Najib administration spent RM642m to bail out SRC International, govt official testifies

The Finance Ministry’s Strategic Investment Department deputy secretary Afidah Azwa Abdul Aziz is pictured at the Kuala Lumpur High Court Complex June 19, 2019. — Picture by Firdaus Latif
The Finance Ministry’s Strategic Investment Department deputy secretary Afidah Azwa Abdul Aziz is pictured at the Kuala Lumpur High Court Complex June 19, 2019. — Picture by Firdaus Latif

KUALA LUMPUR, June 19 — Datuk Seri Najib Razak’s administration had bailed out SRC International Sdn Bhd for a total of RM642 million between November 2015 and December 2017 after the company failed to furnish its RM4 billion debt to the Retirement Fund Incorporated (KWAP), the High Court heard today.

Finance Ministry’s Strategic Investment Department deputy secretary Afidah Azwa Abdul Aziz testified that Najib’s Cabinet had approved three loans to SRC International of RM92 million, RM250 million and RM300 million, in order for the purpose of settling the company’s outstanding loan interest to KWAP.

She added that SRC International had applied for assistance from the Finance Ministry to avoid KWAP from declaring an “Event of Default (EOD)”.

“All three payments approved by the Cabinet and the Finance Ministry (MOF) were made directly from MOF to KWAP,” she said.

Afidah explained for the granting of the first RM92 million loan in November 2015, an internal memo had to be prepared for deliberation at a Cabinet meeting on the proposed government loan and its reason.

The memo was then brought to the attention of second finance minister Datuk Seri Ahmad Husni Hanadzlah on November 4, 2015 who then subsequently approved the memo on the same day.

“The memo was tabled and approved by the Cabinet during a meeting on November 6, 2015 as noted in the minutes which I received several days later,” the witness said.

Yesterday the prosecution’s 40th witness, former deputy Chief Secretary to the government Tan Sri Mazidah Abdul Majid testified in court that the memo was approved without any objections from the Cabinet ministers present based on the minutes of the meeting.

However to Afidah Azwa’s knowledge, she pointed out that SRC International did not make any further payment on the KWAP’s outstanding interest as the company had then applied for another short-term loan for the same purpose in 2016.

“The Finance Ministry agreed to give a loan to SRC International via ‘stand-by credit’ to the amount of RM250 million (through) a memo dated July 4, 2016 and the memo was approved by then second finance minister Datuk Johari Ghani.

“Johari seconded the memo and this was brought to the finance minister’s attention (Najib) where it was agreed upon on July 19, 2016.

“For the second loan, the main reason for SRC International’s application was to prevent an EOD that as mentioned which would require the guarantor (government) to pay the whole RM4 billion loan taken by the company,” she said.

The RM250 million agreement was signed between the Malaysian government representative Datuk Seri Mohd Isa Hussain and SRC International’s Datuk Mohammed Azhar Osman Khairuddin.

According to her, out of the RM250 million loan, a sum of around RM213 million was withdrawn by SRC International.

Subsequently in December 2017, SRC International once again applied directly to the government for another RM300 million loan to pay for the principal and interest payment for the loan it took from KWAP.

“As with the previous two loans, an internal memo was prepared and again the reason cited is that the government had to fulfil its obligation as a guarantor for SRC International.

“At that time, SRC International’s loan debt with the government had reached RM304.68 million,” she said.

Despite the outstanding RM304 million debt incurred by SRC International, she said the Finance Ministry agreed to give the RM300 million loan for the purpose of preventing an EOD by KWAP.

The RM300 million agreement was signed between the Malaysian government representative Mohd Isa and SRC International’s chief executive Nik Faisal Ariff Kamil.

Of the three loan agreements, only the RM92 million in 2015 was endorsed by the Cabinet whereas the remaining RM250 million in 2016 stand-by credit received approval of Najib and the second finance minister.

Afidah Azwa however conceded that she does not know if the third RM300 million loan was approved by the Cabinet or the Finance Ministry as her role in the ministry has changed by then.

She said as far as she knew, SRC International had not made any payments for the RM642 million loaned to it by the federal government.

“As SRC International failed to settle its debt with KWAP, the government as the guarantor of the RM4 billion loan must be responsible to make full principal payment including interests to KWAP,” she added.

She also explained that should an EOD be declared, KWAP as the borrower can terminate the loan agreement and given the right to reclaim the full loan amount or amount guaranteed.

Subsequently, the federal government as the loan guarantor has to bear the full repayment and result in KWAP having to categorise the SRC loan as a doubtful loan.

During the course of the trial, witnesses have testified that KWAP granted a total of RM4 billion in loans in August 2011 and March 2012 to SRC International, with money allegedly flowing through other companies before being transferred into Najib’s accounts.

Afidah Azwa is the 41st prosecution witness of Najib’s ongoing trial involving seven charges of abuse of position, criminal breach of trust and money-laundering over RM42 million of SRC International’s funds.

The trial before High Court Judge Mohd Nazlan Mohd Ghazali resumes at 9am tomorrow.