concealed facts from the cabinet.
in charge of several portfolios in BNM at the time, including the management of external reserves.
Former premier Najib Abdul Razak was arrested at his residence in Jalan Duta, Kuala Lumpur, this afternoon, according to MACC chief commissioner Mohd Shukri Abdull.
The arrest was carried out in relation to the commission’s investigation into the SRC International issue.
Speculation is also rife that the former premier could be charged tomorrow.
Shukri Abdul told the media that the arrest took place at 3pm and the former premier has been taken to the commission’s headquarters in Putrajaya for further questioning.
Previously, MACC had recorded Najib’s statement twice with regard to the SRC International issue.
Last Friday, Malaysiakini had reported that there is a strong likelihood the former premier would be arrested this week.
[More to follow]
NEW YORK: The Federal Reserve’s balance sheet may not have that much further to shrink.
An unexpected rise in overnight interest rates is pulling forward a key debate among US central bankers over how much liquidity they should keep in the financial system. The outcome will determine the ultimate size of the balance sheet, which they are slowly winding down, with key implications for US monetary policy.
One consequence was visible on Wednesday. The Fed raised the target range for its benchmark rate by a quarter point to 1.75% to 2%, but only increased the rate it pays banks on cash held with it overnight to 1.95%. The step was designed to keep the federal funds rate from rising above the target range. Previously, the Fed set the rate of interest on reserves at the top of the target range.
Shrinking the balance sheet effectively constitutes a form of policy tightening by putting upward pressure on long-term borrowing costs, just as expanding it via bond purchases during the financial crisis made financial conditions easier. Since beginning the shrinking process in October, the Fed has trimmed its bond portfolio by around US$150bil to US$4.3 trillion, while remaining vague on how small it could become.
This reticence is partly because the Fed doesn’t know how much cash banks will want to hold at the central bank, which they need to do in order to satisfy post-crisis regulatory requirements.
Officials have said that, as they drain cash from the system by shrinking the balance sheet, a rise in the federal funds rate within their target range would be an important sign that liquidity is becoming scarce.
Now that the benchmark rate is rising, there is some skepticism. The increase appears to be mainly driven by another factor: the US Treasury ramped up issuance of short-term US government bills, which drove up yields on those and other competing assets, including in the overnight market.
“We are looking carefully at that, and the truth is, we don’t know with any precision,” Fed chairman Jerome Powell told reporters on Wednesday when asked about the increase. “Really, no one does. You can’t run experiments with one effect and not the other.”
“We’re just going to have to be watching and learning. And, frankly, we don’t have to know today,” he added.
But many also see increasingly scarce cash balances as at least a partial explanation for the upward drift of the funds rate, and as a result, several analysts are pulling forward their estimates of when the balance sheet shrinkage will end.
Mark Cabana, a Bank of America rates strategist, said in a report published June 5 that Fed officials may stop draining liquidity from the system in late 2019 or early 2020, leaving US$1 trillion of cash on bank balance sheets. That compares with an average of around US$2.1 trillion held in reserves at the Fed so far this year.
Cabana, who from 2007 to 2015 worked in the New York Fed’s markets group responsible for managing the balance sheet, even sees a risk that the unwind ends this year.
One reason why people may have underestimated bank demand for cash to meet the new rules is that Fed supervisors have been quietly telling banks they need more of it, according to William Nelson, chief economist at The Clearing House Association, a banking industry group.
The requirement, known as the Liquidity Coverage Ratio, says banks must hold a certain percentage of their assets either in the form of cash deposited at the Fed or in US Treasury securities, to ensure they have enough liquidity to deal with deposit outflows.
The Fed flooded the banking system with reserves as a byproduct of its crisis-era bond-buying programs, known as quantitative easing, to stimulate the economy. The money it paid investors to buy their bonds was deposited in banks, which the banks in turn hold as cash in reserve accounts at the Fed.
In theory, the unwind of the bond portfolio, which involves the reverse swap of assets between the Fed and investors, shouldn’t affect the total amount of Treasuries and reserves available to meet the requirement. The Fed destroys reserves by unwinding the portfolio, but releases an equivalent amount of Treasuries to the market in the process.
But if Fed supervisors are telling banks to prioritise reserves, that logic no longer applies. Nelson asked Randal Quarles, the Fed’s vice-chairman for supervision, if this was the Fed’s new policy. Quarles, who was taking part in a May 4 conference at Stanford University, said he knew that message had been communicated and is “being rethought”.
