Media statement by Arul Kanda, 1MDB President and Group Executive Director

Issued on 3 June 2015
For immediate publication

RM42 Billion All Accounted For.

“In recent weeks, there has been much speculation about the use of RM 42 billion of debt raised by 1MDB, and more specifically that RM 27 billion of debt proceeds are alleged to be "lost" or "missing".

We provide a summary of what the RM42 billion debt has been used for, information that is fully disclosed in 1MDB's audited and publicly available accounts from 31 March 2010 to 31 March 2014.

We trust this clarification will help to clear any confusion on this matter.”

Ref. No.: 06/15/01 ​​

For immediate release

Statement on 1MDB

As the nation’s Central Bank, Bank Negara Malaysia is entrusted to promote the stability and integrity of the financial system and the sustainability of our economy. Widespread news reports and commentaries regarding 1MDB have raised questions on whether the Central Bank has continued to uphold the trust that has been placed on the Bank.

The purpose of this statement is to provide clarity on the role of the Central Bank with respect to any resident entity, including 1MDB, that makes investments abroad or obtains offshore borrowings under Section 214 of the Financial Services Act 2013 and under the Exchange Control Act 1953 that was in force prior to 2013. All investments that exceed RM50 million per calendar year and any offshore borrowings that exceed RM100 million by resident entities require the Central Bank’s approval.  In relation to this, all submissions that were made by 1MDB have had to comply with the same approval criteria that is applied to submissions by other business entities. If the criteria is not met, the submission will be rejected.  No leniency or special exceptions were accorded to 1MDB. 

In accordance with the legislation administered by the Bank, the following developments will trigger formal investigations:
• When monies for which approvals are given are not used for the purpose indicated in the submission;
• When  incorrect or false information are provided in the submission; and
• Failure to comply with the conditions in the approval.

As part of an investigation process, the Bank will issue a legal directive requiring information pursuant to the relevant Acts that the Central Bank administers. This will require the Board and Management of the entity to provide the information within a specified time frame. Under the Financial Services Act 2013, the penalty for failure to meet this request can result in a fine of up to RM50 million or up to 10 years in prison or both.

In relation to cross border movements of funds, the Bank also relies on financial intelligence authorities in the foreign jurisdictions to bring to our attention irregular or suspicious transactions made in their jurisdiction.  Such arrangements for information sharing must conform to international protocols.  The arrangements require that the information be kept confidential and any breach will lead to the termination of such arrangements. These arrangements also provide for the Bank to share the information with relevant domestic investigation authorities after securing the permission of the foreign authorities.

The scope provided under the Central Bank’s legislation does not provide powers for the Central Bank to investigate in areas such as fraud, tax evasion, corruption, cheating and criminal breach of trust. These will need to be pursued by other law enforcement agencies. 

With respect to 1MDB, a formal enquiry has commenced to examine any contravention of the Central Bank’s rules and legislation. This has involved the issuance of a legal directive requiring information from the entity. The Central Bank is also taking statements from individuals involved in the governance process and obtaining information from other relevant domestic and foreign parties. In addition, Bank Negara Malaysia has forwarded information received from foreign authorities to the relevant investigation agencies after obtaining the permission from the foreign authorities.

The Central Bank wishes to emphasise that further disclosure of details of the investigation may undermine the outcome of the investigation. The Central Bank is doing everything within the powers provided under its legislation, including collaborating with other agencies, to contribute towards a swift resolution of the matter.

1. Inherited debt by the IPP which 1MDB had to assume as part of the cost of acquisition;
2. Expenditure for cost of finance and working capital and realised forex loss (overseas loan)
3. Unaware of the investment fund in Brazen Sky, 1MDB GIL Fund, and Aabar deposit (because did not read the notes in the audited account)

Sorry bad color choices

Mmg police did the right thing. And mmg sukaguam negotiated wt police to proceed wt juz tun wtout pm. But police tak bagi. In the hall clearly u can see 2 camps - Najib n tun. Had the event been allowed to go on it cud hv gone really nasty fr the 2 sets of supporters.

Tentera Tun M? Was it not supposed to be an intellectual discourse?

Steve Austin, astronaut. A man barely alive.

We can rebuild him. We have the technology. We can make him better than he was. Better, stronger, faster.

Rosli filed his RM20 million suit in September 2009  against MACC chief commissioner Tan Sri Abu Kassim Mohamed, his officers and the government for conspiracy to injure his reputation, assault and false imprisonment.

Rosli had also filed a defamation suit against Abu Kassim.

In his statement of claim, Rosli said that former Inspector-General of Police Tan Sri Musa Hassan’s animosity towards Ramli resulted in the defendants conspiring to destroy his reputation and integrity.

MACC officers arrested Rosli on October 11, 2007, two days before the Hari Raya Raya celebrations and the lawyer said newspapers Utusan, The Star and the New Straits Times gave an extraordinary amount of publicity.

He said he had issued a letter of demand to the newspapers and later commenced legal proceedings.

He said The Star issued a public apology after admitting they were wrong, while the NST was found liable for defamation and ordered to pay RM300,000 in damages.

Rosli said the articles were defamatory because it was untrue that he had not complied with the terms of a notice that was issued to him by the MACC.

