Malaysia’s Investment Fund Disaster

Written by John Berthelsen. Published by The Asia Sentinel on 8 December 2014.

In 2008, a boisterous young man by the name of Jho Low Taek, a Penang-born Wharton grad with a taste for Cristal champagne and Broadway blondes, approached Malaysia’s Terengganu state government with a proposal to use the state’s authority to sell RM10 billion (US$2.87 billion)  in bonds to start a state-backed investment fund. 

That proposal has led to what Tony Pua, a Democratic Action Party lawmaker, has called “the mother of the mother of the mother of all scandals in the history of Malaysia.” 

That might be one mother too many, but Pua is not alone, with critics of what is now called 1Malaysia Development Berhad, or 1MDB, coming from outside the opposition as well. It is certain that the proposed Terengganu Investment Authority has metastasized into a mess that can properly be called huge and has put Prime Minister Najib Tun Razak’s tattered reputation on the line yet again.  Much of the story has been detailed in two Malaysian publications, The Edge and the online news portal Malaysiakini's business unit, Kinibiz.

Najib, the head of the 1MDB advisory board, has faced a barrage of questions from opposition lawmakers in Parliament for weeks and an attack on his own flank from former Prime Minister Mahathir Mohamad and his allies, including former Finance Minister Daim Zainuddin, over what can only be regarded as an astonishing level of mismanagement.

The question was why Malaysia needed another government-backed investment fund in the first place, especially one dreamed up by a young friend of the PM's family. It has Khazanah Nasional Bhd., the 23-year-old investment holding arm that manages Malaysia’s assets and makes strategic investments, and the Employee Provident Fund, which also invests employee pension funds. Both are creatures of the Ministry of Finance.

The Terengganu Sultan, Mizan Zainal Abidin, had misgivings over the plan by Jho Low, as he calls himself, so the 27-year-old Low went to the parents of a friend he had made among Malaysia’s privileged elite in the UK. While anti-colonial rhetoric still spews at home, Malaysia’s wealthy have always known where to send their scions. Jho Low was at the exclusive 450-year-old Harrow, with his friend Riza Aziz at nearby 150-year-old Haileybury, which trained English youth for service in India. Riza’s mother is Rosmah Mansor, Najib’s second wife.  

Thus the proposed Terengganu Investment Authority metamorphosed into 1Malaysia Development Bhd., also under the Ministry of Finance. Today 1MDB has accumulated debt of RM36.25 billion (US$10.4 billion) that is only covered by repeated accounting upgrading of the value of property handed to it at a knock-down price by the government to get it started – a 196-hectare former air force base near the center of Kuala Lumpur. 

In recent months, the government, in an attempt to build up the fund so it can be listed, has strong-armed at least three no-bid contracts for 1MDB to build coal-fired and solar power plants. One of those power plants, in Port Dickson near Malacca, was awarded to 1MDB despite a lower bid from a joint venture of YTL International Bhd and SIPP, partly owned by the Sultan of Johor, who is said to have been enraged by the loss and is demanding privately that SIPP be given its own no-bid contract for another plant.

Although its dealings are opaque, sources in Kuala Lumpur believe it was Jho Low, previously regarded as a savvy investor despite his tender years, who drove 1MDB into disaster.  Although the chairman of the Board of Directors is Lodin Wok Kamaruddin, who holds the high-ranking honorific of tan sri, he is regarded as a figurehead and many of 1MDB’s major decisions have Low’s fingerprints on them.

Low, who has accompanied Rosmah on forays to New York to meet celebrities including Lionel Ritchie and Paris Hilton, landing in the pages of the New York Post, involved 1MDB in backing his failed 2011 bid to buy three prestigious London hotels – Claridge’s, the Connaught and The Berkeley, according to documents filed in the Chancery Division of the UK’s Royal Courts of Justice. 

A Los Angeles law firm accused the government of Malaysia, without mentioning 1MDB, of racketeering in funding the phenomenally successful movie The Wolf of Wall Street, an Oscar-nominated picture starring Leonardo DeCaprio and co-produced by Riza Aziz, Rosmah’s son. How that might have been done is unclear. The lawyers for a Los Angeles plaintiff who sued over the rights to the movie refused to elaborate, citing lawyer-client privilege.  But in the case of the Claridge’s campaign, 1MDB issued guarantee letters saying the fund would stand behind the purchase. Presumably that meant Malaysia’s sovereign fund would cover any losses accrued if the sale failed.  