If Fed officials do opt for a bigger balance sheet and decide to continue telling banks to prioritise cash over Treasuries, it may mean lower long-term interest rates, according to Seth Carpenter, the New York-based chief US economist at UBS Securities.
“If reserves are scarce right now, and if the Fed does stop unwinding its balance sheet, the market is going to react to that, a lot,” said Carpenter, a former Fed economist. “Everyone anticipates a certain amount of extra Treasury supply coming to the market, and this would tell people, ‘Nope, it’s going to be less than you thought’.” — Bloomberg
In Malaysia, the selling streak has been ongoing for almost a month. As of June 8, the year to date outflow
stands at RM3.02bil, which is still one of the lowest among its Asean peers. The FBM KLCI was down 1.79 points yesterday to 1,761.
PETALING JAYA: It was a sea of red for equity markets across the region after the Federal Reserve raised interest rates by a quarter percentage point to a range of 1.75% to 2% on Wednesday, and funds continued to move their money back to the US. This is the second time the Fed has raised interest rates this year.
In general, markets weren’t down by much, probably because the rate hike had mostly been anticipated. Furthermore for Asia, the withdrawal of funds has been taking place over the last 11 weeks, hence, the pace of selling was slowing.
The Nikkei 225 was down 0.99% to 22,738, the Hang Seng Index was down 0.93% to 30,440, the Shanghai Composite Index was down 0.08% to 3,047.34 while the Singapore Straits Times Index was down 1.05% to 3,356.73.
In Malaysia, the selling streak has been ongoing for almost a month. As of June 8, the year to date outflow stands at RM3.02bil, which is still one of the lowest among its Asean peers. The FBM KLCI was down 1.79 points yesterday to 1,761.
Meanwhile, the Fed is nine months into its plan to shrink its balance sheet which consists some US$4.5 trillion of bonds. The Fed has begun unwinding its balance sheet slowly by selling off US$10bil in assets a month. Eventually, it plans to increase sales to US$50bil per month.
With the economy of the United States showing it was strong enough to grow with higher borrowing costs, the Federal Reserve raised interest rates on Wednesday and signalled that two additional increases would be made this year.
Fed chairman Jerome H. Powell in a news conference on Wednesday said the economy had strengthened significantly since the 2008 financial crisis and was approaching a “normal” level that could allow the Fed to soon step back and play less of a hands-on role in encouraging economic activity.
Rate hikes basically mean higher borrowing costs for cars, home mortgages and credit cards over the years to come.
Wednesday’s rate increase was the second this year and the seventh since the end of the Great Recession and brings the Fed’s benchmark rate to a range of 1.75% to 2%. The last time the rate reached 2% was in late 2008, when the economy was contracting.
“With a slightly more aggressive plan to tighten monetary policy this year than had previously been projected by the Fed, it will narrow our closely watched gap between the yield rates of two-year and 10-year Treasury notes, which has recently been one of a strong predictor of recessions,” said Anthony Dass, chief economist in AmBank.
Dass expects the policy rate to normalise at 2.75% to 3%.
“Thus, we should potentially see the yield curve invert in the first half of 2019,” he said.
So what does higher interest rates mean for emerging markets?
It means a flight of capital back to the US, and many Asian countries will be forced to increase interest rates to defend their respective currencies.
Certainly, capital has been exiting emerging market economies. Data from the Institute of International Finance for May showed that emerging markets experienced a combined US$12.3bil of outflows from bonds and stocks last month.
With that sort of global capital outflow, countries such as India, Indonesia, the Philippines and Turkey, have hiked their domestic rates recently.
Data from Lipper, a unit of Thomson Reuters, shows that for the week ending June 6, US-based money market funds saw inflows of nearly US$34.9bil.
It makes sense for investors to be drawn to the US, where the economy is increasingly solid, coupled with higher yields and lower perceived risks.
Hong Kong for example is fighting an intense battle to fend off currency traders. Since April, Hong Kong has spent at least US$9bil defending its peg to the US dollar. Judging by the fact that two more rate hikes are on the way this year, more ammunition is going to be needed.
Hong Kong has the world’s largest per capita foreign exchange reserves – US$434bil more in firepower.
By right, the Hong Kong dollar should be surging. Nonetheless, the currency is sliding because of a massive “carry trade.”
Investors are borrowing cheaply in Hong Kong to buy higher-yielding assets in the US, where 10-year Treasury yields are near 3%.
From a contrarian’s perspective, global funds are now massively under-weighted Asia.
With Asian markets currently trading at 12.3 times forward price earnings ratio, this is a reasonable valuation at this matured stage of the market.