"I did in fact comply to the best of my abilities at the time. Finally, the article suggested that my asests were somehow linked to the cop (Ramli) who was under investigation. That was completely untrue," he added.

In December 2010, Rosli was acquitted without his defence being called over a charge of failing to disclose his assets to the MACC.

The prosecution later withdrew its appeal against the lawyer in the High Court.

Rosli and Ramli had also won a civil action against Attorney-General Tan Sri Abdul Gani Patail and nine others who attempted to strike out their suit against them for abuse of power and malicious prosecution.

Ramli and Rosli in November 2013 filed suits against Gani and several others for, among other things, over alleged malicious prosecution over corruption charges.

Last month the Court of Appeal upheld the decision of a High Court but the defendant had filed a leave application in the Federal Court to appeal that ruling.

Ramli, in his RM128.5 million suit, had also named (former IGP) Musa and 10 others for wrongfully bringing two charges against him.

Rosli, in his suit, is claiming more than RM47 million for conspiring to arrest and charge him in court over an alleged failure to declare his assets.

Rosli named Gani, Musa and Abu Kassim in their personal capacities.

The lawyer has alleged that Gani had a role behind the malicious prosecution.

Hmmm ... wonder who can I blame for shit I am leaving behind?

Zafrul had to clean Nazir's shit that his face can't be shown in full by The Star

Spoilt brat MOF-aspirant in between Tun Abdul Razak and Toh Puan Rahah

CIMB Group Holdings Bhd, Southeast Asia's fifth-biggest bank, forecast more pain in its biggest markets due to a slowing economy after reporting a 45.6% drop in first-quarter net profit.

CIMB, Malaysia's second largest bank by assets, is navigating through slowing economic growth and depreciating currencies in the region this year after having aggressively expanded its presence in Southeast Asia over the past decade.

It has embarked on a cost-cutting exercise this year, which is expected to increase its expenses in the short term.

CIMB Group Holdings Bhd's net profit for the first quarter ended March 31, 2015 slumped 45.59% to RM580.12 million from RM1.07 billion in the previous corresponding period, mainly due to exceptional restructuring expenses of RM202 million.

Excluding that, CIMB's earnings would have dropped 26.6% on the back of higher corporate loan provisions from its Indonesian operations.

“We have started 2015 on a better note after a difficult end to 2014. Our core banking operations are performing well, especially the consumer and commercial banking segments,” CIMB group chief executive Tengku Datuk Zafrul Tengku Abdul Aziz said in a statement.

Industries | Fri Jun 12, 2015 7:32am EDT
Related: Industrials

GMT Research report questions AirAsia accounting practices

KUALA LUMPUR, June 12 | By Yantoultra Ngui

Hong Kong-based GMT Research has issued a report questioning airline AirAsia Bhd's accounting practices, accusing it of using transactions with associate companies to boost its earnings, according to a copy obtained by Reuters.

The report was issued on June 10 to GMT's subscribers and since then shares in the low-cost carrier have lost 14 percent or 812 million ringgit ($215 million) in market value.

"We are in discussions with the company about our concerns," GMT's founder Gillem Tulloch said in a statement on the research house's website.
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An official for AirAsia did not immediately respond to a Reuters request for comment.

Maybank analyst Mohshin Aziz said in a note to clients on Friday that while the airline's shares had been hit by an independent report accusing it of accounting anomalies, he was maintaining his "buy" call on the stock.

"We believe AirAsia's accounts are transparent," Mohshin said in the note. "The auditors have approved the latest 2014 accounts without any qualification."

A spokeswoman for PwC, the company's auditor, declined to comment, citing client confidentiality.

AirAsia's stock fell as low as 1.73 ringgit on Friday, a five-year low. By contrast, Maybank has a price target of 2.45 ringgit on the stock.

Shares in AirAsia X, the long-haul arm of AirAsia, have also fallen, declining 8 percent since June 9.

Tony Fernandes, an outspoken Malaysian entrepreneur, founded AirAsia in 2001 with two aircraft and it has since helped to usher in an age of low-cost air travel in Asia.

Its fleet has grown to 171 Airbus jets serving destinations in Thailand, Indonesia, the Philippines and India. At one point, it placed orders for almost 500 jets.

Rivals including Jetstar Asia, Tiger Airways and Lion Air have stepped up their capacity, creating oversupply in a very competitive market.

GMT, which says it is not a short seller but an accounting research firm licensed by Hong Kong's Securities and Futures Commission, said on its website that it has a press embargo on the report until June 24.

It previously issued a report on Singapore commodities trader Noble Group Ltd, adding to damaging criticism led by little known research firm Iceberg. ($1 = 3.7580 ringgit) (Reporting by Yantoultra Ngui; Editing by Edwina Gibbs)

Time. Is the single most important component and commodity in unravelling and making good the entire mess within Federal Government strategic investment corporation 1 Malaysia Development Berhad (1MDB).

• There was no attempt to hijack TIA money.

• In 2009, various discussions were held between the Federal Government and the state government of Terengganu on how each party would provide its share of funding for the TIA. A number of options were discussed in this regard.

• Eventually, the Federal Government’s contribution consisted of it guaranteeing a RM5 billion sukuk issuance by the TIA. This happened on 29 May 2009, prior to the TIA being federalised.