The fund loaned RM7.2 billion to finance oil exploration for another chum out of that rarefied London ex-colonial society – Tarek Essam Ahmad Obaid, a London playboy said to be a grandson of the Saudi Sheikh Obaid, one of the kingdom’s most senior grandees. Tarek met Jho Low a few months before the deal for the loan was consummated, according to Clare Rewcastle Brown, a former BBC reporter who has followed the 1MDB affair closely. Tarek is the founder and chief executive of PetroSaudi International, Ltd.  Despite its pretentious website there is little information on PetroSaudi, which was only incorporated three years before the entry of 1MDB. The money, to be loaned at 8.75 percent, has disappeared. 

What 1MDB has not done is make enough money to cover its huge debt, although determining anything is difficult because no up-to-date accounts have been filed. 

“I was the finance head for oil companies  before I entered politics,” Rafizi Ramli, strategic director and secretary-general of the opposition Parti Keadilan Rakyat, told Asia Sentinel. “Nobody I knew had ever come across PetroSaudi before. We tried to check what it was. It was incorporated in the British Virgin Islands. While it is normal for financial investors to enter into ventures, how could a government commit such a huge sum of money with a greenhorn company with no known track record, incorporated in a haven for dodgy money, in an industry where capital risk is so huge?”  

When the bid to explore for oil collapsed, the money appears to have been invested in speculative yen forex deals, insiders told Rafizi. Forex trading is not for amateurs.  By early 2012, it began to appear that the money had altogether disappeared, according to Tony Pua. 1MDB was having trouble filing its financial reports, a signal that something was wrong.  When 1MDB said the funds had been moved into a fund in the Cayman Islands, its managers refused to say who was managing the money.

Today, Pua said, the entire operation appears to be built on debt, although with audited financial reports delayed it is impossible to say for sure. Its managers are seeking to cover the losses through additional borrowings and money raisings, including a US$4.75 billion one engineered by Goldman Sachs, the international investment bank, that cost 1MDB 10 percent of the offering, a phenomenal amount for “commissions, fees and expenses” according to the prospectus. By comparison, Tenaga Nasional, the state-owned energy utility, paid a 2 percent fee on a US$300 million money raising. SMBC Aviation Capital, which leases jets to Malaysian Airlines, paid 0.5 percent on a US$1 billion capital raising. The fees paid to Goldman worked out at US$1.54 billion, Pua said.

The fund today is betting its future on becoming the country’s biggest power producer and a global energy player. It acquired a string of overpriced independent power producers from the Genting gambling interests and Ananda Khrishnan, the country’s richest businessman and an UMNO crony, for RM11 billion to generate cash flow, at what were astounding valuations. Indeed, within six months, the fund’s auditors wrote off RM1.2 billion of the valuation because they were so overpriced. 

“Because they were desperate to borrow to cover the acquisitions, they had to pay higher interest rates,” Pua said. “And because they were desperate, they paid Goldman crazy fees to arrange the loans.”

On top of the enormous interest burden from the debt, it turns out that the cash flow from the IPPs is so small that it was barely enough to cover the interest, let alone pay back the RM15 billion principal. 

With the hole from the initial failed loan to PetroSaudi, and the vast debt from the IPP purchases, 1MDB is now trying to list to raise US$10 billion from the market. But in order to write a credible prospectus for the listing, it requires strong financials. 1MDB’s financials do not come anywhere near credible enough to assure potential investors of future cash flow. 

The government has stepped in to extend the contracts for the IPPs, which were supposed to end after their contract periods ended. That is still not enough. The government then tendered a contract to build the coal-fired plant in Port Dickson. Critics charge the contract was unnecessary, that Tenaga Nasional, the state-owned utility, had the experience and capital to build the plant itself. The tender turned out to be a fiasco, with the YTL-SIPP consortium coming in with a lower bid, only to be disqualified on what many critics have said was a technicality.

Since then, the government has awarded three contracts to 1MDB, the other two without the potential embarrassment of a tender process. But critics point out that 1MDB has never built anything and is mainly relying on the expertise of Tenaga Nasional. The bid for a 50 megawatt solar power plant project in Kedah in the north of the country is to be the largest solar plant in Malaysia despite the fact there is no guaranteed offtake, that prices for solar, even though they have fallen sharply, still exceed that of conventional plants, and that Malaysians are going to end up paying more for their electricity.  