By Tee Lin Say StarBiz
MOST people are somewhat aware about the Fourth Industrial Revolution.
The first industrial revolution occurred with the rise of steam power and manufacturing using iron and steel. The second revolution started with the assembly line which allowed specialisation of skills, represented by the Ford motor assembly line at the turn of the 20th century.
The third industrial revolution came with Japanese quality controls and use of telecommunication technology.
The Fourth Industrial Revolution, or first called by the Europeans Industry 4.0, is all about the use of artificial intelligence, robotics, genomics and process, creative design and high speed computing capability to revolutionise production, distribution and consumption. Finance is a derivative of the real economy – its purpose is to serve real production. Early finance was all about the finance of trade and governments to engage in war.
It is no coincidence that the first central banks (Sweden and England) were established in the 17th century at the start of the First Industrial Revolution. Industrialisation became much more sophisticated as Finance 2.0 brought the rise of credit and equity markets in the 18th and 19th centuries. Industrialisation and colonisation came about at the same time as the globalisation of banks, stocks and bond markets.
Again, with the invention of first the fax machine, then Internet that speeded up information storage and transmission in the 1980s, finance and industry took a quantum leap into the age of information technology. Finance 3.0 was the age of financial derivatives, in which very complex (and highly leveraged) derivatives became so opaque that investors and regulators realised they became what Warren Buffett called “weapons of mass destruction”. Finance 3.0 stalled in 2007 with the Global Financial Crisis and was only propped up with massive central bank intervention in terms of unconventional monetary policy with historically unprecedented interest rates.
We are now on the verge of Finance 4.0 and it may be useful to explore what it really means.
The common definition of Industry 4.0 is the rise of the Internet of Things, in which cloud computing, artificial intelligence and global connectivity means that cyber-physical systems can interact with each other to produce, distribute and trade across the world in a massively distributed system of production.
But what does Finance 4.0 really mean?
What truly differentiates Finance 4.0 from the earlier version is the arrival of Blockchain or distributed ledger technology. The best way to think about the difference is the architecture of the two different systems.
Finance 3.0 and earlier versions were all about a top-down or hierarchical ledger system, like a pyramid, in which trade and settlements between two parties are settled across a higher ledger.
A simple example is payment from Joe in bank A to Jim in bank B is finally settled across the books of the central bank in local currency. But in international trade and payments, the final settlements (at least more than 60%) are settled in US dollar finally across the ledgers of the Federal Reserve bank system.
Finance 3.0 was not perfect and those who wanted to avoid regulation, taxation or any official oversight basically moved trading and transactions off-balance sheet and also off-shore. This was the “shadow banking” system that financial regulators and central banks conveniently blamed on their failure to see or stop the last global financial crisis.
Although technically the shadow banking system is the non-bank financial system, which would include bond, stock and commodity markets, the bulk of illegal, illicit transactions traditionally was done in cash.
Welcome to the technical innovation called cyber-currencies, which was made possible for peer-to-peer (P2P) transactions across a distributed ledger system (commonly known as blockchain). In architectural terms, this is a bottom-up system which technically can avoid any official oversight. Indeed, cyber-currencies or tokens were invented precisely because the users do not trust the official system.
As the populist philosopher Stephen Bannon said, “central banks are in the business of debasing the currency”. Hence, those who want to avoid the debasement of their savings prefer to deal with either cash or cyber-tokens like bitcoin (pic).
What is happening in the rapidly evolving Finance 4.0 is that as the world moves from a unipolar order to a multi-polar world in which other reserve currencies also contend for trade and store of value, the top-down architecture is fusing (or merging) with a bottom-up architecture in which trade, transactions and stores of value are shifting towards the P2P shadow system.
Why this is taking place is not hard to understand. Post-global financial crisis, the amount of financial regulations have tripled in terms of number of rules and complexity on what the official sector can regulate, which is mostly the banking system. It is therefore not surprising that all the innovation, talent and money are moving to outside the banking system into the asset management industry, which is much more lightly regulated.
No talented banker, however dedicated to the values of banking probity, can resist the temptations of working in asset management, away from the heavily regulated environment where he or she is 24×7 under regulatory internal and external oversight.
Another reason why the cyber-P2P business is flourishing is because the official sector is worried that further regulation would hinder innovation. But those who want to increase the complexity of regulation must remember that for every 50 foot wall, someone will invent a 51 foot ladder.
So competition in the 21st century has already moved from the physical and financial space into cyber-space.
