Malaysia | Skyscraper project goes ahead despite stolen funds

The Exchange 106 rises from the Tun Razak Exchange, TRX, in Kuala Lumpur, Malaysia

Malaysia said yesterday it will not cancel a skyscraper project billed as the tallest in Southeast Asia, even though 3 billion ringgit (USD747 million) from the venture has been misappropriated by the 1MDB state fund linked to former premier Najib Razak.

Finance Minister Lim Guan Eng said Najib’s government had since 2012 guaranteed borrowings, extended advances and purchased land from TRX City Sendirian Berhad amounting to nearly 3.7 billion ringgit ($921.4 million), but 3.067 billion ($764 million) of that was embezzled by 1MDB, mainly to repay its loans.

The new revelation of embezzlement linked to 1MDB comes more than a month after Najib’s coalition, which had ruled Malaysia since independence from Britain in 1957, suffered a shocking defeat in May 9 polls partly due to voters’ anger over the scandal. The fund is being investigated in the U.S. and several other countries for alleged theft and money laundering.

Lim said the stolen TRX fund was a “classic example” of how government money was misappropriated by 1MDB and that he had instructed the TRX management to lodge complains with authorities investigating the defunct fund.

TRX has sought financial assistance and Lim said the government decided to inject 2.6 billion ringgit ($648 million) to complete the project and help recoup stolen funds, repay borrowings and potentially achieve a small surplus return. If the project were canceled, the government would have to pay 3.5 billion ringgit ($872 million) in compensation and lose the 3.7 billion ringgit given to TRX earlier, he said.

“We are not happy but we cannot bear to see a massive eyesore in the heart of Kuala Lumpur,” Lim said, adding that it will also reassure foreign investors involved in the project. “Completing TRX will allow the full value of the project of at least 7.6 billion ringgit ($1.9 billion) to be realized.”

The Exchange 106 skyscraper, which is near completion, is in the heart of the Tun Razak Exchange, a financial district being built by TRX City in Kuala Lumpur and named by Najib after his father Abdul Razak, who was Malaysia’s second prime minister. TRX City also owns a massive mixed property development in another part of the city.

Lim said TRX City, a former subsidiary of 1MDB, was transferred to the Ministry of Finance last year after it was unable to secure land sales or bank financing due to its association with 1MDB.

Najib set up the fund when he took power in 2009 but it racked up billions in debts. U.S. investigators say Najib’s associates stole and laundered $4.5 billion from the fund from 2009 to 2014, some of which landed in Najib’s bank account.

New Prime Minister Mahathir Mohamad reopened investigations into 1MDB that were suppressed under Najib’s rule. He has also banned Najib and his wife from leaving the country.

Anti-graft officials have questioned Najib and his wife Rosmah Mansor. Police have also seized 114 million ringgit ($28.7 million) in cash and hundreds of expensive designer handbags and jewelry from Najib’s home and other properties. The country’s new anti-graft chief has said Najib, who denies any wrongdoing, could soon face criminal charges.

The government has said Najib’s administration conducted an “exercise of deception” over 1MDB and deceived Parliament over the country’s financial situation. The government has axed a high-speed rail project to Singapore and was assessing other large infrastructure projects to cut costs. Mahathir, who was prime minister for 22 years until 2003, was spurred out of retirement by the 1MDB scandal. He has vowed there will be no deal for Najib if he is found responsible for the scandal. Eileen Ng, Kuala Lumpur, AP