KUALA LUMPUR: Tun Dr Mahathir Mohamad yesterday said 1Malaysia Development Bhd (1MDB) had to borrow from tycoon Ananda Krishnan because it had no one else to borrow from.

“No one wants to loan money to 1MDB so they had to get it from Ananda,” said the former prime minister and strong critic of 1MDB, who added that the loan will not solve the problem at the controversial company owned by the Finance Ministry.

“That is not going to solve the problem. They borrow money in order to pay debts. It (situation) is the same except that the owner of the debt is different ... from the banks to Ananda Krishnan,” said Dr Mahathir at a forum on The Malaysian Dilemma yesterday.

1MDB wants to borrow RM2 billion from Ananda to pay its debt and prevent a default of the loan it took from a consortium of banks led by Malayan Banking Bhd and RHB Bank Bhd. Reuters reported yesterday, quoting sources, that Ananda was preparing to settle the RM2b 1MDB loan ahead of deadline. “The banks already know Ananda is paying, everything is in process,” said one of the sources it quoted.

Dr Mahathir also noted that the company had not revealed what it had done with the money it claimed to have redeemed from the Cayman Islands.

“Where is the money? They haven’t told us where it is. And if they do have it, why didn’t they use it to pay off their debts? They wouldn’t need to borrow from Ananda to do it.”

1MDB said last month that it had redeemed more than RM4 billion from investments in segregated portfolio companies registered in the Caymans, but that it did not repatriate it back to Malaysia.

Dr Mahathir said  he would not have set up 1MDB, which has total liabilities of around RM49 billion, if he was still leading the nation.

“We should not have 1MDB at all. It is not a national wealth fund. We have to borrow money for it.

“How can you be rich if you borrow money? If you borrow some money from a chettiar [moneylender], would you count yourself rich after receiving the money?” he said.

“No, you are poor. You are now indebted to the bank,” he said, adding that 1MDB should have only been set up if the government had money to spare.

“So if you have excess money, then by all means have 1MDB. But if you ask me, I would not have 1MDB if I were still the PM,” he said to rousing applause from the floor.

1MDB, Malaysia’s investment arm, has come under fire for its debts, questionable investments and borrowings.

In a press conference later, Dr Mahathir called for a special audit on 1MDB.

“This is now a controversy. It must be clarified. So one of the ways is to have an independent audit of the company. Why does it borrow money at such a high interest rate of 5.9%? When I was the prime minister, I borrowed from Japan at 0.7% interest rate, that was repayable in 40 years,” he said. — The Malaysian Insider

This article first appeared in The Edge Financial Daily, on February 13, 2015.