IPOH, March 15 — The 1 Malaysia Development Bhd (1MDB) can be expected to return to the black by year end. Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah is confident 1MDB would be able to settle its financial woes in a few months’ time despite claims the state-owned investment vehicle will face a tough time to get out of the red with over RM42 billion in debts. Instead of a “failed business organisation”, he said, 1MDB’s problem was in short-term cashflow. Defending its business and investment model, Ahmad Husni said 1MDB’s financial woes were largely caused by accumulation of debts while trying to move fast with its investment agenda.
1MDB’s core investments are in the energy sector and development projects, where it bought several landbanks in Penang, Pulau Indah, Tun Razak Exchange and Bandar Malaysia. He said the problem was not with the investment in the energy sector but in the development projects. “Development projects take a long time to provide returns. When you put in money (in development projects), the money is known as sunk cost. It is not something you can generate income quickly,” he said.
“That is why 1MDB has accumulated so much debt. It was relying on debts to generate projects.” Ahmad Husni spent almost 30 minutes fielding questions from reporters when met at a community function in his parliamentary constituency of Tambun yesterday. He said it was possible to turn the company around through an initial public offering of the energy unit as well as monetising landbanks owned by 1MDB as part of the outfit’s rationalisation.
“The loans are long-term borrowings. Some are to be paid in 2021. We do not worry about the principal payments, but about the interests,” he said. “So why don’t we sell the Penang land, the Pulai Indah land and some parts of the Tun Razak Exchange and even Bandar Malaysia? These sales and the proposed initial public offering will solve the debts.”