• Subsequently, the state government of Terengganu decided to withdraw from the TIA which led to the entity being federalised in July 2009.

• Contrary to Tun Mahathir’s claim, a Cabinet paper on this matter was prepared and approved by Cabinet, in line with standard practice and as required for all government guarantees.

• Furthermore, the government guarantee is not “off budget” as claimed. It is a clear and acknowledged liability of the federal government, which is ultimately the 100% shareholder of 1MDB.

• The entire premise of this statement is incorrect as the sukuk was arranged by AmBank, not Goldman Sachs.

• AmBank fully underwrote the sukuk issuance (i.e. it took the risk to provide RM5 billion to 1MDB) and, therefore, earned any commission it received for doing so.

• It is a fact, verifiable by a check on the relevant Bank Negara Malaysia webpage, that on 29 May 2009 (the date the RM5 billion sukuk was issued), yields for Government bonds were 2.82% (3 years maturity), 3.56% (5 years maturity) and 4.27% (10 years maturity). It is clear that for every additional year of maturity, the yield is higher.

• The RM5 billion sukuk issued by 1MDB has a 30-year maturity, i.e. it would mature at a date three times later than the 10-year government bond, which was the longest maturity period for a bond at that time. There were no 30-year government bonds in issuance for comparison purposes.

• The 1MDB sukuk was issued at a discounted price of approximately 88, i.e. a discount to face value of 100, which is common for a fixed income instrument. The discount represents the additional yield benefit to sukuk investors. This discount, when added to the coupon of 5.75%, results in a yield of approximately 6.15% - not 7% as incorrectly claimed by Tun Mahathir.

• Based on the logic outlined above, 1MDB achieved 30-year financing for its sukuk at a yield of 6.15%. By contrast, 10-year government bonds had a yield 4.27%. Given the difference in the maturity period, this was a good outcome by any yardstick in the fixed income markets.

• The figures being quoted by Tun Mahathir are incorrect. To be clear; the interest cost on RM42 billion of debt by 1MDB as of 31.03.2014 was RM2.4 billion, i.e. a significant 20% less than what Tun Mahathir claims.

• 1MDB did indeed borrow RM2 billion as arranged by a subsidiary of Tanjong PLC. These proceeds were used to repay a RM2 billion loan provided by a syndicate of domestic lenders. It was not used to pay interest, as claimed by Tun Mahathir.

• As for the rationale behind why Tanjong PLC arranged the financing for 1MDB, we make reference to note 41 (iii) (h) on page 170 of 1MDB’s financial statements dated 31 March 2014.

• The note states “On 7 August 2014, PIH (i.e. Powertek Investment Holdings), a subsidiary of the Company (i.e. 1MDB), entered into a Subscription Agreement with Tanjong under which Tanjong agreed to subscribe for equity in PIH, of up to RM2.0 billion on the occurrence of certain events… which proceeds shall be used solely for the repayment or prepayment by PIH of any amount owing under the RM5.5 billion loan facility arranged by Maybank Investment Bank Berhad and RHB Investment Bank Berhad… ”

From the above, it is a clear fact that Tanjong had an obligation to subscribe to RM2.0 billion of equity in PIH, the proceeds of which would be used for repayment of the loan facility.

• Regretfully, as previously explained, 1MDB is bound by confidentiality agreements and cannot elaborate further on why the RM2.0 billion equity investment was subsequently agreed by the parties to become an RM2.0 billion loan but we trust that the facts shared above provides some clarity on this matter.

• It is important to note that 1MDB purchased 13 different power plants with a generating capacity of approximately 5,500 Megawatts (MW).

• Of the above purchase, contrary to Tun Mahathir’s suggestion, only 2 plants had a near term “expiry of licence” i.e. a 440 MW Powertek plant in January 2016 and the KLPP (Genting) plant in February 2016.

• The “licence” of the KLPP plant was subsequently extended for 10 years, thereby proving it was a good asset purchased by 1MDB.

• Furthermore, 1MDB is awaiting a decision from the Energy Commission for extension of the Powertek 440 MW plant.

• It is important to note that 1MDB is ultimately 100% owned by the Government of Malaysia.

• Accordingly, any transfer of land to 1MDB and any subsequent benefit in land value increase is ultimately 100% for the Government of Malaysia.

• In reference to the figures quoted by Tun Mahathir, he is again incorrect. The fact is that 1MDB paid RM230 million, not RM320 million, to acquire this parcel of land.

• 1MDB is the master developer and has an obligation to fund infrastructure and strategic assets on the land. The cost of this infrastructure that 1MDB is contractually obligated to deliver in TRX is at least RM1,500 psf. This is a direct benefit to any land buyer and forms part of the purchase price paid.

• The financial statements of 1MDB clearly provide the basis for asset valuations. Furthermore, independent valuations have been conducted by professional valuers. This is a requirement by the auditors of 1MDB who have signed off on the accounts with no qualifications.

• PetroSaudi, via a subsidiary company, owned assets, comprising rights to oil fields in Turkmenistan and Argentina, worth approximately USD2.7 billion. These assets were sold by PetroSaudi to another subsidiary, “JV Co”, which at the time of the asset sale, was a company formed by and initially 100% owned by PetroSaudi for the purposes of a proposed joint venture with 1MDB.

