1MDB should be rated before cabinet approve cash injection

Prime Minister Datuk Seri Najib Tun Razak being chairman of 1MDB advisory board is under tremendous pressure to explain the many twists and turns of its large borrowings and opaque transactions. Joint ventures with susceptible company Saudipetrol with mysterious shuffling and revaluation of assets purchased at dip discounts from the government. Within 5 years of operation it racked up 42 billion in loans with little profit to show. 1MDB is a serious contingent liability for the Malaysian government at a difficult economic time. Public debt is already at the upper limit 55% of GDP threshold.

There is seems to be mysterious wheeling and dealing at every major transaction right from the inception of the fund. 1MDB must have stretched the limit of defining fair values in its balance sheets. No wonder auditors Ernst and Young were replaced by KPMG and later Deloitte in the last 5 years. 1MDB has been ably restructuring its dubious transactions for even the big 4 auditors to detect the effect of accounting entries. 1MDB is an accounting quagmire for any auditor.

This sovereign development fund has accumulated high interest debts that are backed by dubious and unverifiable assets. The silence and complicity by the various government agencies in the reckless borrowing of 1MDB is speaks volumes of government transparencies and accountability. There is so much of concealment and non-disclosure by senior officers, directors, advisers and auditors in its investment and valuation.

Billions of dollars guaranteed by Malaysian government is managed and transacted by the Prime Minister’s associate and family friend the party-loving billionaire tycoon, Jho Teck Low. The name Jho Teck low does not appear anyway in the management but his footprints are all over 1MDB. While Malaysian budget was revised due to shortfall in oil revenue, billions of borrowed funds guaranteed by Malaysian government were injected into 1MDB funds.

Despite all the above developments the Cabinet doesn’t seem to press the panic button and feels all dealings and transactions are above board. At the same time it has deferred the approval of RM3 billion cash injection. The cabinet should ensure 1MDB be rated before approving the cash injection. If 1MDB has done nothing wrong as claimed by the PM’s backers why was the fund not rated by rating agencies which would be required before investing public fund. Government should only invest if the sovereign fund is above the investment grade. Therefore to dismiss all the bad publicity and negative reporting Cabinet need a third party professional opinion before deciding on the cash injection. An independent rating agency would dispel all aspersions.

 

 

Explore posts in the same categories: From the desk of Senator S Ramakrishnan

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