By Khairie Hisyam
Rafizi Ramli
A member of parliament (MP) raises concern on possible Chinese influence in decisions involving the Malaysian air force amid confusion over a deal by 1Malaysia Development Bhd (1MDB) to divest 60% in its Bandar Malaysia development project.
In a statement today, Pandan MP Rafizi Ramli said available information on the share sale agreement between 1MDB and a consortium involving China state-linked China Railway Group carries significant implications on Malaysian sovereignty and national security.
The statement came as confusion grows on the actual transaction price for the 60% divestment after China Railway Group told the Hong Kong Stock Exchange (HKEx) a 28% lower figure for the transaction than what 1MDB previously announced.
To recap, on Dec 31, 2015 1MDB announced share sale deal with a consortium comprising Iskandar Waterfront Holdings (IWH) and China Railway Engineering (M) Sdn Bhd (CREC) to dispose of 60% equity in its Bandar Malaysia development project at a land sale value of RM7.41 billion.
IWH holds 60% interest in the consortium, while CREC holds 40%.
However, on Jan 3 China Railway Group told HKEx that the consortium is paying RM5.28 billion for 60% equity in Bandar Malaysia Sdn Bhd. 1MDB later clarified that the RM5.28 billion is China Railway’s estimated nett equity value for the 60% equity in Bandar Malaysia Sdn Bhd.
Nett equity value is the fair value of a company without taking into account existing liabilities.
1MDB further clarified that the RM7.41 billion price tag may be adjusted further depending on negotiations involving “whether or not certain Bandar Malaysia-related liabilities can be passed to the consortium”.
Specifically, this refers to existing sukuk obligations on Bandar Malaysia Sdn Bhd’s part as well as contract costs to relocate the Sungai Besi military air base located on the land.
This implies that 1MDB has not fulfilled its obligations to relocate the Royal Malaysian Air Force (RMAF) air base on the development land, said Rafizi, adding there is a likelihood that the obligation will be shared by the buying consortium after the deal is completed.
Among other questions that arises is whether there will be Chinese influence on decisions relating to the relocation of the RMAF’s air base on the Bandar Malaysia land as well as whether the consortium will have any say on the costs involved the relocation, said Rafizi.
“Arul today confirmed that the RM2.13 billion difference is to take into account relocation costs and existing facilities on the land,” said Rafizi. “If the consortium refuses to pay the RM2.13 billion, will that affect the relocation process of RMAF facilities?”
‘PM should explain’
In his statement, Rafizi called upon Prime Minister Najib Abdul Razak to provide a clarification on the matter given the significance of the Sungai Besi air base to national security.
“No reasonable sovereign countries would involve a company owned by another country in any decision involving its military installations and facilities,” said Rafizi today.
HKEx-listed China Railway counts the China state government as a major shareholder via China Railway Engineering Corp. For its part in the transaction for a majority stake in Bandar Malaysia development, China Railway told HKEx that it will pay RM2.64 billion out of the RM5.28 billion price tag for 60% equity in Bandar Malaysia.
China Railway is among the world’s largest engineering and construction firms with turnover exceeding US$100 billion (RM433.8 billion) annually, a statement said. The company has had business presence for over 15 years in Malaysia, mainly in construction, it said.
Its partner, IWH, is the master developer of Flagship A area in Iskandar Malaysia and is a public-private partnership between Credence Resources Sdn Bhd, which holds 60% equity, and the Johor State government via state arm Kumpulan Prasarana Rakyat Johor Sdn Bhd, which holds the remaining 40%. It currently owns 4,300 acres of prime waterfront land in Iskandar Malaysia.
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