With the aim of cutting its debts, the remaining stake in a multi-billion dollar development project of 1Malaysia Development Berhad’s (1MDB) was taken over by the Malaysian government through an agreement that was signed very recently between the two parties.
1MDB’s 40 percent holding in the Bandar Malaysia project would now be controlled by the finance ministry of the country according to the shareholder agreement.
Malaysian tycoon Lim Kang Hoo’s Iskandar Waterfront Holdings and its partner, state-run China Railway Engineering Corp were the buyers of the other 60 percent of 1MDB’s shares in the Bandar Malaysia project at the cost of $1.7 billion through a sale that took place in December. The Bandar Malaysia project is a major development project in Kuala Lumpur that will include a public transport hub.
1MDB’s debt, which totaled about 50 billion ringgit ($12.20 billion) in January, is aimed to be cut and a lid on its problems is aimed to be put through the agreement which was a part of a land and power asset sale plan.
Allegations of money-laundering in at least six countries, including the United States, Switzerland and Singapore, by the 1MDB fund which was founded by Malaysian Prime Minister Najib Razak in 2009, is being investigated.
The 1MDB’s advisory board, chaired by Najib, would be dissolved and the finance ministry would take over its remaining assets, Malaysia’s finance ministry had said in May.
At least $4.2 billion in irregular transactions by 1MDB was identified by a Malaysian parliamentary committee in April. The wrongdoings have been denied by both 1MDB and Najib.
Claiming that $681 million deposited into his personal bank account was a gift from Saudi Arabia’s royal family, Najib was cleared of any criminal offences by the Malaysian attorney general’s office in January.
As Iskandar Waterfront Holdings (IWH) is partly owned by the Johor state government, the agreement effectively places control of the Bandar Malaysia project in Malaysian hands, Najib said.
“This is very much a government project, with strong support of our partners,” he said at the signing ceremony.
In order to support the project’s projected 25-year development plan, a special financing scheme supported by a consortium of Chinese, Malaysian and London-based banks with a total asset base of $12 billion, called the Bandar Malaysia Fund, was announced by Najib.
Incentives that would include a 10-year tax exemption, eight years free of stamp duties, real property gains tax and removal of import duties for construction materials not available locally would be provided to companies involved in developing Bandar Malaysia by the government, Najib added.
Earlier after 1MDB and China Railway Engineering Corp (CREC) – a member of the consortium that bought the stake – gave conflicting figures on the value of the sale, there was confusion surrounding the Bandar Malaysia deal.
However it valued the land at $1.2 billion but would assume portions of liabilities and costs that come approximately to $500 million, CREC later clarified.
(Adapted from CNBC)