TROUBLED state investor 1Malaysia Development Bhd (1MDB) today paid the final tranche of its US$1.2 billion debt (RM4.89 billion) to the Abu Dhabi state fund, resolving a dispute that could have been an embarrassmyent to the Najib government ahead of the next general election.
The last payment of US$630 million to the International Petroleum Investment Company (IPIC) 10 days before it is due, is in no small measure due to hefty premiums paid by Chinese companies for properties owned by 1MDB, namely land in Pulau Indah in Selangor and Air Itam in Penang.
This intervention by the Chinese companies and their ability to pay above market price is an indication of their growing heft in the region and Beijing’s readiness to help the Malaysian government with a problem that has been a millstone around its neck in the last few years.
1MDB and IPIC struck up a relationship in 2012, when the former guaranteed two bonds worth US$1.75 billion each for 1MDB to raise funds for the purchase of power-generation assets. In return, 1MDB was to make collateral payments to IPIC.
Both sides were unable to reconcile the missing monies, with Malaysia insisting that it had repaid US$3.5 billion to IPIC subsidiaries which maintained that they did not receive most of the funds.
In May last year, Abu Dhabi and Malaysia agreed to settle the dispute by private arbitration in London, the result of which is that 1MDB would pay IPIC US$1.2 billion in three instalments, the last of which was handed over today.
The Malaysian Insight has reported that Arul Kanda Kandasamy will stay on as 1MDB president and chief executive indefinitely as the scandal-hit state investment fund unwinds all its assets.
Arul was due to end his tenure on December 31. He was appointed in January 2015 to turn around the state investor which has been that shaken by allegations of money laundering by the United States Department of Justice and authorities in Singapore and Switzerland.
It is understood that Putrajaya made the decision to keep Arul Kanda in the 1MDB top job to ensure smooth operations ahead of the general election due by August.
Opposition leaders had previously called on the debt-laden 1MDB and Prime Minister Najib Razak, who is also Finance Minister, to reveal how they were raising the money to pay IPIC.
The Economist Intelligence Unit in a recent report noted China’s strong support for the Najib administration amid the 1MDB scandal, ranking Malaysia fourth most desirable overseas direct investment country for China.
“The country has emerged as a key node on the BRI (Belt and Road Initiative) and has a welcoming attitude towards Chinese investment, not least in part owing to the support it has provided to the embattled administration led by Najib, which has been embroiled in a scandal tied to the activities of sovereign wealth fund 1MDB ,” said the EIU.
THE MALAYSIAN INSIGHT