It is interesting for Minister in charge of Economic Planning to come out NOW and say 1MDB unsustainable from start...? He goes on to say all OK [financial performances and governance...] with regard other high profile GLCs like Maybank, CIMB, Axiata, Telekom Malaysia and Sime Darby,...
Is it an attempt to save the rest of Malaysian government-owned and/or government-linked companies, from suffering a similar public perception, questions, etc that is befalling 1MDB...If 'hanky-panky' and wrong doings are discovered in 1MDB and related companies, naturally every other GLCs will also suffer the same public scrutiny...
Now the Minister says 1MDB was unsustainable from the start, a fact that could have been admitted from the very start...
If a private company fails, it just winds-up and its creditors recover what they can from its assets - but the problem is made worse here, because Malaysian government guaranteed a lot of these debts...so still, we will be liable.
Now, the question is WHY? Is the Najib team breaking-up, and some are jumping off the sinking ship, and trying to distinguish themselves as being different...? Has this got something to do about who will be the next Bank Negara chief?
Well, how much debt? PM Najib informed us that there is no outstanding debt obligations at the moment - I would take that as what needed to be paid till now has been paid - but the debt still remains...
Remember that Moody revised its rating from positive to stable - and this means, the obligation for the annual payment to bond holders increased. It would be good if our Prime Minister tells us how much we now have to pay. Are the bonds in RM or USD? This will also be significant. To understand the difference between bonds and shares - see 1MDB, Malaysian Bonds, Moody, Credit Rating - More Worries for Malaysians?
Dato’ Sri Abdul Wahid Omar was appointed as a minister in the Prime Minister’s department in charge of economic planning on 5th June 2013.
1MDB was unsustainable due to low capital, high debt: Abdul Wahid OmarCNBC.com
The financial structure of Malaysian state investment vehicle One Malaysia Development Berhad (1MDB) was unsustainable from the very start, according to a top government minister.
1MDB's design was an exception, not the norm, for Malaysian government-linked companies, Abdul Wahid Omar, Economic Planning Minister of Malaysia, told CNBC's"The Rundown" on Monday.
Rather than being listed like other firms, 1MBD, which was set up in 2009, was wholly owned by the Ministry of Finance, he said.
"The model that they took was low capitalization and huge borrowings, and I think as they found out, it wasn't a sustainable model. With that came debt realization, where the board has now embarked on a rationalization plan."
1MDB teetered on the verge of default in 2015 after racking up 42 billion ringgit ($11 billion) in debt in just five years. After missing various deadlines to repay loans to creditor banks, speculation was rife that the company wouldn't be able to service the rest of its obligations. Because the fund is wholly owned by the government, Prime Minister Najib Razak's administration is responsible in the case of a default. At the time, 1MDB was widely considered a serious liability risk for an economy whose finances were already under strained by the oil price crash. Crude oil-related income accounts for 30 percent of Malaysia's government revenues.
A debt rationalization program was launched in May 2015 to reduce 1MDB's burden by selling assets, and in November the beleaguered fund successfully sold its energy assets for $2.3 billion to a Chinese nuclear power supplier.
"The norm [in Malaysia] is successful transformation of the government-linked companies that we've embarked on," Abdul Wahid told CNBC.
1MDB's outlook took a new twist in July, after the Wall Street Journal (WSJ) reported that $700 billion had been transferred from the fund to the Prime Minister's personal bank accounts back in 2013. Najib has repeatedly denied any wrong-doing. In January, he was cleared by the Malaysian Attorney General after a probe found that the money came from the Saudi royal family.
But the finding has done little to dampen interest in 1MDB's activities, with the fund currently being investigated by local and international officials for alleged corruption and money laundering.
Regarding the scandal surrounding the wealth fund, Abdul Wahid said Malaysian authorities were doing their best to investigate the matter.
"That process is ongoing, including the enquiry by the public accounts committee. This is a parliamentarian committee, comprising of members on both sides of the political divide, the opposition and the government and we should allow this process to continue," he said.
The latest revelations came on Friday, when the WSJ reported that a production firm called Red Granite Pictures, co-founded by Najib's stepson, was used to finance the making of Hollywood feature "The Wolf of Wall Street," using money from 1MDB. But the fund has said it neither invested in nor transferred any money to Red Granite.
He said companies, including Malayan Banking Bhd, CIMB Group Holdings Bhd and Axiata Group Bhd, had all gone through this transformation by steadily improving their financial performance and governance, besides enhancing their nation-building role.