If there is one thing I learnt as a former regulator, it is that if the banks are behind the curve in terms of technology, the regulators are even further behind, since they learn mostly from those whom they regulate. But if financial regulators deal with financial innovation through “regulatory sandboxes” where they allow their regulated banks to experiment in sandboxes, they are treating their regulated institutions as kids in an adult game of ruthless technology.
Time for the official sector to make their stand clear or else Finance 4.0 promises to be very different from the orderly world that they are used to imaging. Nothing says this clearer than a recent survey by the Chartered Financial Analyst Institute, which showed that 54% of institutional investors surveyed and 38% of retail believe that a financial crisis in the next one-three years is likely or very likely.
You have been warned.
– Tan Sri Andrew Sheng writes on global issues from an Asian perspective.
ASSUMING the government repays its debt by RM1mil a day, it would take Malaysia 2,979 years to pay off its debts.
Malaysia’s new Prime Minister Tun Dr Mahathir Mohamad revealed on May 21 that the country’s debt level has breached the RM1 trillion mark during his first address to civil servants.
The statement, which was nothing less than alarming, has since raised concerns among Malaysians on the country’s fiscal sustainability. Bursa Malaysia was hammered for four consecutive days, as investors frantically sold off their stakes.
The benchmark FBM KLCI saw the biggest year-to-date decline on May 23, tumbling by 40.78 points or 2.21% to 1,804.25 points.
Total gains made by the index this year were all wiped out in just four days following Dr Mahathir’s announcement.
The ringgit, which has weakened since early April, continues to decline as concerns on public debt loom.
Big impact: The benchmark FBM KLCI saw the biggest year-to-date decline on May 23, tumbling by 40.78 points or 2.21 to 1,804.25 points.
An economist tells StarBizWeek that Dr Mahathir’s public announcement on the high debt figure is “not helping”, as anxiety intensifies among Malaysians and in the market.
For context, Malaysia’s real gross domestic product (GDP), an indicator of the size of economy, was RM1.35 trillion as at end-2017 – close to the said RM1 trillion debt amount.
Meanwhile, the federal government’s revenue this year is projected at RM239.9bil as per Budget 2018.
Several critics, including Umno Youth deputy chief Khairul Azwan Harun, claim that Dr Mahathir’s statement on the federal government debt was exaggerated and far-fetched.
AmBank Group chief economist Anthony Dass says that although the current scenario shows some signs of similarities to the 1997/98 Asian Financial Crisis, he would not conclude that the current fiscal condition is somewhat similar to the downturn 20 years ago.
At a glance, the “RM1 trillion debt” remark stands in sharp contrast to Bank Negara’s debt tally of RM686.8bil as at end-2017, putting the federal government’s debt-to-GDP ratio at 50.8% – lower than the 55% self-imposed debt limit.
Dr Mahathir refutes this, saying that the national debt-to-GDP ratio has shot up to 65.4%. A day after his announcement, Finance Minister Lim Guan Eng put the ratio at 80.3% of GDP, or about RM1.09 trillion in debt as at end-2017.
Why is there such an obvious difference in the debt amount now that a new government is in place?
Here is where “creative accounting” comes into play.
The lower official debt figures released under the previous Barisan Nasional government had excluded the contingent liabilities and several other major “hidden” debts from the direct liabilities, which amounted to RM686.8bil as at end-2017.
Contingent liabilities, which were released separately prior to this, basically refer to government-guaranteed debt and do not appear on the country’s balance sheet. Examples of contingent liabilities are the loans under the National Higher Education Fund Corp (PTPTN) and certain debt of the controversial 1Malaysia Development Bhd (1MDB).
As at end-2017, Malaysia’s contingent liabilities stood at RM238bil.
Funding for several government mega-projects such as the mass rapid transit (MRT) projects was also categorised as contingent liabilities. The MRT lines were funded by DanaInfra Nasional Bhd, the government’s special funding vehicle for infrastructure projects.
DanaInfra raises money from the market through sukuk, which are, in turn, guaranteed by the government. The guaranteed amount is classified as a contingent liability.
In the event of less-than-expected revenue collection from the MRT lines moving forward, the government will have to intervene to repay the sukuk holders.
The current ruling government believes that RM199.1bil out of the RM238bil contingent liabilities deserves attention to ensure proper debt repayment.
The 1MDB alone comes with an estimated contingent liability of RM38bil.
High figure: The 1MDB alone comes with an estimated contingent liability of RM38bil. — Reuters
On the remaining government guarantees, the Finance Ministry says they have been provided by “entities which are able to service their debts such as Khazanah Nasional Bhd, Tenaga Nasional Bhd and MIDF”.
