM2.066 billion to make the payments, representing a portion of the RM5.05 billion settlement agreement made with IPIC.

Lim said this to confirm what had been widely suspected. Two foreign newspapers yesterday had published articles, quoting sources, claiming the same thing.

The finance minister’s confirmation contradicted 1MDB’s claim last year that it raised the money from an “ongoing rationalisation programme” that involved selling assets like power plants and land.

Lim said Khazanah and BNM will be queried about their involvement in the 1MDB bailout.

“But this is something we will have to evaluate carefully. If they are instructed in writing to take certain actions, I’m sure they have some justification,” he said in Putrajaya.

Lim had, on Wednesday, also confirmed that 1MDB was insolvent and had no means to make good its debts, which are all guaranteed by the government of Malaysia.

He also called the fund’s president and CEO Arul Kanda Kandasamy “dishonest” in not admitting the trouble at 1MDB.

Arul Kanda in turn has threatened to sue Lim for the remark. Lim said Arul Kanda is free to take any action against the government.

“If he wants to sue, we will be waiting for him. I don’t know if he will do it, but he is free to do so. But he must bear in mind that he is now the only employee in 1MDB, and 1MDB is solely owned by the Ministry of Finance,” he said.

In a statement made in his personal capacity, Arul Kanda said he is considering taking legal actions against Lim who had called the state fund chief as “utterly dishonest and untrustworthy”.

“I strongly deny the potentially defamatory and personal attacks against me by the finance minister,” Arul Kanda said.

“Therefore, in my personal capacity, not in relation to my employment and specifically only in relation to his statement, I have sought legal advice from my lawyers to advise me on my options.”

Lim yesterday also brushed off claims that the Pakatan Harapan government’s ongoing probe on former Prime Minister Datuk Seri Mohd Najib Razak and news of the RM1 trillion national debt level were the only reasons for the market’s slump over the last few days.

“I don’t think you can identify whether the market rises or falls based on one statement made by the federal government. As I said earlier, the time has come for us to lay the facts on the table.

“Let us speak the truth, not only to the people, but also to the financial markets. Let the market adjust according to its own dynamics.”

Lim also explained that the RM1 trillion national debt referred to the RM686.8 billion official federal government debt coupled with guarantees worth RM199.1 billion.

“Based on the two items, the federal government debt would amount to RM885.9 billion. This represents the 65.4% gross domestic product as highlighted by Prime Minister Tun Dr Mahathir Mohamad on Wednesday.”

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