KUALA LUMPUR, Oct 27 – Tun Dr Mahathir Mohamad today urged Putrajaya to explain how the 1Malaysia Development Berhad (1MDB) had benefited Malaysians, after a news report exposed the extent of the sovereign wealth fund’s debts. “A government spokesman said that the money from 1MDB is used for Bumiputras,” wrote the former prime minister in his blog, chedet.cc.
“What I know is that one scholarship was given to a music student. It’s impossible that the scholarship cost RM38 billion? “The government should explain clearly to the people, especially the Bumiputras, what kind of aid they can receive from 1MDB.” Dr Mahathir noted that a portion of the money that 1MDB has borrowed was used to purchase a private power plant, but at a rate higher than the market price, according to a report by The Edge Weekly.
He also questioned as to why the interest rates for its loans were so high. “The Edge in its report mentioned that the costs for the multi-billion ringgit loans were extraordinarily high,” said Dr Mahathir. According to the report, 1MDB had agreed to pay 5.75% annual interest on a RM5 billion 30-year Islamic bond which was guaranteed by the federal government.
1MDB had also paid above industry standards on two subsequent bond issues it made in 2012 and 2013, with the fees and other payments worth more than RM1 billion paid to the investment bank, Goldman Sachs International. However, Equisar International Incorporated, a firm owned by the Sarawak government, only paid Goldman Sachs 1.25% to manage its USD800 million loan, wrote Dr Mahathir.
“A government spokesperson said 1MDB has land worth RM40 billion, while its debt is only RM38 million. Hence, the rakyat need not worry. But why must the payment to Goldman Sachs be so high?” asked Dr Mahathir. He added that sovereign wealth funds such as 1MDB were usually set up by high oil-producing countries with excess income, but this was not the case for Malaysia, which had a budget deficit.
“Perhaps the entire article was a libel to tarnish the government and the prime minister. “But without an audit by an independent body and a reasonable explanation, I fear that many will believe the fairytale,” wrote Dr Mahathir.