KUALA LUMPUR, Sept 9 — The US$1.4 billion (RM6.03 billion) that Malaysia’s state investment fund 1Malaysia Development Berhad (1MDB) is said to have paid to a United Arab Emirates state investment vehicle has allegedly gone missing, the Wall Street Journal (WSJ) reported.
Citing two sources familiar with the matter, WSJ said 1MDB’s financial backers in the United Arab Emirates are asking questions on the US$1.4 billion payment that was said to have never reached the latter’s state investment fund International Petroleum Investment Co (IPIC).
“The dealings between the two countries shines a rare light on the workings of sovereign-wealth funds, which have increased significantly in size and are backed by wealthy governments but often lack transparency,” the WSJ said of Malaysia and the United Arab Emirates’ financial dealings through 1MDB and IPIC.
According to the WSJ, IPIC had guaranteed the US$3.5 billion (RM15.07 billion) bond issued by 1MDB to fund its purchase of power plant assets back in 2012.
The deal would then see IPIC getting options to buy a 49 per cent share in the power plants, besides receiving collateral for the bond, the WSJ said.
While the 1MDB financial statements said that it paid US$1.4 billion as collateral, the WSJ said the Auditor-General’s draft report on 1MDB said this sum went to IPIC’s subsidiary Aabar Investments PJS.
But IPIC’s consolidated financial statements do not mention receiving the US$1.4 billion, with two sources familiar with the issue claiming that both IPIC and Aabar did not receive the amount, WSJ said.
The influential US publication also reported that the United Arab Emirates is seeking to cut off ties with Malaysia’s 1MDB and is preparing a restructuring plan for the IPIC, which has now chalked up heavy debts.
The WSJ said 1MDB, IPIC and Aabar did not respond to requests for comment.
The office of Prime Minister Datuk Seri Najib Razak, who is also both the Finance Minister and 1MDB advisory board chairman, did not respond to the WSJ’s requests for comment.
The UAE spokesman Ibrahim Al Abed did not provide comments, the WSJ said.
In May, IPIC and its subsidiary Aabar Investments emerged as the firms providing a US$1 billion (then estimated as RM3.6 billion) lifeline to 1MDB to pay off a US$975 million debt that was maturing soon.
Aabar had provided aid on another occasion to 1MDB, the WSJ said, where it guaranteed the 1MDB’s US$2.32 billion sum in a Cayman Islands account.
The WSJ also noted that Malaysian investigators had found some of the alleged bank transfers of close to US$700 billion or RM2.6 billion to Najib’s accounts were done through a British Virgin Islands firm’s accounts at Aabar-owned Swiss bank Falcon Private Bank, adding that Falcon Bank declined comment on the matter.
The Auditor-General is expected to release the full findings on 1MDB this year, while Bank Negara Malaysia has not released its findings on the fund that is owned by the Ministry of Finance.
The Malaysian Anti-Corruption Commission (MACC) has said it is still probing the RM2.6 billion that it said was a donation from unnamed Middle Eastern sources and is not linked to 1MDB.
The MACC has declined to confirm if Najib has been asked to explain the RM2.6 billion donation, but he had previously said that he has not taken any funds for personal gain.
WSJ first reported about the RM2.6 billion donation in an expose in July 2.