• In return for the USD2.7 billion asset transfer, JV Co had to pay PetroSaudi USD700 million. This indebtedness resulted from the asset transfer. Accordingly, there was no loan made or “to settle”.

• On 29 September 2009, 1MDB executed a joint-venture agreement with PetroSaudi. Upon completion of an independent valuation, 1MDB contributed USD1 billion of cash in return for 40% ownership of JV Co, and PetroSaudi was left with a 60% stake in the JV Co. In effect; 1MDB’s contribution was in cash, whereas PetroSaudi’s contribution was in independently valued assets worth USD2.7 billion.

• It was part of the joint-venture agreement that, of the USD1 billion from 1MDB, USD700 million would be used to pay PetroSaudi for the initial asset transfer to JV Co (see above) whereas USD300 million would remain in JV Co. Upon satisfaction with the independent valuation, as per the joint-venture agreement, 1MDB made a payment of USD700 million to a subsidiary of PetroSaudi, and obtained legal title to 40% share of JV Co, a company with independently valued assets worth USD2.7 billion at the time.

• Accordingly, PetroSaudi had full rights to the USD 700 million paid by 1MDB and these funds were for PetroSaudi to use, at its discretion.

• The joint venture with PetroSaudi was terminated in March 2010, with PetroSaudi assuming 100% ownership of JV Co. 1MDB converted its USD1 billion of equity in JV Co to murabaha notes issued by JV Co, under the terms of a Murabaha Financing Agreement. PetroSaudi, as 100% owner of JV Co, fully guaranteed JV Co’s obligations under the murabaha notes.

• 1MDB then made further investments of USD500 million and USD330 million in additional murabaha notes issued by JV Co.

• In total, 1MDB invested USD1.83 billion cash in murabaha notes issued by JV Co, a company that, by then, was 100% owned by PetroSaudi following the termination of the joint venture in March 2010.

• In June 2012, the entire USD1.83 billion amount invested by 1MDB in murabaha notes was repaid, by way of conversion into shares of Petrosaudi Oil Services Limited, for a value of USD2.22 billion.

• In September 2012, 1MDB sold its shares in PetroSaudi Oil Services Limited for USD2.318 billion and received fund units in a Cayman registered fund. The Cayman registered fund is managed by Bridge Partners, a Hong Kong-based fund manager. These fund units were owned by 1MDB via its 100% subsidiary, Brazen Sky, and held through BSI Bank Singapore as custodian.

•  Accordingly, 1MDB invested a total of USD1.83 billion with PetroSaudi (initially as equity, then as murabaha notes), and ultimately owned USD2.318 billion of fund units i.e. a gain over time of USD488 million. 

• The facts detailed above can be verified by reference to the notes to the audited financial statements of 1MDB dated 31.03.2010, 31.03.2012 and 31.03.2014.

• Despite Tun Mahathir’s vigorous claims, it is a fact that Arul Kanda never said he “saw the cash”. He is on the record as saying he had “seen the statements”, referring to the fund unit ownership and redemptions.

•  Tun Mahathir repeats in his blog posting the original MOF answer to Parliament, but has chosen to ignore the amended answer by MOF and the clarification issued by Arul Kanda on 10 June 2015.

• There was indeed a misunderstanding on information provided by 1MDB to MOF, which required the original Parliamentary answer to be subsequently amended. This is a matter of public record and has been acknowledged by 1MDB.

• As the President of the company, Arul Kanda takes full responsibility for this misunderstanding and will ensure better communication with all stakeholders. Furthermore, as clarified by the MOF, appropriate steps have already been implemented to prevent this happening again in the future.

• We must accordingly question why must Tun Mahathir keep repeating his earlier statement, when clarification has been provided and responsibility has been accepted.

• As for Tun Mahathir’s reference to Bank Negara Malaysia, it is a fact that Bank Negara Malaysia is presently conducting an investigation on 1MDB. It is only appropriate to await the outcome of this investigation instead of casting doubt and sharing half-truths in the public domain.

• From the answer to question (2) above, it should be clear that from September 2012, 1MDB owned, via its subsidiary Brazen Sky, fund units in a Cayman Registered Fund, with a valuation of USD2.318 billion as of31.03.2015. These fund units were held through BSI Bank Singapore, as custodian. This has been the case since 2012.

• The existence of USD2.318 billion in fund units has never been questioned, and this value was included in the audited financial statements dated31.03.2014, which must provide a true and fair value of the assets of the company. 

• In fact, the first tranche of USD1.22 billion fund units was redeemed in cash in 2014 and the cash proceeds were used to pay for termination of options relating to the energy business, granted to Aabar, working capital and interest payments - as outlined in the company’s publicly available financial accounts.

• As for the remaining USD1.1 billion of fund units, these have also been redeemed, as previously announced by 1MDB. All “documentary proof” on this redemption will be provided to auditors of 1MDB and the lawful authorities.

• Despite repeated public clarifications, Tun Mahathir chooses to ask the same question again and again. One must question the motive behind why he keeps saying that the “USD1billion is missing” when it is obvious that the funds have been accounted for and audited.

