Yearender2018: Business under scrutiny

  • Lifestyle
  • Sunday, 30 Dec 2018

The Tun Razak Exchange 106 (TRX Signature Tower) will be the next tallest building in Malaysia. Photo: The Star/Art Chen

Tun Razak Exchange 

When the Pakatan Harapan government came into power, among the ongoing mega projects that went under scrutiny was the Tun Razak Exchange (TRX). Not only was it linked with the scandal-ridden 1MDB, the ongoing property glut also raised concerns on whether the development was even viable.

Given how the project was quite advanced in its development and a lot of money had been pumped in, the government chose not to scrap it. To date, seven plots of land on TRX totalling RM2.88bil have been sold. 1MDB acquired the TRX land from the federal government for RM302.38mil in 2010.

In March 2013, Abu Dhabi Malaysia Investment Co Ltd – a 50%/50% joint venture between 1MDB and Aabar Investments PJS – was the first major multinational anchor investor in TRX. A month later, US$3bil (RM11.94bil) was raised overseas for the TRX development.

However, no money was channelled to the development.

Khazanah Exodus 

In July, a 77-day impasse between Pakatan Harapan and Khazanah Nasional Bhd ended with the board of the national sovereign fund handing their undated resignation letters to the government.

In a stunning move that caught top government officials by surprise, nine board members resigned, including CEO Tan Sri Azman Mokhtar, following repeated criticisms by the new government, led by Tun Dr Mahathir Mohamad, that Khazanah had deviated from its objectives and that the executives were overpaid.

The sudden exodus of Khazanah’s entire board of directors saw a number of top officials from various government-linked companies leaving their posts.

Tan Sri Muhammad Ibrahim. Photo: Bernama
Tan Sri Azman Mokhtar. Photo: Bernama

A Change In Bank Negara 

Tan Sri Muhammad Ibrahim’s tenure as Bank Negara governor came to an abrupt end in June, in the wake of questions over the valuation of a land deal that saw the back earlier in the year pay a whopping RM2bil for 22.5ha adjacent to the central bank.

Questions were raised over the land purchase, especially when five valuers questioned the high price paid for Lot 41. The key issue was why the money was paid before the central bank received the title.

It was later revealed that the money the finance ministry received from Bank Negara went towards paying 1MDB’s debt.

Mismanagement Of Funds 

Tabung Haji building on Jalan Tun Razak, Kuala Lumpur. Photo: The Star/Azman Ghani

An appalling state of financial affairs are being uncovered at the Federal Land Development Authority (Felda) and Lembaga Tabung Haji (LTH).

According to Minister in the Prime Minister’s Department Datuk Seri Dr Mujahid Yusof, LTH has been illegally distributing hibah (dividends) to its depositors since 2014. The declaration and payment for hibah had contravened the Tabung Haji Act 1995 for making such payments despite recording more liabilities in the previous years.

Returns for deposits were as high as 8.25%, a move which also turned out to be a reason for its poor financial state of affairs.

Felda is facing serious cash flow problems as it is saddled with debts of RM8.05bil, and cash balance is expected to drop to about RM100mil, hampering efforts for external funding.

Although implicitly owned by the government, financial institutions are not prepared to extend loans or carry out long-term bond programmes unless there is a government guarantee because of its weak finances.

Trade Wars 

China’s President Xi Jinping (left) and US President Donald Trump (right), along with members of their delegations, meeting at the G20 Leaders Summit in Buenos Aires, on Dec 1, 2018. Photo: AFP/Saul Loeb

This year saw a trade war between China and the United States, with each country introducing tariffs on goods traded between each other. Trade war fears had led to a bear market in China, where by late June, the total value of the country’s stock markets was 20% lower than beginning of the year when it reached record levels.

In July, when the tariffs went into effect, markets rebounded following positive jobs report in the US, including Asian markets.

Meanwhile, a report by Nomura Global Markets Research analysed the 7,705 products included on the tariff lists, and estimated potential gains from import substitution for 13 Asian countries.

It said Malaysia topped the list of beneficiaries, with the biggest benefit likely to come from electronic integrated circuits, liquefied natural gas and communication apparatus.

Carlos Ghosn. Photo: AP/Michel Euler

Fall Of An Automotive Visionary 

Carlos Ghosn will forever be known as the man who helped turn-around France’s Renault SA, and then Japan’s Nissan Motor Co, eventually linking both companies in an alliance with Mitsubishi Motor Corp in a profitable venture.

Ghosn, 64, was arrested in November for allegedly falsifying his financial reports and misusing funds at Nissan. This resulted in the board unanimously voting to end his 19-year reign as chairman.

Based on reports, the Brazilian-born businessman, who also has French and Lebanese nationalities, is suspected of under-reporting his income by US$44mil (RM184mil) over a five-year period.

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