Apart from contingent liabilities, there are several major “hidden” debts, which do not fall under both direct liabilities and contingent liabilities.
An economist with a leading investment bank in Malaysia calls the debts “off-off-balance sheet” government debt.
These are the future commitments of the federal government to make lease payments for public-private partnership projects such as schools, roads and hospitals.
Examples of such debt would include the debt of Pembinaan PFI Sdn Bhd, a company owned by the Finance Ministry. Pembinaan PFI was established in 2006 under the previous Tun Abdullah Ahmad Badawi administration to source financing to undertake government construction projects.
According to its latest available financial statement for 2014, Pembinaan PFI held a total debt of RM28.75bil.
Interestingly, at end-2012, the company’s debt was the third highest among all government-owned entities, just behind Petronas (RM152bil) and Khazanah Nasional (RM69bil).
With no independently generated revenue, the interest payments on Pembinaan PFI’s debts would eventually come from the federal government’s coffers.
The Finance Ministry puts the debt under this third category at RM201.4bil.
All together, Malaysia’s debt and liabilities are said to amount to a total of RM1.09 trillion.
Actually, for those in the loop, the different debt categories and total liabilities are not something new.
Lawmakers from Pakatan Harapan, particularly current Bangi MP Ong Kian Ming, have alerted the authorities about the debt figures over that past few years.
Ong is also currently the special officer to the Finance Minister. The layman might ask, what was the former government’s relevance of classifying these debts into separate off-balance sheet items?
The motive is to make sure the national balance sheet looks healthy and lean.
Many have questioned the new government’s move to lump contingent liabilities and debt obligations with the direct liabilities. It should be noted that as per the standard procedure of credit rating agencies, only the direct liabilities are taken into the calculation of the debt-to-GDP ratio.
In a StarBiz report this year, Moody’s Investors Service sovereign risk group assistant vice-president Anushka Shah said that by carving out certain expenditures off its budget, the government would be able to optimise its expenditure profile and minimise the associated impacts from its spending.
However, she pointed out that Malaysia’s federal government debt burden remains elevated at 51%, relatively higher than the median of other A-rated sovereign states at 41%.
On the country’s contingent liabilities, Anushka described them as “low-risk” at the current level, and added that the government has been prudent and careful in managing the guaranteed debts.
“We find that the government has adopted rigorous selection criteria when it grants the guarantees to the respective entities.
“The companies which have received guarantees from the government are relatively healthy and have strong balance sheet positions,” she said.
Ever since Dr Mahathir shocked the market with the “RM1 trillion debt” remark, the focus among Malaysians has largely centred on the nominal value of the debt.
A greater emphasis should instead be given on “debt sustainability”, which basically refers to the growth of debt against the growth of the economy.
Economists who spoke to StarBizWeek have mixed opinions on the level of seriousness of Malaysia’s public debt problem.
Suhaimi: Malaysia’s debt has risen faster
than economic growth.
According to Maybank group chief economist Suhaimi Ilias, Malaysia’s debt has risen faster than economic growth over the last 10 years.
“In the past decade, officially published government debt and government-guaranteed debt have risen by 10% and 14.5% per annum, respectively, faster than the nominal GDP growth of 7% per annum, which raises valid sustainability risk.“On the government’s debt service costs relative to the operating expenditure, the ratio was 12.7% as at end-2017 and based on Budget 2018 is projected to rise to 13.2%. It has been rising steadily from 9.5% in 2012.
“There is a 15% cap on this under the administrative fiscal rule, while the 11th Malaysia Plan target is to lower the ratio to 9.8% in 2020. The government is looking at the debt issue from this sustainability perspective in our opinion,” he says.
Meanwhile, Socio-Economic Research Centre (SERC) executive director Lee Heng Guie says that various indicators of debt burden suggest that Malaysia’s rising public debt level warrants close monitoring to contain the long-term risks of fiscal and debt sustainability.
“High levels of government debt over a sustained period will have economic and financial ramifications over the longer term. Rising public debt could crowd out private capital formation and, therefore, productivity growth.
“This occurs through the competition for domestic liquidity, higher interest rates, a shifting of resources away from the private sector or investment in low-impact projects. This situation is made worse if the government wastes borrowed money on unnecessary projects,” he tells StarBizWeek.
In contrast to Suhaimi and Lee, Alliance Bank Malaysia Bhd chief economist Manokaran Mottain points out that Malaysia’s debt sustainability scenario is yet to be a cause for concern.
