Looking beyond Jho Low

In his ‘world exclusive’ interview with the Star, Jho Low spent a lot of time talking about his contacts in the Middle-East and how he got to know them during his school and college days.

It sounded like an attempt at damage control.

Anyway, I am not interested in his parties with the celebrities. What do you make of the Wynton Group’s website here?

What I wanted to learn more about was the rationale behind the Terengganu Investment Authority and his links with local politicians. (After all, we already know he is familiar with Taib Mahmud’s son in UBG.)

When the TIA was first set up in Feb 2009, we heard of it in business news reports. It came up with the largest single sukuk issue for the second quarter of 2009, structured as a RM ‘Murabaha’ offering, raising RM5 billion, according to the CPI Financial website. With a coupon rate of 5.75 per cent, this worked out to an annual interest equivalent of RM287.5 million annually, according to the Edge weekly (26 July 2010).

The bonds are guaranteed by the Malaysian government, according to Bloomberg.  AmInvestment Bank was hired as the lead arranger.

TIA was widely described as a ‘sovereign wealth fund’.

An analyst was quoted in Bloomberg as saying:

“To my knowledge, wealth funds manage the wealth of the state or country, not the debt,” said Sani Hamid, a director of wealth management at Financial Alliance Pte, a Singapore-based financial advisory firm. “Development projects don’t guarantee returns because three’s a social angle to it; you can’t maximize profits on development projects.”

Asia Sentinel reported that Terengganu had recorded a first in setting up a sovereign wealth fund, but questioned why the state would want to borrow money for the fund when it had annual oil revenues of its own.

Other questions were also asked about the bond issue, which 1MDB CEO Shahrol Halmi responded to in an illuminating Edge report reproduced on the 1MDB website.

The TIA morphed into 1MDB after what is believed to have been a tussle over control of the TIA. Jho Low denies any involvement with 1MDB and the Sungai Besi land deal. The Star had reported in January that “Low was in fact instrumental in driving TIA during its formative stage; he continues to play a role in 1MDB, particularly in wooing the Arabs to part with the money to invest in the country”.

Meanwhile, the Edge weekly (26 July) reports that 1MDB is now seeking a further RM5 billion bridging loan in two tranches of RM3 billion and RM2 billion, to finance future projects. This may not carry a government guarantee, though 1MDB itself is a government-backed entity.

1MDB has already entered into a RM2.5 billion joint-venture fund with PetroSaudi International.

Other future 1MDB projects talked about, include:

• the Sungai Besi land development with a Qatar partner (“By right… the government or its entities should be in the driver’s seat and the projects should not be parceled out through joint ventures or other forms of collaboration,” said the Edge, ‘Frankly Speaking’, 5 July 2010);
• energy-intensive projects in Sarawak with State Grid Corp of China worth RM11 billion in economic value (including RM6-8 billion in large aluminium smelters and three dams).