All of these moves are an attempt to rescue 1MDB and give it the potential to demonstrate income to investors. So on the advice of a 27-year-old neophyte and friend of the prime minister’s family, the country has created a state-backed investment fund, got itself involved in a series of businesses it knew nothing about, put the country’s sovereign backing behind a private hotel bid and a Hollywood movie, run up a vast amount of debt, and now is seeking to bail itself out via preferential contracts to build electrical plants with expertise so far it doesn’t have.  The critics expect that this is going to cost Malaysia’s taxpayers and ratepayers a considerable amount of money.

Link:

http://www.asiasentinel.com/politics/malaysia-investment-fund-disaster/

Pornography: A Habit That Can Destroy Lives

Published by The New York Times (Room for Debate) on 11 November 2012. By Gail Dines, a professor of sociology and women’s studies at Wheelock College in Boston, is the author of “Pornland: How Porn Has Hijacked Our Sexuality.” Robert Jensen, a professor in the School of Journalism at the University of Texas at Austin, is the author “Getting Off: Pornography and the End of Masculinity.” They are founding members of Stop Porn Culture.

Assessing the effects of mass media is never simple, but the important questions about pornography are obvious: What happens when a culture is saturated with sexually explicit images eroticizing male domination and female subordination? When those images become increasingly cruel and degrading to women and increasingly racist? When pornography becomes the de facto sex education for most boys and an increasing number of girls?

These disturbing trends do not apply to all pornography. There are many varieties made by hundreds of small producers, but the porn industry around Los Angeles dominates, shaping cultural ideas about sexuality, relationships and intimacy. Just as the food industry shapes how we eat and the fashion industry shapes how we dress, the sex industry shapes the way we think about sex.

This dominant source of pornography has some consistent themes. The most extensive peer-reviewed study in the past decade found that a majority of scenes from 50 top-rented porn movies contained physical and verbal abuse of female performers. Physical aggression – including spanking, open-hand slapping and gagging – occurred in 88 percent of scenes, with expressions of verbal aggression – usually a man calling a woman derogatory names – in 48 percent.

Individual experiences as a viewer of pornography differ, and many men and some women report pleasurable experiences. But clear patterns emerge from more than 30 years of academic research and organizing informed by a feminist critique of pornography. In heterosexual couples, men who habitually use pornography sometimes withdraw from intimacy with female partners, and sometimes make demands on female partners for sexual acts that are uncomfortable, painful or degrading to the woman. Women in heterosexual relationships report that both these behaviors can destroy relationships, and men sometimes report that they are aware of the damage but cannot break the habit. 

Anyone who doubts these trends should talk to marriage therapists and divorce lawyers. 

Although there is little systematic research on performers, anecdotal evidence suggests it’s a harsh business for women. The industry portrays high-profile performers with glamorous lives, but producers and directors we’ve interviewed said candidly that the industry “chews up and spits out” women. According to the Adult Industry Medical Health Care Foundation, which provided testing and health care for performers in Los Angeles until it closed last year, female performers are at risk for injuries and diseases. The group’s founder once said the average career of these women was “six months to three years, tops,” after which they must cope with a variety of physical and psychological problems. 

Pornography is the industrialization and commodification of sex, and like all big industries, its product is generic, formulaic and plasticized. These images tend to rob sex of its creativity, playfulness and intimacy, and hence are ultimately profoundly alienating. The performers, the consumers and the culture deserve better.

Link: 

http://www.nytimes.com/roomfordebate/2012/11/11/does-pornography-deserve-its-bad-rap/a-pornography-habit-destroys-relationships

SUMPTUOUS EROTICA: Sex therapist said the couple needed immediate help

Published by Malaysia Chronicle on 20 October 2012.

SEX BLOG- Girlfriend's parents warn law student not to touch her again

KUALA LUMPUR: THE Malaysian law student who posted pictures of him and his girlfriend having sex on their blog was warned by the woman's parents not "to touch her again".

Alvin Tan Jye Yee, 24, a third-year law student at National University of Singapore, was given the stern warning by parents of his girlfriend, Vivian Lee, 23, after their blog, "sumptuous erotica", came under the spotlight. A Singapore daily quoted Tan as saying that both their parents were very upset over the pictures.

"I never thought this matter would become big. A lot of relatives called my parents asking why I did that. My girlfriend's parents also scolded me for turning their daughter into a 'bad girl'," said Tan, adding that the decision to post the pictures was mutual.

