KUALA LUMPUR: The secretive Malaysian government guaranteed fund 1MDB, which has in a short four years accumulated debts of RM38 billion, is a potential financial time bomb for the Malaysian government.

Regional news weekly, The Edge Review, in its latest issue has a cover story on 1MDB that traces its roots to an investment fund originally proposed by well-connected 30-something businessman Low Taek Jho to the Terengganu government.

The article argues that the fund has poor cash flow and is emerging as a rising contingent liability on a government that is already heavily burdened with debts.

A banker who follows 1MDB was quoted as saying: “1MDB doesn’t have strong cash flow and, at the rate it is borrowing, sooner or later the government has to step in to take responsibility.”

The Edge Review also touched on the controversial dealings between 1MDB and  privately owned PetroSaudi International and the special ties with Goldman Sachs which saw the US investment bank handling much of the debt papers issued.
Reference was made to the large premiums 1MDB paid to acquire a few power stations and whether they were linked to political contributions.

The Edge Review is a digital only weekly magazine. The full article can be viewed through a standalone subscription or through The Edge Collection bundle subscription available on both Apple and Android App Stores. For details go to www.thedgereview.com or www.subscribe.theedgemalaysia.com

This article first appeared in The Edge Financial Daily, on July 22, 2013.