• Furthermore, Tun Mahathir has been quoted on the record as stating “RM42 billion is missing”. He now states that “USD1 billion is missing”. This continuous change in figures is perplexing, and raises questions as to the motivation behind these ever-changing claims.

• “Documentary proof” for all the assets of 1MDB, including the fund units and other financial assets of 1MDB, has been presented to the auditors of 1MDB. It is based on this that 1MDB’s accounts have been signed off by the auditors, without qualification.

• In addition, “documentary proof” has now been presented to the Auditor-General and Bank Negara Malaysia, the lawful authorities, who we would expect to carefully scrutinise these documents.

• We are fortunate in Malaysia to have rule of law which states a party is “innocent until proven guilty”. Due process requires that the lawful authorities first undertake investigations, establish the facts and take action accordingly.

On the subject of 1MDB, this blogger admit to being defensive against slander made against 1MDB for wrongful fact, manipulation of fact and argument, and fabricating of documents. But never it was to say all are OK with 1MDB.

There are issues of governance, bad decision making, maybe mismanagement, and presence of some questionable Mickey Mouse doing insider trading and flipping commission. And that need to be proven.

Mismanagement and bad decision could arise out of stupidity but stupidity is not a crime. Wrongful accusation can be. RPK used to be charged for criminal defamation.

In the meanwhile, Tun M is rewriting his excuses to whack at 1MDB. He is consolidating while on offensive retreat. (What is that?) He could be repeating himself because he realised his "adviser" was too presumptous and made many factual errors. He need to take cognizance of developments on 1MDB.  

Past vs present, prince vs politician, preachers vs progressives ― what’s next for Malaysia?

Past vs present, prince vs politician, preachers vs progressives ― what’s next for Malaysia?

By Zurairi AR

COMMENTARY, June 17 ― Two roads are diverging ahead for Malaysia and its people as the country clumps towards 2020.

The issues dominating headlines lately, from the sports attire of national gymnast Farah Ann Abdul Hadi during her recent gold-winning stint at the Singapore SEA Games to the 1Malaysia Development Bhd (1MDB) scandal and the unending debate over PAS’ hudud bid, are manifestations of our struggle to define our future.

As we chart our course towards developed nationhood, here are the three most pressing dilemmas Malaysia must deal with.

1. The past or the present?

Prime Minister Datuk Seri Najib Razak who set out to transform the country in 2009 has come under much pressure in his second term in office, currently over his brainchild 1MDB.

Under siege, the sixth PM drew deep into his Bugis ancestry for the “warrior spirit”, and declared that he will never back down amid calls for his resignation.

But that declaration appears to be haunting him now following his notable absence from the   “Nothing2Hide” forum here on June 5, where he was scheduled to dialogue with civil society on current affairs, including 1MDB’s financial irregularities.

The public forum would have pitted him face-to-face with his past: former prime minister-turned-vocal critic Tun Dr Mahathir Mohamad who has been persistently raising questions on the Najib administration’s handling of 1MDB and its RM42 billion debt, but which was cancelled at the last minute purportedly to maintain “public order”.

For Najib who had scored relatively high ratings before Election 2013, that forum marked the swing in public support from him to Dr Mahathir. The defining moment when Dr Mahathir, 89, was manhandled by the police during his impromptu speech after Najib failed to show.

It was ironic that the man who earned notoriety for the iron fist with which he ruled the country for 22 years has found merit in freedom of speech ― especially when succeeding prime ministers fail to seek his advice and guidance in governing the country.

With Dr Mahathir firing salvo after salvo at Najib, the prime minister has taken to address the questions on his personal blog.

And while the end of Dr Mahathir’s administration was coloured by an uprising, some in society have now made an about-turn and yearn for a return where his uncompromising attitude had pulled Malaysia through some tough times.

So, what’s next for Malaysia?

Will it stand by Pahang-born aristocrat Najib and his Barisan Nasional administration whom they had voted for in Election 2013 even as living costs rise following the introduction of the unpopular Goods and Services Tax (GST) in April?

Or will it side with the meddling Dr Mahathir and his pick of Najib’s successor from the Umno pool, which the Kedah-born has admitted to be very shallow and devoid of intellect?

Will Malaysia embrace its present, or will it now look to the past to guide its future?

The next Umno party elections to choose its new chief ― and ultimately the nation’s prime minister ― is a year away and it can be delayed until after the next general elections which must be held by 2018, unless a faction in Umno grows bold and steps up pressure against Najib.

2. The prince or the politician?

The crown prince of Johor Tunku Ismail Sultan Ibrahim was not a popular man due to his exploits in the local sporting scene, which he had personally acknowledged, dubbing himself “the most hated man in Malaysian football”.

But that perception has been changing following his snipes against the Najib administration through slick statements released on the Facebook page of the Johor Southern Tigers football team he leads.

It has since increased the 30-year-old’s profile among young Malaysians disenchanted with the establishment.

Support for the young prince skyrocketed after Tourism and Culture Minister Datuk Seri Nazri Abdul Aziz, in an attempt to shield Najib, earned the wrath of Johoreans who saw the Perak politician’s verbal jousts as a slur against the Malay royal institution.

