1MDB AN INEVITABLE DEBACLE: Poor Najib has no Plan B!

Datuk Seri Najib Razak must be the happiest man after the recent Umno general assembly. He managed to steer almost all discussions away from touching on the failures of his various transformation programs, and above all the scandalous 1MDB. The 1MDB was not formed based on surplus funds but on borrowed money. It was not allocated for in the budget too.

1MDB is definitely in big trouble and if indeed 1MDB is a success story, Najib would have put is as a show-case project and is boasting about it in the assembly. Then 1MDB faced a situation where its external auditors, KPMG resigned and Deloitte Malaysia was appointed instead. This incident is sufficient enough to raise the warning flag! Yet the only parrot-like clarification we have been hearing is that “The Company has all its debts backed by solid assets, with healthy cash flows and strong growth potential beyond their finite life”. Of course 1MDB has no worries at all because it is wholly owned by the Umno/BN government via Khazanah National! Eventually, whatever disaster that 1MDB may create, the people will pay for it with their effort and sweat.

Although 1MDB managed to source its own funds, unfortunately the money has not been spent prudently. 1MDB has made several bad business deals like buying several independent power plants at a higher cost than the market price. It has invested a portion of the borrowed money into some risky transactions in Cayman Islands. In fact Dr Mahathir considers the RM7.0 billion cash investment in Cayman Islands as gambling.

But the people in the assembly hall are not fools either; they know that 1MDB is bad business for Malaysia and more so for Najib. However to ensure that Najib remains in power for the benefits of those in the hall they had to dance to the tune set by Najib. That’s all.

On the other hand it seems that the most unhappy among Umno members is Tun Dr Mahathir whose voice have fallen onto deaf ears and being sidelined by those in power now. But outside Umno, Dr Mahathir is not alone. Despite his wrong doings when he was in power, the majority of the people are hoping that he will be able to achieve something to ensure that Najib takes the 1MDB debacle seriously, if not, it will morph into a disaster for the country. As for Najib, I am sure the majority of the people do not care what will happen to him and his wife. After all, leaders come and go and in Malaysia, with fat pockets.

The 1MDB will just be like the Bank Bumiputra Malaysia Bhd (BBMB) scandal in 1983, what was then the biggest banking scandal in world history erupted in Hong Kong, when it was discovered that Bumiputra Malaysia Finance (BMF), a unit of BBMB, had lost as much as RM2.5 billion which had been siphoned off by prominent public figures into private bank accounts. Some unconfirmed reports mentioned that, this too was borrowed money; syndicated loans from several European banks. If this is true then the total loss could be more than RM5.0 billion, including paying back the loans with interests.

At present, the ringgit has fallen in value with no sign of halting. Petronas has not much funds anymore not only because of the fall in revenue due to the cheap oil price, but its funds have been abused by the Umno-BN government since its creation. Petronas is also pulling out from the RM120 billion shale oil project in Canada which it has spent about RM16 billion.

The EPF funds have also been stretched thin such that there are proposals to extent the withdrawal age limit from 55 to 60 years old. Malaysia has no savings but a lot of debts to be paid.

We also have the RM12 billion PKFZ money-making scheme which has not been concluded yet. The Umno-BN government has to allocate some fund for this as well.

With less revenue for Petronas, its contribution to the annual budget will be reduced too by about RM25 billion say some analysts. The expected RM30 billion GST collections in 2015 will not be achievable because when everything is more expensive, people, the majority who just want to make the ends meet would not spend a lot. What more, if there is not much increase in their income? Thus the amount collected from GST which is meant as extra fund for the budget, will only cater for the deficit from Petronas.

Despite the lower ringgit, our exports will not be attractive either simply because it cost more to produce due to higher imports cost of raw products and components.

Thus with the present economic downturn, the GST and everything costing more, the aforementioned factors the economic activities will slow down, companies will start retrenching, unemployment will increase, many will be declared bankrupt and many business will go bust. These will eventually add up to make Malaysia unable to service its debts punctually and it would be another Greece in the making.

Now, at the moment, Najib as his usual self is not doing anything. Instead he is more interested in staying in power by revamping the Sedition Act. Initially people may give him the benefit of the doubt that may be he needed time to formulate some clever strategies with his close advisors and think-tanks, but no, he is truly dumb after all. His advisors are useless and think-tank full of idiots to let him create the 1MDB and not convincing Najib to take pro-active actions.

What will Najib do when the above scenario really happens next year? How will Najib turn around the economy? How will Najib service the accruing 1MDB loans with some say at RM20 billion and total liability of more than RM40 billion? How will Najib service the other Umno-BN government loans without increasing the budget deficit which he planned to reduce if not bursting it?

If Najib has no plan B, then he must think of an exit plan. –TMI