Anwar: Letter of support is sovereign guarantee

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KUALA LUMPUR: Datuk Seri Anwar Ibrahim insists that the letter of support issued by the government to 1Malaysia Development Bhd (1MDB) is indeed a sovereign guarantee as Putrajaya would still be liable if the sovereign wealth fund — which he terms “the biggest liability ever undertaken by the government” — defaults on its loan.

He said that Deputy Finance Minister Datuk Ahmad Maslan, who has been insisting otherwise, should check his facts with his ministry, while adding that a letter of support from the Ministry of Finance (MoF), under any law, is called a sovereign guarantee.

The former deputy prime minister, who also served as finance minister between 1991 and 1998, also pointed out that any letter of support, before being issued, would have to be submitted to the Cabinet for approval first.

“In the eight short years I was finance minister, a letter of support from the minister of finance is considered a guarantee. That is the reason it became an issue with PKFZ (Port Klang Free Zone).

“The practice is for the finance ministry to refer (the letter of support) to the Cabinet for approval, which I believe did not take place [in 1MDB’s case]. This liability is the government’s responsibility, which is the reason they (Putrajaya) should not manipulate it by ignoring guarantee procedures,” the opposition leader told reporters at the Parliament lobby yesterday.

In the PKFZ bailout scandal, the letter of comfort issued to bondholders was recognised as a form of government guarantee, hence the MoF had given a loan of RM1 billion to PKFZ to repay its bondholders.

Meanwhile, Petaling Jaya Utara MP Tony Pua, in a statement, expressed his disappointment with the excuse given by the auditor-general for exempting 1MDB from the National Audit Department because it was already being audited by a “Big Four firm”, referring to international auditor Deloitte.

“We call upon Tan Sri Amrin Buang to seriously consider including 1MDB as one of the future audit projects for the National Audit Department because it is the single largest debtor in the country, outside of the government. 

“If 1MDB, with more than RM42 billion of debt, for one reason or another, collapses like another controversial firm, Renong Bhd, in the late 1990s, then the implication for the country’s economy will be earth-shattering,” he added.

 

This article first appeared in The Edge Financial Daily, on November 14, 2014.