After Tunku Ismail mocked Najib’s absence at the Nothing2Hide forum, Nazri warned the prince to stay out of politics, unless he is willing to come down to a level playing field where others can “whack” him.

The spat escalated as the prince claimed that everybody should have the right to speak out, even as it was announced Nazri himself will be investigated by the police for “public mischief” under the Penal Code after his remarks against Tunku Ismail.

This culminated in a public rally yesterday where some 2,000 Malays gathered outside the Johor palace ― on a working day, no less ― to support the royal family, which they said should not be criticised even by a minister.

Previously consigned to a symbol of Malay sovereignty, the monarchy is increasingly dipping its hands into politics, as evident in the recent Selangor mentri besar crisis and the Johorean criticism against Putrajaya.

So, what’s next for Malaysia?

Will it take the side of its politicians, who despite their perceived arrogance and public display of wealth, were democratically elected by the people and therefore can be “punished” through the ballot box?

Or will it continue to be beholden to the Malay rulers of old, some who now claim to be the “voice” and the “servant” of the people by speaking up against Putrajaya?

Even when said royal house just commissioned a “monster” truck with custom paint job and royal crest, and claiming in the past that its RM27,000 monthly allowance is not enough?

Faced with two opposing groups of elites, will Malaysian swear fealty to one over the other?

But as desperate Malaysians look for heroes to champion their grouses, it may not be too farfetched to say it will be a grassroots movement of independent-minded individuals that will fill the role, instead of elected representatives or the monarchy.

3. The preachers or the progressives?

The so-called ulama, or clergy class, completed its domination of federal opposition Islamist party PAS in its party elections this month, sweeping the so-called progressives clean from the top table of leaders that make up its central working committee.

Its influential ulama wing also proposed a motion to cut ties with Pakatan Rakyat (PR) ally DAP, one that was approved without a debate by its top leadership which had included president Datuk Seri Abdul Hadi Awang and spiritual leader Datuk Dr Haron Din.

The unilateral decisions made in PAS’ muktamar, or annual congress, seemed to be the last straw, with the DAP announcing the eight-year-old opposition pact now “dead”.

While the pro-ulama in PAS insisted that PR is still tenable with PKR, several of its progressive leaders and DAP have already moved on to the idea of a next political coalition ― one that might include a new party to replace PAS.

Although framed as a faction war, the real battle in PAS is a tug-of-war between ideas that affect the whole of Malaysia: whether the nation should purely be an Islamic state, or merely a secular nation governed by Islamic ideals.

The ulama faction represented the Islamists who wish to see the controversial Islamic penal code of hudud be implemented, with the Quran and Islamic teachings greatly influencing public policies that will include moral policing and proselytisation.

The progressives, on the other hands, are best described as Muslim democrats who prioritise loftier goals of the Islamic teachings such as social justice and good governance, putting it above the implementation of hudud and moral policing.

With the next general elections being a race to grab the votes of the rural Malay communities, Malay-majority parties such as PAS and even Umno will look to a religious auction where one will try to “out-Islam” the others.

So, what’s next for Malaysia?

Will it choose the progressives, who despite offering Islamic values only as a way to serve the public, insist on the role of Islam is the religion of the federation nonetheless?

Or will it vote for the preachers, who uses Islam’s position as the religion of the federation as justification the increasing influence of the religion in the public sphere of our multicultural society?

With Islam unlikely to take a back seat in politics, which brand of the religion will Malaysians pick?

Just like how a group of Muslims have banded together for an injunction to stop PAS from tabling private members’ bills to pave way for its hudud, more and more from the Malay community itself is working as a check and balance against creeping Islamism.

Malaysia has slightly more than four years left until it reaches its 2020 milestone, and one more general election where it will decide its next step.

How will Malaysia choose? Which side will prevail? For observers, these are interesting times.

Differing opinions are bound to be expressed on Bloomberg View. The defence of “fair comment”, however, does not apply to getting facts so woefully wrong. We would hope that the editors at Bloomberg agree, and will correct or take down such a disgracefully biased and ill-informed article.

Angeline Franscis, daughter to the divorcing couple

Back then, MUI was said to be associated with a certain politician. That was useful for Khoo who  seemed to be able to get whatever he wish for.

Khoo had a macai in a former ITM lecturer. He acts as his proxy in certain counters. However, the whole market linked MUI with this politician.

The politician was a high flyer from a young age. Still in politics, but rather dormant. These days he is heard to work himself through NGO and trying to revive the visions of Tunku Abdul Rahman. And he is being rumoured to try do another 916.

The politician's portion, said to be about 20% and allegedly kept with Khoo as proxy, could be revealed open in court should it be taken out of the balance to be divided.

Puan Sri Pauline Chai

Beauty queen loses appeal

M. Mageswari The Star/ANN
Saturday, Jun 20, 2015

PUTRAJAYA - A wife does not have the right to choose where she wants to stay, the Court of Appeal has ruled.

In Malaysia, the common law rule still applies, that is, the wife follows the husband's place of residence.

The court decided this in the appeal by former beauty queen Pauline Chai Siew Phin against a court order that favoured her estranged husband, tycoon Tan Sri Khoo Kay Peng, who wanted their divorce case heard in Malaysia instead of the United Kingdom.

