Friday 29 Mar 2024
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KUALA LUMPUR (April 4): 1Malaysia Development Bhd's (1MDB) financial model of low capitalisation and huge borrowings was unsustainable from the beginning, Minister in the Prime Minister's Department Datuk Seri Abdul Wahid Omar told CNBC.

CNBC quoted Abdul Wahid as saying in an interview that 1MDB's structure was an exception, and not the norm for Malaysian government-linked companies (GLC). Rather than being listed like other firms, 1MDB, which was set up 2009, is wholly-owned by the Finance Ministry, according to him.

"The model that they took was low capitalisation and huge borrowings, and I think as they found out, it wasn't a sustainable model.

"With that came debt realisation, where the board has now embarked on a rationalisation plan," Abdul Wahid said.

CNBC reported that 1MDB, after accumulating RM42 billion in debt within five years, raised concerns that the company might not be able to service its debt obligations.

As 1MDB is wholly-owned by the government, CNBC reported that Prime Minister Datuk Seri Najib Tun Razak's administration was responsible, should there be a loan default.

But Abdul Wahid said Malaysia had a track record of successful transformation of GLCs.
 
He said companies, including Malayan Banking Bhd, CIMB Group Holdings Bhd and Axiata Group Bhd, had all gone through this transformation by steadily improving their financial performance and governance, besides enhancing their nation-building role.

"The norm (in Malaysia) is successful transformation of the government-linked companies that we've embarked on," Abdul Wahid was quoted as saying.

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