1MDB: scandal-hit Malaysia fund seals China deal for power assets

By Michael Peel in Bangkok. Published by Financial Times on 24 November 2015.

Malaysia’s scandal-hit 1MDB state investment fund has clinched a deal to sell power assets to one of China’s fast-expanding state nuclear companies for $2.3bn. The agreement with China General Nuclear Power Group helps cut the Malaysian fund’s big debt pile but hands over a keystone of sovereign-backed 1MDB’s activities to a Chinese state buyer.

It is the latest twist for the state investment fund, where the fate of billions of dollars borrowed as it ran up more than $11bn of debts from contentious deal making has sent ripples reverberating from Malaysia to the Middle East to the Cayman Islands.

The higher than expected price also raises the question of whether the deal is in part a reminder by Beijing of its influence in Malaysia, after President Barack Obama’s efforts last week to woo Najib Razak, the country’s premier, as an ally on US-China maritime disputes.

While beating expectations, the 9.83bn ringgit pricetag represents a steep discount on the roughly 12bn ringgit that 1MDB has said it paid for the assets over the past few years, although attached power purchase agreements, are closer to expiry and so less valuable. Foreign buyers also benefit from the steep fall in the value of the currency, which has tumbled by about a fifth in the past year against the dollar.

CGN’s main local rival bidder was Tenaga Nasional, the state-owned electricity company, and the auction process attracted companies from Saudi Arabia and Qatar. Shares in Tenaga rose 5 per cent early on Tuesday, apparently in relief that the company would not be used by the government to bail out 1MDB.

But the sale to CGN creates complications of its own, given how factions of the ruling United Malays National Organisation have stoked hostility towards the country’s Chinese Malaysian business elite. The deal also appears to over-ride rules that limit foreign investors to minority stakes in the Malaysian power production industry without a special waiver. 

James Chin, director of the Asia Institute at Australia’s Tasmania university, said there could yet be a backlash against CGN if electricity users ended up paying more. “It will become a racial issue if there is a power [price] hike to benefit the new operators,” Mr Chin said.

Arul Kanda, the former Abu Dhabi-based banker brought in earlier this year to restructure 1MDB, said CGN was the “clear winner” of an auction he hailed as a “vote of confidence in the Malaysian economy”.

Malaysia has been under growing economic pressure because of a mix of international energy price falls, high consumer debt levels and concerns about the fallout from 1MDB’s troubles.

Both the price and the politics of the CGN deal are now likely to come under greater scrutiny, at a time when the Najib government is under severe pressure over its stewardship of 1MDB. The premier has for months been fighting off a campaign to oust him over mysterious payments of almost $700m to his personal bank account. He denies wrongdoing and says the money was from an unnamed Middle Eastern donor.

CGN’s 1MDB deal was revealed after Mr Najib held talks on Monday with Li Keqiang, his Chinese counterpart. Mr Li announced Beijing would both buy more Malaysian government bonds and offer Kuala Lumpur the chance to purchase almost $8bn of Chinese debt and shares.

The 1MDB deal is part of a broader overseas expansion by CGN, including a high-profile push in the UK. CGN’s rival China National Nuclear Corp agreed a deal last week to build two nuclear power plants in Argentina.

Link: http://www.ft.com/cms/s/0/2f8a2b1e-9274-11e5-9e3e-eb48769cecab.html?ftcamp=published_links%2Frss%2Fasiapacific%2Ffeed%2F%2Fproduct#axzz3sOgbYepM

Malaysia under fire for 'human rights clampdown' ahead of Barack Obama visit

By Philip Sherwell, Asia Editor. Published by The Telegraph on 19 November 2015.

Malaysia has intensified a crackdown on free speech and dissent ahead of Barack Obama’s arrival on Friday for a high-profile summit, campaigners have said. The daughter of a jailed opposition leader and human rights activists have called on Mr Obama to raise the country’s human rights record with his host.

Najib Razak, the embattled prime minister, may have hoped for some respite from his domestic political woes and a deepening financial controversy during the summit with the US president and other Asian leaders. But domestic activists and international campaigners have maintained the focus on Malaysian’s human rights crackdown as Mr Obama arrives on Friday for the meeting between the Association of South East Nations (ASEAN) and the US.