However, in a video posted on Tan's YouTube account early yesterday, he said his family was supportive and had not talked about the matter from a moral slant. In the video, the couple also did not show any remorse and said they would do it again.

They spoke of the massive support they received from friends and how they made hundreds of new friends after the blog came under the spotlight. Tan said they did not want to shut down their blog, but did so due to pressure from family members. He added that the blog had been shutdown temporarily.

Federal Commercial Crime Investigation Department director Datuk Seri Syed Ismail Syed Azizan said action could be taken against the couple if their blog was registered in this country. "We are checking where it was registered. If they did it in Singapore, it falls under the republic's jurisdiction."

A senior sex therapist said the couple needed immediate help. Dr Edward Chan, principle consultant psychologist at the LoveLife Centre for Sex Therapy, International Psychology Centre, said the couple showed symptoms of dangerous levels of sexual addictions. "From what was reported, I can say that the couple suffers exhibitionism -- a form of sexual addiction, and swinging, which is another form of sexual addiction."

"Both can be very dangerous if not treated, as they can't have a normal loving relationship. They have to resort to such extreme measures to achieve sexual satisfaction," he told the New Straits Times. He said it was good for a person to love his or her body, but there was a fine line between love for the body and being addicted to show it off for satisfaction.

On exhibitionism, Chan said an exhibitionist was a person who liked to show their private parts and get stimulated from it. Swingers are those who get satisfaction from watching their partner having sex with another person, or listening to their experiences after the sex has ended. It can also extend to partner swapping.

"Both forms of sexual addictions are treatable. They need to seek help immediately as these are illnesses which can lead to destruction of their relationship and also add stress to their lives," said Chan who has 16 years experiences in the field. For exhibitionism, he said the couple could seek help from LoveLife Centre where they would be given sex therapy sessions.

- New Straits Times

Link: 

http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=42778:sumptuous-erotica-law-student-warned-not-to-touch-girl-again&Itemid=2

Selling Sex Short: The Pornographic and Sexological Construction of Women’s Sexuality in the West

http://feministsforchoice.com/feminist-conversations-meagan-tyler.htm Published by Feminists for Choice on 18 June 2012. By Hennie.

Feminist Conversations is a regular feature at Feminists for Choice, in which we spotlight activists. After reading Meagan Tyler’s book Selling Sex Short: The Pornographic and Sexological Construction of Women’s Sexuality in the West, and not being able to put it down, I had to ask her a few questions. 

You have written extensively about pornography, the sex industry, and the construction of women’s sexuality. How did this interest come about?

Looking back now, it seems rather an odd thing to have chosen to research! What really got me interested was teaching in high-schools in my home town of Melbourne. Most schools in Australia have uniforms and on the few “free dress” days a year, students often want to wear their most coveted pieces of clothing. All the way back in 2004, I noticed a growing number of 12 and 13 year old girls wearing Playboy branded t-shirts, which seemed like a new phenomenon. I wanted to know about the marketing operations that were going on with companies like Playboy and if they were consciously “mainstreaming” their brands. So I went back to uni to do a PhD.

What was your motivation for writing Selling Sex Short?  

The book came out of my PhD research. When I started looking at the mainstreaming of pornography, or what some scholars refer to as “pornographication” or “pornification” of popular culture, it became clear that you can’t look at these pop culture trends without looking at the pornography industry itself. I hadn’t bargained on this when I started and didn’t really know what to expect when my research led me to actually having to look at how elements of the porn industry operate.

A lot of other academics have undertaken content analyses of pornography (i.e. to find out what is in mainstream porn, e.g. what kind of acts, violence, engagement with the camera / other actors etc.) so I needed to do something different. What interested me was what those within the industry actually say about how and why porn is produced, which is what led me to analyse Adult Video News, a porn industry based magazine aimed at producers, directors, distributors and vendors. In intra-industry forums people are often very open and forthright about the problems and harms that they believed are associated with the production of pornography. That, to me, was fascinating, and occasionally, quite disturbing. But it is important that we understand pornographic content in the context of its production. How the porn industry markets its products, for example, gives us important information about how the industry wants itself to be seen and what those within the industry believe consumers want to see and buy.

