1MALAYSIA Development Bhd’s (1MDB) silence in the face of the latest round of allegations, which includes fraud, is doing the country no favours as it is already grappling with a number of economic headwinds — weak crude oil prices, a falling ringgit and poor consumer sentiment, to name but a few.

The allegations are also hurting 1MDB’s ability to resolve its debt problem and raise more capital for future growth.

As long as the strategic investment fund keeps mum, foreign investors and the Malaysian public will continue to fear the worst and the possibility that it might default on some

RM42 billion of debt it has accumulated over five years. But Corporate Malaysia is beginning to speak up.

According to CIMB Group Holdings Bhd chairman Datuk Seri Nazir Razak, 1MDB was invited to the Invest Malaysia 2015 conference that was held two weeks ago. He was disappointed that it declined to be present to address questions from the investing fraternity.

“We need to allay concerns, [and] put concerns to rest. Probably, we should disclose what needs to be disclosed so that people [can] get the full picture,” Nazir said last week.

“The reality is, if you keep it hanging there, nobody is really sure of the full ramification. When people don’t know, they expect worse and worse, and I think that’s where we [stand] today.”

Nazir’s statement came after 1MDB said it would refrain from commenting on speculative news reports. In this instance, it is the serious allegations by whistle-blower site Sarawak Report that 1MDB gave false bank statements pertaining to its subsidiary accounts to the Singapore branch of BSI Bank.

Sarawak Report also said investigators had concluded that 1MDB had “cheated” and “given fake documents” to Bank Negara Malaysia and Deutche Bank.

“Investigators into 1MDB’s 2009 joint venture with the company PetroSaudi International have concluded that the partnership lied to its banks and Bank Negara by confirming that the company Good Star Ltd was a 100% subsidiary.

“In fact, Good Star is a third-party concern controlled by Jho Low, whom we have shown was secretly directing the fund’s investment decisions,” writes Sarawak Report.

There could also be a breach of Foreign Exchange Administration rules, writes the portal, since 1MDB PetroSaudi cannot show that the money transferred to Good Star was not transferred to the joint venture, its original intended purpose.

Even the statement by Bank Negara governor Tan Sri Zeti Akhtar Aziz that 1MDB’s woes did not pose a systemic risk to the country’s banking and financial system or its sovereign rating has done little to ease public concern.

It does not help that criticism of 1MDB has spilt over into the political arena in recent months, beyond the usual brickbats from opposition politicians. Since late last year, former prime minister Tun Dr Mahathir Mohamad has been using 1MDB as an avenue to lambast Prime Minister Datuk Seri Najib Razak’s administration and its alleged involvement in the creation of 1MDB. After all, Najib is the chairman of 1MDB’s advisory board.

This adds to the perceived political risk of the country, which is not good for markets as it deters foreign investment interest. Several foreign publications have already reported on the potential for a transition in the country’s leadership at some point this year.

Nonetheless, acknowledging the mounting criticism of his administration, Najib, at the launch of the Performance Management and Delivery Unit’s annual report last week, said he “will never surrender”.

He urged Malaysians to “think maturely” and not be overcome with emotion when judging the government and its “noble efforts”.

He said no words could describe how important it is for everyone to be magnanimous (berjiwa besar) in their fight to develop the country.

“Because of that, I urge everyone to avoid all the conflict (sengketa) and find a point of similarity (titik persamaan) for the sake of peace in Malaysia,” he said.

Just as criticism is not making Najib’s job any easier, it has been undermining 1MDB’s ability to resolve its debt problem in an orderly and sustainable way.

1MDB needs to swiftly monetise its assets to pare down its debt and it may need more financing support from the government for the time being to help it meet its RM2.4 billion annual debt obligation.

But the current environment of political attacks and public scrutiny may affect 1MDB’s ability to execute such plans effectively, and Malaysians will ultimately pay the price if more value is destroyed at 1MDB since it is owned by the Ministry of Finance.

Hence, to turn 1MDB around, it needs to put the criticism to rest, but it cannot do so by staying silent.

Given the politically sensitive nature of 1MDB, it isn’t entirely surprising that its management prefers to keep mum. However, it is just as rare to see corporate leaders like Nazir speak out. But he is certainly not alone.

This article first appeared in The Edge Malaysia Weekly, on May 4 - 10, 2015.

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