Justice Balia Yusof Wahi, who chaired a three-man panel, said they found that there were no merits in Chai's appeal.

"Having found that the common law rule of domicile is still applicable in Malaysia, it is not open for the wife to have her domicile of her choice," he said in a unanimous decision.

"We are not agreeable that this court should depart from the common law rule," added Justice Balia.

The three judges, he said, also disagreed with Chai's lead counsel Datuk Seri Gopal Sri Ram that the rule was unconstitutional under Article 8 of the Federal Constitution, which is the clause on equality.

The judges said the rule is not beyond the powers of the Article 8.

The Court of Appeal, which affirmed an earlier High Court order, awarded RM30,000 (S$10,731) in costs to Khoo.

The other judges on the Bench were Court of Appeal judges Justice Dr Hamid Sultan Abu Backer and Justice Abdul Rahman Sebli.

Read on here.

Tan Sri Khoo Kai Peng

The lawyer said they will apply for a stay of the Court of Appeal’s decision “as soon as possible” to “render the appeal not nugatory.”

Yong noted, however, that if the stay is not granted, the divorce hearings could potentially take place simultaneously in Malaysia as well as in the United Kingdom.

“The husband's appeal in the UK is in October, that will determine if the UK proceedings proceed. The Malaysian proceeding depends on whether we can get a stay of Court of Appeal decision. But both can take place at the same time, (and) it can be very complex,” he said.

He added that they will take the case all the way up to the Federal Court, if necessary, to argue the constitutionality of Malaysia's Law Reform (Marriage and Divorce) Act 1976.

“It’s a question of the constitution, it’s a question of Article 8 on the grounds of equality that the wife is incapable of having her domicile of choice even though she's separate from the husband,” he said.

MMO in full here.

The audit committee said it is "somewhat distressed and peeved to have been accused of corporate governance abuses and condoning accounting gimmicks".

AirAsia had said last week that its next quarterly financial statements will reflect the results of its associates, and that its accounts were transparent and prepared in line with global and local accounting standards.

Share price succumbed to a foreign report

On 10 Jun 2015, a GMT research report raised the concerns about AirAsia’s ballooning outstanding receivables owed by its associates and a possibility of recapitalisation exercise. Subsequently, its share price plunged 32% and hit a 5-year low at RM1.43 within the next 5 days. The 39-page report also highlighted that AirAsia gained profits from “overcharging” its associates and implied this situation similar to the financial shenanigans which involved Shin Corp and AIS.

Repayment of receivables through cash-funding

As of 31 March 2015, the receivables owned by Indonesia AirAsia (IAA) and AirAsia Philippine (AAP) had swelled to about RM1.5b and RM0.7b respectively. During 1Q15 result briefing, the management of AirAsia had tabled the capital injection plans at IAA and AAP to partially recover the amount with at least RM1.0b (out of RM2.8b) owed by both associates. Following GMT accusation, AirAsia unveiled more details that the group is in final discussions with their local partners to inject fresh capital c.USD100m into both associates as well as issuance of another USD100m convertible bonds (CB) by IAA and PAA respectively (USD400m in total). The CB sale is the part of pre-sale of IPO plan and will carry a coupon rate of 3-4%p.a. with 2-year maturity. We believe that the funding plan should be able to instil the investor confidence to avoid the destructible write-down of these associates’ receivables.

Lease rate in line with market rate

The GMT report accused that AirAsia has failed to disclose the related party transactions which we do not fully agree. The carrier has consistently reported its leasing income and other variable fees generated from its associates in its quarterly reports. As of 1Q15, the total aircraft leasing incomes was RM224m (17% of total revenue) with 47 leasing aircraft. Based on the simple calculation, it works out to an average leasing rate of USD430k monthly. The leasing rate is slightly higher than average market rate of USD350k monthly but it is justifiable given its higher utilisation rate and shorter economic life span. AirAsia would continue to lease its aircraft to Thai AirAsia (TAA) rather than transfer these aircraft assets to the latter if it has intention to further benefit from these associates.

Various options in tapering off gearing.

The recent intense competitions and irrational capacity expansions had weakened the AirAsia’s financial strength. Its FY14 net gearing ratio spiked up to 250% from 105% in the past two years. We believe that there are ample ways for AirAsia to degear. The setting up of a leasing company by the holding company, Asia Aviation Capital (AAC) will greatly reduce the gearing ratio through novating a total of 61 narrow-body aircraft to this entity. From the tax perspective, the structure is also more tax efficient since the subsidiary is based in Labuan tax free haven. Secondly, the group can monetise its non-core assets including AA Expedia, Tune Money, Tune Insurance, AACOE and BIG. Moreover, AirAsia planned to sell and leaseback 16 older aircraft (out of >120 directly owned aircraft) to raise a total proceeds of USD384m (eight of aircraft deal were already secured).

AirAsia clarifies legal constraints for consolidation, refutes GMT allegations

Published: 22 June 2015 12:05 PM

AirAsia Bhd clarified today that it is bound by legal constraints that have limited its ability to consolidate the accounts of its consolidate companies in Indonesia, Philippines, Thailand and India.