Manokaran: Debt sustainability scenario is
yet to be a cause for concern.
This is because debt repayments are made on an annual basis as opposed to a colossal one-off payment of RM1 trillion.
“Malaysia’s economic growth of above 5% is sufficient to cover government debt. As long as the economy is growing while the government is able to service the debt charges, it is not really that alarming.
“Even in the United States, the government debt-to-GDP level exceeds 100% at US$21 trillion against the real GDP of US$18.57 trillion,” he says.
Manokaran adds that while total government debt has risen over the years, Malaysia’s annual debt growth rate has been growing slower in recent years.
The government must now move fast to introduce measures to reduce and manage the country’s debt levels. This is highly crucial in assuring creditors and investors that the country’s fiscal health remains uncompromised.
Given the fact that the world is currently at the tail-end of the 10-year economic cycle, it is timely for the government to focus on its ability to fulfil its debt obligations.
In the event of an economic turmoil, a heavily-indebted country would be adversely affected.
Lim has emphasised the federal government’s commitment to honour all of the country’s debts.
“This new government puts the interest of the people first, and hence, it is necessary to bite the bullet now, work hard to solve our problems, rather than let it explode in our faces at a later date,” he said in a statement earlier.
Economists believe that the government must strictly embark on reforming the national expenditure in carrying out debt consolidation.
This includes cutting down on unnecessary expenditure, plugging leakages in the federal government’s finances and containing public-sector wage bills.
Lee has recommended an overhaul the current pension system, considering the unsustainable current trend.
“On revenue reform, the design of tax policy should be fair and equitable in order to be sustainable.
“The push for a wide and investment-friendly reform to boost potential growth should be expedited, as strong investment and economic growth has a huge effect on enhancing revenue growth and reducing public debt.
“On budget planning and development, an oversight body needs to be set up to ensure better fiscal rules, budgetary processes and closer fiscal monitoring to ensure fiscal discipline,” says Lee.
Manokaran says the new government should consider expenditure cuts through the privatisation and reformation of the numerous government-linked corporations, as well as the reduction in size and budget allocation of the Prime Minister’s Office.
On the national mega-infrastructure projects, Manokaran and Suhaimi say that the renegotiation and review of such projects will be vital in managing future debt growth.
Time will tell whether the government can live up to its promise of reducing the public debt dilemma. Pakatan must now balance its “populist” electoral promises and stellar fiscal management policies.
As for now, the government deserves to be complimented for calling a spade a spade, acknowledging the problem at hand.
PUTRAJAYA: On top of paying RM6.98bil to bail out 1Malaysia Development Bhd (1MDB), the Government is now facing the prospect of forking out an additional RM953mil to service the company’s debts by November.
“I have been informed that besides the RM142.75mil due at the end of this month, another RM810.21mil worth of interest is due between the months of September and November in 2018,” Finance Minister Lim Guan Eng told reporters after being briefed by ministry officers.
Lim, who was shocked at the revelation, added that the ministry had been bailing out 1MDB by servicing its debts since April 2017, which included payments for International Petroleum Investment Corp’s (IPIC) settlement agreement amounting to RM5.05bil.
“This confirms the public suspicion that 1MDB had essentially deceived Malaysians by claiming that hit had paid via ‘successful rationalisation exercise’.
“It has been the ministry that has bailed out 1MDB,” he said.
He also said the previous government had conducted an exercise of deception with regard to 1MDB and even misrepresented the financial situation to Parliament.
Lim said 1MDB’s chief executive officer Arul Kanda Kandasamy, and directors Datuk Kamal Mohd Ali and Datuk Norazman Ayob will be grilled to determine the company’s state of affairs and its ability to service its debts.
He said officers from the ministry would conduct a detailed study on 1MDB’s debts and liabilities aimed at resolving the “crisis created by the scandal”.
“We will also submit our findings to the 1MDB task force formed by the Prime Minister,” Lim said.
Asked what was the full extent of 1MDB’s debts and liabilities, Lim said this would only be known with full access to files and accounts which had been previously barred or blocked to auditors.
He added 1MDB had contributed to the nation’s debts. – The Star
Najib and Mahathir face off in fierce Malaysian election: https://news.cgtn.com/news/
Important report: RCI Secretary Datuk Dr Yusof
Ismail speaking to media after submitting a police report over Bank
Negara forex trade losses in Putrajaya.
THE Royal Commission of Inquiry into the foreign exchange losses suffered by Bank Negara Malaysia (BNM) back in 1990s has recommended that three people be probed over their involvement and liability.
