1MDB unsustainable from the start, says Umno minister
Minister Abdul Wahid Omar points to fund’s low capital-high debt business model as the reason why.
(FMT) – The business model of embattled state investment fund 1Malaysia Development Berhad was unsustainable from the start, a government minister said today.
Abdul Wahid Omar, Minister in the Prime Minister’s Department in charge of Economic Planning, was quoted telling CNBC’s “The Rundown” programme today 1MDB’s low capital, high debt business model was to blame.
“The model that they (1MDB) took was low capitalisation and high borrowings, and I think as they found out, it wasn’t a sustainable model. With that came debt realisation, where the board has now embarked on a rationalisation plan,” he was quoted as saying.
According to Abdul Wahid, 1MDB’s design was an exception, not the norm, for Malaysian government-linked companies, as it was not listed like other firms, but wholly owned by the Finance Ministry.
“The norm (in Malaysia) is successful transformation of the government-linked companies that we’ve embarked on,” Abdul Wahid said, citing firms like Maybank, CIMB, Axiata, Telekom Malaysia and Sime Darby as examples.
He said all those companies had gone through major transformation by steadily improving their financial performances and governance and enhancing their role in nation-building.
1MDB however, set-up in 2009, raked up to RM42 billion in debts and missed various deadlines to repay loans to creditor banks.
The company embarked on a debt rationalisation programme in May last year by selling its assets, including Edra power to a Chinese company for billions of ringgit.
To make matters worse, 1MDB was now being investigated by local and foreign authorities for alleged corruption and money laundering.
Abdul Wahid told CNBC that Malaysian authorities were doing “their best” in probing the fund, and urged all parties to allow it to go on.
Prime Minister and Finance Minister Najib Razak on Monday told Parliament that 1MDB had no outstanding debts, and that it had always serviced its debts, and interest on its borrowings, promptly.
