1MDB bringing back Cayman Islands fund, says minister

Sovereign fund 1Malaysia Development Bhd (1MDB) is bringing back the RM7.18 billion it had invested in the Cayman Islands, despite making good returns.

Deputy finance minister Datuk Ahmad Maslan said the fund had already brought back 60% of its funds, and the balance 40% will return to Malaysia by year-end, even though the funds registered a return of 6% to 7% as of end of last year.

“So, there is no reason to claim that the money is lost, as accused by various quarters. Such allegations do not arise,” he said when winding up the debate on Budget 2015 in Parliament today.

1MDB is Malaysia’s second sovereign wealth fund after Khazanah Nasional Bhd.

Critics have long questioned the fund’s heavy debts, usage of funds and opaque operations.

In September, former prime minister Tun Dr Mahathir Mohamad wrote on his blog that 1MDB has already incurred a RM38 billion debt in just five years of its operations.

He was worried that Putrajaya, already facing a deficit budget, would not have the ability to help pay 1MDB’s debt.

He also said a large part of the money raised from the issue of debt paper by 1MDB was sent to the Cayman Islands, a move which many questioned.

In April last year, 1MDB had brushed aside allegations that the investment was put in Cayman Islands companies and would vanish, saying they were baseless and an election ploy.

“1MDB has earmarked the proceeds for investments in the near future. Pending that, these funds for cash management purposes are currently placed under regulated and licensed international fund managers managing Cayman Island-based international standard fund structures.”

Confident about 1MDB’s world-class advisers, Ahmad said Putrajaya would leave it to the fund to decide who managed the RM7.18 billion.

He said some of the funds which had been brought back have been used for investments in 1MDB’s projects such as the Tun Razak Exchange and Bandar Malaysia developments.

It had also been used to pay off its debts and for the purchasing of power plants, which the fund had stakes in, he added.

In addressing the allegations levied against the fund, Ahmad stressed that Putrajaya had only issued an explicit guarantee letter to the RM5.8 billion loan taken by 1MDB.

“There are no other guarantees (by the government), the rest is shouldered by 1MDB,” he said in reply to Tony Pua’s (DAP – Petaling Jaya Utara) claims that the federal government had provided a “letter of support” for 1MDB Global Investments Limited to borrow US$3 billion (RM9.6 billion) in March last year.

He also insisted the wealth fund did not make third-party payments or overpaid investment bank Goldman Sachs International for bonds issued in 2012 and last year.

1MDB had been accused of paying Goldman Sachs fees of about 10%, which was an above-market rate.

“No fees were paid to any third parties, in fact Goldman Sachs is shouldering risks by doing the fund-raising exercise for 1MDB,” he added. – November 6, 2014.