Pilgrims Fund says it has acquired plot of prime 1MDB land for development

Kuala Lumpur

A DECISION by Malaysia's Tabung Haji (TH) or Pilgrims Fund to acquire a plot of land in Kuala Lumpur's Tun Razak Exchange (TRX) for RM188.5 million has raised concerns that government-owned and -linked agencies would be tapped to bail out the debt-laden strategic development agency, 1MDB.

TH has revealed that it acquired the plot - it did not disclose the size - at a discount to the current market value as independently assessed.

Its deputy group managing director and chief executive Johan Abdullah said in a statement on Wednesday that a residential tower to be built on the plot by TH's property subsidiary is expected to "contribute positively to the group's future earnings".

Mr Johan, noting that the acquisition was in line with its property investment strategy of focusing on the domestic sector, said: "The investment is a commercial decision which fits with TH's risk appetite; it has gone through all internal due processes accordingly."

In January, the government had directed state-owned agencies and funds to defer overseas investments and to focus on those on home turf instead, in an attempt to stem the flight of the ringgit.

Still, the acquisition has come under scrutiny for a number of reasons.

TH disclosed details about the investment only after confidential documents were leaked by a blog called The Benchmark, and TH executives were pressed for answers.

(Incidentally, TH has a facility for whistleblowing on its corporate website, which encourages its staff or members of the public to lodge complaints of corruption or other wrongdoings involving the fund.)

Notwithstanding TH's justifications for making this acquisition, its actions will inevitably be seen as a move to aid 1MDB, which has been trying to refinance some of its loans - they total a staggering RM42 billion (S$15.5 billion) - through various means, including an outright sale of assets.

The plot in the 70-acre TRX acquired by TH, along with another 495 acre plot that was a former air force base, had been sold to 1MDB so cheaply that they were practically gifted.

Indeed, critics of 1MDB have been quick to point out that the odd profit that it managed to eke out in its five-year history resulted from a revaluation of these assets.

The close association between TH chairman Abdul Azeez Abdul Rahim and Prime Minister Najib Razak has emerged as another sticking point. An Umno Member of Parliament, Mr Abdul Azeez also sits on Umno's powerful supreme council; and Mr Najib, also the finance minister, set up 1MDB and is chairman of its advisory board.

The prime minister has been under tremendous pressure to explain how the Finance ministry-owned 1MDB ran its operations to the point where its cash flow could not service its debts.

Mr Najib's harshest critic, former prime minister Mahathir Mohamad, has called on him to step down as premier; Dr Mahathir has in fact taken it upon himself to dislodge him.

But this will not be easy because unless Mr Najib resigns or is removed by Umno, his position remains solid; he enjoys the backing of party chieftains such as Mr Abdul Azeez, whom he installed in the plum position of TH chairman.

Analysts say TH has tens of billions of ringgit and investments in various listed entities; government-linked agencies like it could be approached to help.

The Benchmark said TH had made another - much bigger - investment in TRX, an assertion which TH has denied.

"Leakages of proposal papers are not proof of approved investment decisions," it said, implying perhaps that the matter had been considered nonetheless.