Mr Najib’s government has reportedly used criminal defamation and sedition laws to prosecute activists, journalists and opposition leaders in the run-up to the ASEAN summit in an attempt to quell dissent. The crackdown has been chronicled in scathing reports released recently by Human Rights Watch and Amnesty International.

This month, a United Nations working group concluded that Anwar Ibrahim, the jailed former deputy prime minister, was being held in violation of international law and called for his immediate release. Mr Anwar has been named a prisoner of conscience by Amnesty and his case described as a “travesty of justice” by Human Rights Watch. 

Mr Anwar’s daughter, Nurul Izzah, an MP and deputy leader of his People's Justice Party, urged Mr Obama to use his visit to highlight Malaysia’s rapidly deteriorating human rights situation. “The forthcoming ASEAN-US summit is an opportunity for President Obama to ask much more of Prime Minister Najib Razak's administration and lead the global community in confronting the government's violations of human rights,” she wrote in US News & World Report. “And he must call publicly for my father's release and that of other political prisoners.”

Phil Robertson, deputy Asia director of Human Rights Watch, said that Malaysia was now “on a human rights precipice” and that “in no other country in ASEAN has the human rights situation fallen so far and so fast over the past two years”. He urged Mr Obama to tell his host that “his accelerating human rights crackdown on political opponents and civil society activists must stop, and make it clear that failure to do so will affect bilateral relations with the US.”

It is the second time in recent months that critics have used a high-profile international summit hosted by Malaysia to focus on Mr Najib. In September, the prime minister backed out of giving the welcome address to the world’s leading anti-corruption gathering organised by Transparency International. It had recently emerged that Mr Najib had received payments into his personal bank accounts of nearly $700 million from an unnamed Middle Eastern benefactor. The prime minister has denied any wrongdoing or personal benefit and his aides have insisted that the money was channelled through Mr Najib’s accounts as a political donation to help his party fight the 2013 elections.

Mr Najib was already facing searing criticism for his role in the scandal of the 1MDB state investment fund, which has wracked up debts of $11 billion since he set it up in 2009. He currently heads the fund’s advisory board. It was during an investigation by Malaysian officials into alleged corruption at 1MDB that the payments into Mr Najib’s bank accounts were revealed. His aides’ explanation of the provenance of the funds has done little to dim the controversy. His government has reacted by launching a wide-ranging crackdown on critical voices. It has charged two opposition members of parliament, an opposition activist, and two rally organisers with criminal offences for exercising their free speech rights and raided the offices of two online news portals reporting on corruption investigations.

The timing is awkward for Mr Obama as he again faces a series of hurdles in his goal of pursuing a US foreign policy “pivot” to Asia. He will arrive from the Asia-Pacific Economic Co-operation (APEC) summit in Manila where the gathering was overshadowed by the Paris terror attacks, Sino-US tensions over the South China Seas and a lively debate about the “hottest” leader pitching Canada’s Justin Trudea against Enrique Pena Nieto of Mexico.

And Mr Obama has wooed Mr Najib as a regional ally in his campaign to secure support for the trans-Pacific trade deal – an initiative that he hopes will be a major foreign policy achievement his final years in office. The Malaysian leader was even invited to play golf with Mr Obama last December during his annual Christmas holiday in Hawaii. But in September, it was revealed that US federal investigators were examining claims of 1MDB corruption. It has just emerged that the web of international investments by the scandal-plagued 1MDB fund has stretched to include a former leading Obama fundraiser, an ex-White House official and a hip-hop superstar.

1MDB paid private-equity group DuSable Capital Management $69 million to buy its stake in a joint venture to develop solar power plants in Malaysia, the Wall Street Journal reported. DuSable was founded in 2013 by Frank White, a former Democratic Party fundraiser, Shomik Dutta, a former special assistant at the White House, Pras Michel, one of the original members of the band the Fugees.

There are no allegations of wrongdoing but the deal has raised questions in Malaysia about links between the state fund that is close to Mr Razak and well-connected US figures.

Link here: http://www.telegraph.co.uk/news/worldnews/asia/malaysia/12004884/Malaysia-under-fire-for-human-rights-clampdown-ahead-of-Barack-Obama-visit.html