1MDB to sell Malaysian property project stake for US$1.7b

The fund had racked up more than $11 billion in debt – a burden that had weighed on the ringgit currency – before beginning a restructuring programme this year.

“In June, I said that the challenges facing 1MDB would be resolved by the end of the year, and I am pleased to confirm that as of today the company has already entered into agreements that will see its debts reduced by approximately 40.4 billion ringgit (US$9.4b)”, said Mr Najib.

The question that arises, in the wake of 1Malaysia Development Berhad’s so-called rationalisation drive, was what business the company would be involved in when all its assets have been sold to settle its debt problems, said a political analyst in his latest blog posting.

China Railway Engineering is now likely to be in pole position for work on a high-speed rail link from Kuala Lumpur to Singapore that terminates in Bandar Malaysia. “Under the plan, the Chinese firm will assume responsibility for some RM16 billion to RM18 billion debts”.

“The inclusion of CREC as an worldwide partner with 24% of project equity represents significant Foreign Direct Investment (FDI) and is a major testament to the continued strength and attractiveness of the Malaysian economy, as we move into high income nation status”, he said.

Apart from the sale, 1MDB has also agreed to sell its power generation arm, Edra Global Energy Bhd, to China General Nuclear Power Corp for RM9.83 billion in November.

The multi-billion dollar purchases are expected to boost Beijing’s chances of securing contracts to build other major projects in the country as China seeks to extend its influence in Southeast Asia. The prime minister said in the new year massage that some disputes were “exploited and politicized” by his opponents. Iskandar Waterfront, a company owned by Malaysian tycoon Lim Kang Hoo (林剛河), stands to own 60 percent of the joint venture, while China Railway stands to own the remainder.

Malaysia managed hanged on to its development target of 4.5 percent to 5.5 percent year-on-year, despite falling oil price and stagnation in export, thanks to strong domestic demand. Najib has denied taking money for personal gain and has been cited as saying that the funds were to meet the needs of the party and the community, and that this wasn’t a new practice.

Controversy turned to scandal in July when the Wall Street Journal reported that investigators looking into 1MDB had identified funds worth 2.6 billion ringgit ($605.36 million) that had been transferred directly to the prime minister’s bank accounts. Reuters has not verified the report.