In a strongly worded response to a report by Hong Kong-based GMT Research Ltd, AirAsia audit committee chairman VU Kumar said the committee was concerned about the report’s allegations of improper accounting for AirAsia’s associate companies, “accounting gimmicks” and corporate governance abuses.

“The audit committee, the board and management are therefore somewhat distressed and peeved to have been accused of corporate governance abuses and condoning accounting gimmicks.

“The audit committee wishes that statements are verified with those responsible before they are put out in the market place to ensure that they do not unfairly tarnish the image of AirAsia, the board of directors, management and auditors,” he added.

According to Kumar, the report had stated: “Of course AirAsia management will try to avoid consolidating associates if it leads to materially lower reported profits and without duress auditors are unlikely to push for it”.

The GMT Report had also referred to “accounting gimmicks” and corporate governance abuses.

Kumar said that after a series of meeting with AirAsia’s auditors PricewaterhouseCoopers (PwC) over the past year on the need to consolidate its associate companies as it would present a “true and fair” view of AirAsia’s relationships with its associate companies, the company was informed that to do so would be a breach of the MFRS10 (Consolidated Financial Statements Accounting Standard).

Subsequently, the “true and fair” override would also not be allowed, he added.

“PwC has however taken the strict interpretation of power in MFRS10 (Consolidated Financial Statements Accounting Standard) and advised that AirAsia cannot consolidate its associates companies because it does not have legal power,” he said.

“Their view is power in substance is insufficient to meet the criteria for consolidation, as such substantive power can be withdrawn at any time by the associate companies.

“Therefore, contrary to the GMT report that AirAsia did not want to consolidate its associate companies, we were compelled not to consolidate as a result of the opinion of our Auditors. Consolidation would have attracted an audit qualification.”

He also said PwC had informed the company that aviation regulations in Indonesia, Philippine, Thailand and India stipulate that AirAsia cannot have legal control or legal power over its associate companies.

He said any change in AirAsia’s present relationship with associate companies, be it in equity shareholdings or shareholders agreement, that would ascribe legal control to AirAsia will result in the loss of its associates’ airline operating licences.

He said due to AirAsia being unable to consolidate its sister operations, the company fully disclosed the financials and operating statistics of its associates, as provided in the first quarter 2015 announcement to Bursa Malaysia on May 28 this year, for stakeholders to have information on the performance and financial position of the associate companies.

Last week, news of the GMT Research report had caused AirAsia shares to plummet to a record five-year low on Wednesday.

On June 12, GMT Research had published a report on its website questioning its accounting, profit generation, cash flow issues, leverage and group structure.

The Edge Financial Daily had reported last Tuesday that an analyst, who had viewed the report, said the main concern raised by GMT Research was AirAsia’s applied method to account for losses from its associates, saying the concern was that AirAsia had understated losses by its associates.

AirAsia (fundamental: 0.2; valuation: 1.4) shares rebounded on Thursday by as much as 9.15% after AirAsia released a four-page explanation on its desire to consolidate the accounts of its associates, which is impeded by regulatory barriers.

AirAsia shares are currently trading 2 sen or 1.24% higher at RM1.63, with 18.66 million shares traded. It is the second most active stock on Bursa Malaysia. – The Edge Markets, June 22, 2015.

Property in question: Dudley International House in Caulfield East, Melbourne

There are also Australian facilitators tied to these suspect dealings, including Melbourne man Peter Mills, who once did a stint in Pentridge prison for corporate fraud. Mills was recently quizzed in a civil court case about whether the $4.75 million generated by inflating Dudley House's sale price was used "to grease palms" overseas.

His reply was short but surprisingly honest. "Yeah, I think so".

It has now been learnt that some of the emails and documents published on the blog were found to be tampered with, bringing into question the veracity of these allegations.

An expert from PGI said: “Our investigation is still ongoing, but it is clear that we are looking at a case of large-scale data theft, and our analysis substantiates that Justo is the source of the data published on Sarawak Report.

“For example, when we looked into a PowerPoint file that was on one of the Sarawak Report’s blogs, we found evidence in the metadata of that file that it had been handled by a certain “xavierj” in 2013; two years after Justo left PetroSaudi, and four years after the file had originally been created by a law firm that advised PetroSaudi.

“It is also clear that the stolen data sets are incomplete, and underwent an editing process after they were removed from PetroSaudi’s systems, and before they were published on the Internet. There are many inconsistencies between the published data and the data which still exists on files within PetroSaudi relating to that period of time. Simply put, it is incomplete data, creatively selected and edited to fit a desired narrative.

This could mean the authorities might investigate media outlets that published stories citing the Sarawak Report for being an accomplice to blackmail and fraud or even if these outlets profited from the fall of 1MDB bonds and the Malaysian stock due to negative reports stemming from unverified sources.

Sources close to 1MDB told The Rakyat Postthe media outlets which published news based on The Sarawak Report were now responsible for the economic sabotage inflicted on the country.

The magazine Foreign Affairs seems to admit that Malaysia’s affirmative action has merit. Like the reversal of the opinion on Malaysia’s fixed exchange rate policy, there now seem to be a reversal of condemnation of our affirmative action, at least by the Foreign Affairs magazine. Other foreign media simply copy the biased reports made a long time ago without trying to investigate the realities regarding Malaysia’s management of race relations and development of its economy.