Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on April 8, 2016.

 

KUALA LUMPUR: The entire board of 1Malaysia Development Bhd (1MDB) has decided to offer its resignation to Minister of Finance (Inc) (MoF [Inc]). The decision came shortly after the tabling of the Public Accounts Committee’s (PAC) report on the strategic investment fund in Parliament yesterday.

In its report, the PAC has called for investigation into former chief executive officer (CEO) Datuk Shahrol Azral Ibrahim Halmi and other top executives.

However, 1MDB’s board defended that it had done “its best” to manage the company, so that it would not be a financial burden to the government.

This includes implementation of corporate governance measures like standard operating procedures for the company, and setting up a board audit and risk management committee, said 1MDB in its statement.

“However, given the findings of the PAC report, the board has collectively, this morning, decided to offer its resignation to the MoF Inc, the 100% shareholder of 1MDB.”

1MDB views that the PAC report has established various facts and dispelled numerous allegations about the investment fund that is wholly owned by MoF.

1MDB noted that the decision was a “difficult one”, but the company believes it was the right thing to do in order to facilitate follow-up investigations, as recommended by the PAC.

The investment fund ran into deep financial trouble due to the mismatch of its cash flow and loan repayments.

1MDB highlights on its official website that it has a three-tiered governance structure comprising a board of advisors, board of directors and senior leadership team.

Its board of directors comprises chairman Tan Sri Lodin Wok Kamaruddin, president and group executive director Arul Kanda Kandasamy, Shahrol, Tan Sri Ismee Ismail, Tan Sri Ong Gim Huat and Ashvin J Valiram.

Lodin is the CEO of Lembaga Tabung Angkatan Tentera, which controls conglomerate Boustead Holdings Bhd and Affin Holdings Bhd. Meanwhile, Ismee is the group managing director of Lembaga Tabung Haji. Both Affin Bank Bhd and Tabung Haji have bought land in Tun Razak Exchange from 1MDB when the investment fund needed to sell assets to repay debts.

Meanwhile, Prime Minister Datuk Seri Najib Razak is the chairman of 1MDB’s board of advisors, and Sheikh Hamad Jassim, Qatar’s former prime minister and minister of foreign affairs, is the special advisor.

1MDB’s board of advisors also includes Tan Sri Nor Mohamed Yakcop, Petroliam Nasional Bhd  chairman Tan Sri Mohd Sidek Hassan, Government Chief Secretary Tan Sri Dr Ali Hamsa and Finance Ministry Treasury Secretary-General Tan Sri Dr Mohd Irwan Serigar Abdullah.

1MDB said with the benefit of hindsight, it could understand how the National Audit Department and PAC could identify its lapses and shortcomings.

1MDB emphasised that its operations were complex and the company’s decisions were based on specific transactions.

1MDB said: “It is important to understand that the decisions were made in the context of specific transactions at that point in time”.

“Furthermore, 1MDB is a complex company, with multiple roles of undertaking large strategic projects, establishing collaboration with foreign government entities and attracting foreign direct investment in Malaysia.

“More importantly, the funds of 1MDB have been fully accounted for and there is no case of ‘RM42 billion missing’, as has been alleged by some irresponsible parties. It has also been confirmed that 1MDB did not transfer RM2.6 billion to the personal accounts of the prime minister as had been alleged,” 1MDB said.

1MDB said it was well known that it only had RM 1 million cash equity, which necessitated heavy dependence on borrowings to fund investments.

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