COCKTAIL OF LIES? The Arul Kanda concoction for 1MDB

BELATEDLY I congratulate Arul Kanda Kandasamy for his gallant attempt to assure the Malay reading public via this week’s Mingguan Malaysia (MM) newspaper that everything is ok with 1MDB.

That the newly appointed President and Group Executive Director (aka the number one man of 1MDB) opted to make a lengthy explanation through the MM was in itself intriguing.

He must have been aware that much of the debate on 1MDB, especially by the experts, took place not in the Malay press but in the English and the business media.

Whether he made the decision to speak to the MM on his own or at the behest of a higher power, the move has its merit.

It is easier to convince the audience of the Malay language media who generally are not deeply knowledgeable in economic and business matters.

Politically, it is beneficial to influence the Malays that everything is just fine with 1MDB because they form the bulk of the Barisan Nasional voters. So Arul Kanda could be playing a bit of politics here.

Unfortunately, the more analytical responses to his MM interview are taking place in the English media.

Arul Kanda appears to have not succeeded in convincing the public on a number of accounts via his earlier interactions with the English press and business media.

While denying as mere speculation media reports that billionaire T. Ananda Krishnan had advanced a loan of RM2 billion to help 1MDB paid its debts to several local banks, he did not specifically state where the money came from.

The readers of MM and Utusan Malaysia may not be aware or may have forgotten, but many people still recall that among his first statements he made as the head honcho of 1MDB was that 1MDB would not bring back all the money it invested in Cayman Islands.

Arul Kanda Opts for Consolidation: Pic/Graphic from The Star

(Arul Kanda told MM that the money was not invested in the Caymans. 1MDB merely used the tax haven to register its funds, which are invested around the world.)

The Malay Mail online on Feb 7 quoted Arul Kanda as confirming that 1MDB would not repatriate the US$1.103 billion (RM3.91 billion) it redeemed from its Cayman's investments “as the money will be used to service the firm’s debt interest payments.”

Dollar Is Better Than Ringgit

In a report that appeared in Singapore’s Business Times, Arul Kanda said it was only “sensible” that the money stays in US dollars.

“There’s a very sensible and simple reason for that. We are keeping the money in US dollars as we have US$6.5 billion (RM23.06 billion) in bonds out there, in which interest payments come up to nearly US$400 million (RM1.4 billion) a year,” he said.

Explaining further, Arul Kanda said this US$1.103 billion is the second tranche of funds in 1MDB’s Cayman Islands foray, which totalled US$2.32 billion (RM8.23 billion).

He said although the entire sum has been redeemed in full, only the first tranche of US$1.22 billion (RM4.33 billion) has been repatriated (to Malaysia).

“The cash is in our accounts and in US dollars. I can assure you (about that)...I have seen the statements,” Arul Kanda said.

So if the RM2-billion it paid the banks came from the repatriated amount, why not say so? Instead he told MM that the amount was paid ahead of deadline.

1MDB Belongs to the Public

Unless 1MDB states unequivocally the source of the RM2-billion fund, there will be enough people who will continue to believe that Ananda provided it.

The argument that 1MDB does not have to make public its business dealings because it is not a listed company but still prepares a comprehensive annual account is a mere technicality. 1MDB is more than a listed company. It is a government-owned company and is, therefore, answerable to the people.

His assertion that 1MDB’s doors are always open to people wanting explanation but nobody comes is also not true. Maybe his next brave endeavour is to meet the Public Account Committee (PAC) of the Parliament.

It is a well known fact that while the opposition politicians are complaining openly about the business conduct of 1MDB, the government members are bitching behind the scene.

As for the media, they had gone to listen to briefings and press conferences held by 1MBD’s top brass, including its Chairman (Tan Sri) Lodin Wok Kamaruddin, but left with more questions than answers. Hopefully Arul Kanda is more convincing and have a better luck with the press.

In the meantime it would be useful for him to address the public and the media once and for all on all matters affecting 1MDB such as:

1. Why did it buy end-of-life IPPs from YTL, Genting and Ananda Krishman’s Tanjong Energy?

2. Has it applied and received the extension for the concession period of the power plants and negotiated new PPAs with TNB?

3. Who are the Malaysian and international subscribers of its US$6.5 billion (RM23.41 billion) global sukuk other than those we already know, almost all of which are government-linked companies and investment funds (GLCs/GLICs)?

4. Apart from power plants, TRX, the redevelopment of the Sungai Besi RMAF Base and the Penang land what are other 1MDB assets?

5. Is it true that 1MDB pay as much as 95% above the market price for its Penang land and is it true that part of the land is occupied by squatters?

6. Is it true that it also invested in a mining concession in Mongolia?

7. Why the necessity for 1MDB to do a land-lease development for TRX with an Australian company when all the three major property developments mentioned by Arul Kanda in the MM interview – KLCC, KL Sentral and Mid Valley – were all developed by locals?

8. Until a month ago Arul Kanda was a banker. Is it a norm for a state-owned strategic investment company to be so highly geared as 1MDB?

9. Would he as a banker fund such a highly geared company?

Opting For Consolidation

Some of these questions might have found answers. In the latest development, Arul Kanda on Feb 18 announced that the company would not undertake any new investments or projects and raise new borrowings.

In an announcement after a strategic review of its business, 1MDB said it might sell assets including its land in Air Itam, Penang and Pulau Indah, Selangor, and look at options on monetising the Edra Energy, which is its power generation division.

As for its real estate projects in Tun Razak Exchange (TRX) and Bandar Malaysia, the federal government-owned fund will sell land development rights or enter into profit-sharing joint ventures.

Arul Kanda is new in 1MDB. He may not know all about the company unless he has always had a special relationship with it that he is acutely aware of what is going on in it.

He can choose to be a true turn-around manager and saviour of the company by making sure that what is dreaded about 1MDB does not happen. Or he could become his master’s voice.

And whatever he says to the press, please do not ever emulate what the media people of the Prime Minister’s Office allegedly told the New York Times in relations to the Jho Low expose that is “neither any money spent on travel, nor any jewellery purchases, nor the alleged contents of any safes are unusual for a person of the prime minister’s position, responsibilities and legacy family assets.”

Foot Note: As for the PM inheriting family's assets as stated above, a few days ago I was told by a former political aide to the late Tun Abdul Razak Hussein that he did not die a wealthy man. He left behind two houses – one in Pekan and another in Kuala Lumpur. -http://kadirjasin.blogspot.com/