They are former prime minister Tun Dr Mahathir Mohamad, his then finance minister Datuk Seri Anwar Ibrahim and ex-Bank Negara advisor Tan Sri Nor Mohamed Yakcop, whom the report also named as “principally liable for criminal breach of trust”.
The 524-page report also called out Tun Daim Zainuddin, who served as finance minister from July 14, 1984 to March 15, 1991, for having aided and abetted Nor Mohamed by leaving BNM “to its own devices”.
The commission found that the Cabinet in the 1990s was not given the full picture by Anwar on the forex losses, adding that he had “deliberately concealed facts and information and made misleading statements”.
“The Commission is of the opinion that there was deliberate concealment as BNM’s annual reports did not state the actual losses incurred from the forex dealings from 1992 to 1994.
“It is also of the opinion that the then prime minister (Dr Mahathir) had condoned the actions of the finance minister,” it said.
The RM31.5bil losses, it said, were hidden using “unconventional accounting treatments”, such as booking losses to reserves in the balance sheet and the absorption of the remaining losses by the transfer of shares from the Government to BNM as well as the creation of a “Deferred Expenditure” to be repaid in instalments over a decade.
“All the actions to conceal the losses were discussed and approved by the board of directors before the accounts were signed off by the Auditor-General.
“No further action was taken by the Finance Minister and Treasury secretary-general (as a board member) despite being informed by the Auditor-General on the losses and the unusual accounting treatments,” said the report.
Anwar, noted the Commission, had been informed about the actual forex losses suffered by BNM.
Dr Mahathir, it said, was informed by Anwar together with then Treasury deputy secretary-general Tan Sri Clifford Francis Herbert in late 1993 that BNM had suffered estimated losses of RM30bil on the forex dealings for 1992 and 1993.
However, in the extract of minutes from three Cabinet meetings on March 30, April 6 and 13 in 1994, Anwar had made “no mention of the actual losses of RM12.3bil for 1992 and RM15.3bil for 1993.”
Anwar had chaired the March 30 meeting as the deputy prime minister. The losses for 1993 were reported as RM5.7bil.
“The prime minister, who chaired the meeting on April 6, did not correct or offer more information when the forex losses for 1993 were recorded as only RM5.7bil,” it pointed out.
“The Commission is of the view that it is the finance minister’s responsibility to inform the Cabinet the significant financial affairs about BNM as the Cabinet has collective responsibility with the finance minister and the prime minister for the country’s affairs.”
Dr Mahathir, it said, claimed to have no knowledge of the real amount of losses, which was untenable with his meticulous nature, as well as that under the law, BNM was the banker and financial agent to the Government with the remainder of its net profit to be paid into the Federal Consolidated Fund.
The report said as pointed out by Herbert, he had expected Dr Mahathir to be outraged but his reaction was quite normal with him uttering “sometimes we make profit, sometimes we make losses”.
“His reaction to and acceptance of the huge forex losses suggest that he could have been aware of the forex dealings and its magnitude,” said the report.
The RCI also found Dr Mahathir’s claim that he could only remember the amount of RM5bil forex losses when informed about it in a meeting with Anwar and Herbert in late 1993 to be “questionable”.
It said this was because based on testimonies of other witnesses and documentary evidence, the RM5.7bil only surfaced when Bank Negara’s 1993 annual report was presented to the Cabinet on March 30, 1994.
“Despite his denials, the Commission is of the opinion that a thorough investigation should be carried out to determine the extent of his involvement and liability,” said the report.
By Martin Carvalho, Hemananthani Sivanandam, Loshana K. Shagar, and Rahmah Ghazali The Star
|Inspector-General of Police Tan Sri Mohamad Fuzi Harun says police will
open investigation paper following a report that was lodged by Royal
Commission of Inquiry (RCI) secretary Datuk Dr Yusof Ismail. (Image is
for illustration purpose only).
KUALA LUMPUR: Police have set up a taskforce to investigate possible criminal breach of trust and cheating which may have been committed during Bank Negara Malaysia’s foreign exchange losses in 1990s
Inspector-General of Police Tan Sri Mohamad Fuzi Harun said police would open investigation paper as the forex Royal Commission of Inquiry (RCI) had lodged a police report this afternoon.
“A taskforce has been formed and it will lead the investigation. We are investigating the case under Section 409 of the Penal Code for criminal breach of trust,” he told the New Straits Times when contacted.
RCI’s secretary Datuk Dr Yusof Ismail, who is the Finance Ministry Strategic Investment Division director, had lodged a report at Putrajaya police headquarters at 4.10pm asking police to start an official investigation.
