KUALA LUMPUR: Opposition lawmaker Rafizi Ramli called yesterday for the Employees Provident Fund (EPF), Kumpulan Wang Persaraan (Diperbadankan) (KWAP) and Lembaga Tabung Haji to divest all their bonds and investments in the troubled 1Malaysia Development Bhd (1MDB) and its subsidiaries.

The PKR secretary-general and Pandan Member of Parliament disclosed documents from a recent Cabinet briefing by Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah, which showed that KWAP had signed a heads of agreement (HoA) for the sale and leaseback of a commercial office tower with 1MDB Real Estate Sdn Bhd, a subsidiary of 1MDB, at the Tun Razak Exchange (TRX). The TRX is owned by 1MDB.

The documents also detailed other 1MDB business dealings with Australia’s Lend Lease, Prudential and Gamuda Bhd.

“The risk is actually no longer just to 1MDB, but to the whole country and the treasury,” Rafizi told reporters at the Parliament lobby yesterday, referring to the bonds subscribed by the EPF, KWAP and Tabung Haji with 1MDB.

The EPF had subscribed RM200 million in bonds issued by 1MDB in 2009. It also has exposure of RM1.5 billion in 1MDB subsidiaries, Panglima Power Sdn Bhd and Jimah Energy Ventures Sdn Bhd (JEV).

Based on the response from the Ministry of Finance recently, Rafizi said KWAP had also invested a total of RM1.4 billion in 1MDB and its subsidiaries as at March 31, 2015. They were JEV, Bandar Malaysia Sdn Bhd, 1MDB Energy Ltd and 1MDB Global Investment Ltd.

Given the negative sentiment in the capital market and threats to downgrade the country’s ratings, Rafizi opined that it is highly unlikely the government can absorb the RM42 billion loans of 1MDB since the country’s debt level has reached RM700 billion when taking into account its contingent liabilities.

KWAP, the pension fund for civil servants, recently came under fire over news that it planned to buy a parcel of land at the TRX for RM2,300 per sq ft.

Contrary to reports stating that the public does not need to worry about their money and that KWAP had not signed a sale and purchase agreement with 1MDB, Rafizi said: “A HoA is an early agreement that is undertaken to formalise the main terms.”

“How is this then not a binding contract?” he asked.

This article first appeared in The Edge Financial Daily, on May 21, 2015.