KUALA LUMPUR: Deputy Finance Minister Datuk Chua Tee Yong appeared to defend 1Malaysia Development Bhd yesterday, saying that “some” companies also require an extension for their loan repayments.
Asked to comment on reports that the 100%-owned sovereign wealth fund of the Finance Ministry was seeking a third extension to repay its RM2 billion loan, he said if banks were to grant the extension, it would reflect the banks’ confidence in 1MDB.
“For banks to allow [an] extension, this also shows that they have a certain confidence in the company,” he told reporters after opening the Malaysian Business Student Summit 2015 at Universiti Malaya’s Faculty of Business and Accountancy.
“Every company has its proper way of financing structure. Some companies also require an extension [to repay loans],” he said.
News report said that 1MDB is seeking a third extension to repay its RM2 billion loan that was originally due on Nov 30, 2014. The third extension is being sought to allow time for the investment company to sell a stake in its energy unit, the news report stated.
The lead lenders of the RM2 billion loan are Malayan Banking Bhd and RHB Bank Bhd.
Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said on Tuesday the central bank will ensure that any potential loan default by any institution will not have systemic implications on the country’s financial system.
However, she noted that the prerogative to give an extension to 1MDB for the repayment of its loans lies with the lenders, not the central bank.
Asked to comment on economic matters, Chua said the main issue concerning the country is “the [low] oil price and whether Malaysia will hit a twin deficit”.
“As analysts are unable to accurately predict the rate of rebound for oil prices, there is a lot of uncertainty in the market,” he said.
Chua advised people to remain positive as well as consume more local products to aid small and medium enterprises (SMEs).
“Consumers can also play a role by assisting and consuming local products which will help SMEs. The export council that we have set up is also trying to increase trade surplus,” he said.
While acknowledging analysts’ concerns about the initial implementation of the 6% goods and services tax (GST) in April, Chua said that the government is confident of gaining additional revenue from the policy as more than 300,000 companies have registered for the new tax system.
On critique from Fitch Ratings about the structural weakness of Malaysia’s economy following the revised Budget 2015, Chua said measures announced by Prime Minister Datuk Seri Najib Razak will require time to manifest their desired effects.
He also said one of the objectives under the Economic Transformation Programme is to reduce the government’s dependence on oil revenue which has been fruitful.
“Between 2008 and 2009, oil revenue’s contribution to the government was 40% but it has been dropping on a yearly basis and in 2014, it was estimated to be about 20% to 22%,” he said.
He added that with the GST in place, it will contribute to the government’s coffers and reduce the government’s tax gap — the amount of taxes owed compared to the amount collected — of approximately 20%.
This article first appeared in The Edge Financial Daily, on January 30, 2015.