In the police report, it was stated that those who were involved in the alleged wrongdoings were Bank Negara Malaysia (BNM) officers, BNM Board of Members, National Audit Department, Finance Ministry and the prime minister who served during the period.
|Royal Commission of Inquiry (RCI) secretary Datuk Dr Yusof Ismail seen
leaving the Putrajaya police headquarters after lodging a report. Pic by
AHMAD IRHAM MOHD NOOR
The RCI, in its 528-page report that was tabled in Parliament today, said it believed that Datuk Seri Anwar Ibrahim, who was Finance Minister at the time, had misled the government and concealed the actual losses suffered by BNM.
RCI also said it believed that the prime minister at the time, Tun Dr Mahathir Mohamad, had approved Anwar’s “misleading statements”.
The commission also revealed that the losses were far larger than that what was initially reported by the central bank, RM31.5 billion as against RM5.7 billion, in the period of three years.
Yusof spent almost 40 minutes at the police headquarters and later spoke to reporters who were waiting outside.
He said in the report, the commission had requested the police to start a official investigation on the possible criminal breach of trust, forgery and other wrongdoings which may have been committed during the forex activities.
“Our report is basically requesting the police to start investigation and for the Attorney-General Chambers to take action based on the findings by the police,” he said.
Putrajaya OCPD Asst Comm Rosly Hassan who confirmed that the report was made, said a special unit in Bukit Aman would investigate the case.
By TEOH PEI YING and HASHINI KAVISHTRI KANNAN New Straits Times
They are the most amazing economic ants on Earth, ‘Sugar King’ writes in memoirGood Chinese business management is second to none; the very best of Chinese management is without compare. I haven’t seen others come near to it in my 70year career. Robert Kuok
The overseas Chinese were the unsung heroes of the region, having helped to build South East Asia to what it is today, said Malaysian tycoon Robert Kuok (pic).
He said that it was the Chinese immigrants who tackled difficult task such as planting and tapping rubber, opening up tin mines, and ran small retail shops which eventually created a new economy around them.
“It was the Chinese who helped build up Southeast Asia. The Indians also played a big role, but the Chinese were the dominant force in helping to build the economy.
“They came very hungry and eager as immigrants, often barefooted and wearing only singlets and trousers. They would do any work available, as an honest income meant they could have food and shelter.
“I will concede that if they are totally penniless, they will do almost anything to get their first seed capital. But once they have some capital, they try very hard to rise above their past and advance their reputations as totally moral, ethical businessmen,” Kuok said based on excerpts of his memoir reported in the South China Morning Post .
“Robert Kuok, A Memoir’ is set to be released in Malaysia on Dec 1.
Kuok said the Chinese immigrants were willing to work harder than anyone else and were willing to “eat bitterness”, hence, were the most amazing economic ants on earth.
In the extracted memoir published by the South China Morning Post, Kuok, pointed out that if there were any businesses to be done on earth, one can be sure that a Chinese will be there.
“They will know whom to see, what to order, how best to save, how to make money. They don’t need expensive equipment or the trappings of office; they just deliver.
“I can tell you that Chinese businessmen compare notes every waking moment of their lives. There are no true weekends or holidays for them. That’s how they work. Every moment, they are listening, and they have skilfully developed in their own minds – each and every one of them – mental sieves to filter out rubbish and let through valuable information.
“Good Chinese business management is second to none; the very best of Chinese management is without compare. I haven’t seen others come near to it in my 70-year career,” he said.
“They flourish without the national, political and financial sponsorship or backing of their host countries. In Southeast Asia, the Chinese are often maltreated and looked down upon. Whether you go to Malaysia, Sumatra or Java, the locals call you Cina – pronounced Chee-na – in a derogatory way,” he said.
He added that the Chinese had no “fairy godmothers” financial backers.
“Yet, despite facing these odds, the overseas Chinese, through hard work, endeavour and business shrewdness, are able to produce profits of a type that no other ethnic group operating in the same environment could produce,” he said.
Kuok ultimately attributed the Chinese survivability in Southeast Asia to its cultural strength.
“They knew what was right and what was wrong. Even the most uneducated Chinese, through family education, upbringing and social environment, understands the ingredients and consequences of behaviour such as refinement, humility, understatement, coarseness, bragging and arrogance,” he said.
In the debut instalment of six extracts from the first-ever memoir of Malaysian tycoon Robert Kuok, reproduced exclusively here, he recalls how ..