KUALA LUMPUR (Oct 19): Second Finance Minister Datuk Johari Abdul Ghani today clarified that infrastructure projects financed by Asia Infrastructure Investment Bank (AIIB) will not be tax exempted from the member countries’ tax regime.
“We have to look at the bank (AIIB) and the companies backed by it, separately. Take a company that secures a project in our country, for example. If it makes a profit, we will tax what it earns,” he said in Parliament.
Citing Article 51 of AIIB’s Articles of Agreement, Johari explained that only income and transactions related to the multi-lateral bank’s operation are tax exempted.
Johari also assured Malaysian infrastructure projects will not favour their awards to China-based companies, despite the AIIB concept being initiated by the country.
Additionally, pursuant to Articles 46 and 50 in regards to the immunity of judicial proceeding and privilege to AIIB and its employees and officers, Johari said these are to facilitate the bank’s operation under various judicial framework.
“There are 57 founding member countries, and like the World Bank, AIIB will set up offices and operate in different judicial system, and these clauses are to ensure that AIIB’s operation will not be paralyzed, due to trivial matter in one particular nation,” he said.
However, he stressed that the clauses come with exception, which in cases arise out of or in connection with the exercise of its powers to raise funds, through borrowings or other means, to guarantee obligations, or to buy and sell or underwrite the sale of securities.
“The immunities [are] only restricted to their operation, nothing beyond that. Therefore, should AIIB or its staff involve in commercial crime related to conflict of interest, we can still bring them to court,” he said.
Concerns were also raised in the parliamentary session today with regards to benefits that AIIB would bring to Malaysia, since the country is committing US$109.5 million (RM459 million) for 1,095 shares in AIIB.
Johari defended Malaysia’s participation in AIIB, saying the country will benefit from it in “a larger economy perspective”.
“Malaysia has a lot of exports like palm oil product. By supporting multi-lateral bank concept and facilitate development of infrastructure like ports and transport facilities in less developed countries, we can expand our exporting destinations,” he said, adding that Malaysia has an upper hand in building relationship with these countries, being a participating nation.
Johari added that the committed fund has to come from the government, instead of any government-linked company or fund.
“We are required to participate in AIIB as a country, not as a company,” he said when being asked whether the government would get entities like Khazanah Nasional Bhd to fund the commitment.
Johari also revealed that based on the country’s gross domestic product (GDP), Malaysia was originally offered to commit US$1.1 billion, equivalent to 10,948 shares.
“We only committed 10% of what we have been offered. We have a lot of other things to do in the country, rather than this, so we committed a lesser amount, about 0.11% stake in AIIB,” he said.
Yesterday, Johari reportedly said Malaysia will pay US$21.9 million or a 20% of the stake in five instalments, over five years.