1MDB’s problems reminiscent of Renong, says report
(The Malaysian Insider) – There are striking resemblances between 1Malaysia Development Bhd (1MDB) and Renong Bhd which collapsed amid major debts in 2001, StarBiz reported today, adding that 1MDB would likely struggle to market its land development rights in light of its financial problems.
Like 1MDB, Renong too faced multiple debts, having chalked up arrears of over RM20 billion in the late 1990s as well as an RM3.2 million put option that its major shareholder, Tan Sri Halim Saad, had to fulfil.
Halim, who was in 1984 taken in by former finance minister Tun Daim Zainuddin (pic) to become Umno’s sole corporate nominee, had built up Renong into Malaysia’s largest conglomerate, with ventures in the banking, construction, telecommunications, real-estate development and tolled-roads industries.
According to StarBiz, he said he had wanted to fulfil the option and could have saved Renong from its debts but was not allowed to do so.
The Edge Review said then that the Asian financial crisis of 1997 had led to the fall in Renong’s share prices and exposed the conglomerate’s poor cash-flow and large debt burdens.
Eventually, in an exercise which cost some RM5.2 billion, Khazanah Nasional Bhd took over Renong which reportedly had assets but lacked cash-flow and had funded long-term projects with short-term funding.
Much as the government then could not afford Renong’s collapse, which would have impacted the banking system, a default in 1MDB would trigger a cross-default of its loans and impact the government’s credit rating, StarBiz said in its report.
“This is why a committee comprising the likes of (Datuk Seri) Ahmad Husni is looking into resolving 1MDB’s problems,” an official was quoted as saying.
Criticism has been mounting over the Finance Ministry wholly-owned investment vehicle, established in 2009, which has accumulated debts of up to RM42 billion, backed by Putrajaya.
Scrutiny has grown more intense following news portal Sarawak Report‘s recent exposes, which piled pressure on Prime Minister Datuk Seri Najib Razak and prompted opposition politicians, former and current Umno leaders, including long-serving former prime minister Tun Dr Mahathir Mohamad and anti-graft bodies, to demand a thorough investigation into the fund.