The other half of the book is really about sex therapy. I had done some previous research on the supposed “epidemic” of female sexual dysfunction (FSD), which was largely “discovered” after Viagra hit the market. In countries like Australia, the US and the UK, some medical experts were claiming that almost half of all women were suffering from some form of FSD. I wanted to find out how the sex therapy industry was marketing its treatments for this form of dysfunction and what larger cultural changes were occurring to create such popular interest in a medicalised understanding of sexuality.

In the end, I wanted to know what kind of sex these two industries were promoting. The trend towards pornographication and the trend towards the medicalisation of women’s sexuality post-Viagra were both noticeable cultural shifts occurring in roughly the same time period but I had no sense of if they were connected or if they related to each other at all. I was quite surprised to find that there were both theoretical and material connections between the two. I had no idea before starting my research, for example, that some therapists recommend pornography to patients as a template to follow for their own sex lives or that a number of porn stars have produced their own sex advice literature.

The book really came about because I didn’t want the debates about these issues to be limited to academia. We need to be having much more informed public discussions about sexuality and inequality.

The book is written from a feminist perspective (especially so radical feminism), what does feminism mean to you?

Yes, the book certainly draws on radical feminist writing and theorising, which is quite unusual these days. So much so, I am often required to dispel myths about radical feminism and feminism in general before even beginning to speak about my research. It is quite bizarre being accused of being a prude or being “anti-sex” when you spend your professional life researching, writing and talking about sex and sexual pleasure!

One of the most important elements of feminism is an understanding that sexuality is socially constructed. That is, sexuality is not purely an issue of biology. How we understand and experience sexuality is heavily contingent upon the cultural and historical circumstances in which we live. This perspective is not unique to feminism, but it is a very important element of all forms of feminism.

So when we talk about inequality between men and women, for example, a social constructionist approach forces us to recognise that this is not an innate or pre-determined situation. This is a situation that can, and should, be challenged.

But challenging inequality is, unfortunately, not enough. There are real material barriers relating to overcoming disadvantage associated with gender, class, race and ethnicity, disability and sexuality (to name but a few). And this is why claims that individuals can simply be “empowered” to overcome disadvantage rings a bit hollow. If we do not recognise that there are often structural and institutional barriers to equality then we tend to blame people for their own circumstances.

To bring about real change, we need social movements. And that is what, to me, feminism is at its heart: a social movement for equality and women’s civil rights.

What are the main points you would like readers to know about the book, but also about pornography and sexology?

The overarching theme of the book is really that sex is a social act. Our conceptions of what sex is, and what is should be, are framed by cultural expectations and norms. The porn industry and sex therapy are both important players in forming these expectations and norms in the West today. So it is important that we question the glamourised version of porn that is (carefully) presented to us in many pop culture representations and that we also question the over-simplified and medicalised version of sexuality presented to us by many so-called “sex experts”. The book shows that the concepts of what “good sex” is in both porn and sexology (the “science of sex”) actually have a lot in common, in particular, the idea that women’s sexuality is largely there to service men’s needs. Hardly a great vision for women’s sexual pleasure!

Ultimately, we need to start imagining versions of sexuality we would like to see and this is how I end the book. There aren’t any grand solutions presented, I just hope it opens up some new conversations.

You discuss the influence of the sex industry and sexology on women’s sexuality and the notion that these industries promote harm, objectification and the sexual servicing of men by women. For those who have not read the book, could you offer a short explanation?

I argue that the dominant model of sexuality promoted to women in both pornography and in sexology / sex therapy has a lot in common with systems of prostitution. That is, it is assumed that women should be constantly sexually available and that women’s role is primarily having to sexually service men. In this model it is not a woman’s sexual pleasure that defines whether or not sex is “good sex” but rather whether or not she has performed to the expectations of an (assumed) male lover.

That this model of sex, focused on men’s sexual pleasure, is a hallmark of how the porn industry constructs “good sex” is probably not surprising.  What was surprising, to me at least, was that these same assumptions about what women are “really for” can be found in academic and popular sexology. There are concepts such as “receptivity”, for example, which suggest normal and healthy women should be “highly receptive” to sexual advances from a male partner and that women should have sex when they don’t want to in order to please angry or irritable partners. This vision of sex presented to women is quite bleak, and in many instances, tends to justify men’s sexual coercion.

A model of sex which promotes the idea that women should acquiesce to unwanted sexual advances because they are there simply to please men is seriously harmful, not only to individual women’s interests, but to women as a group. It also sounds like something from a century ago! Instead of telling women to “Lie back and think of England” we tell them to watch porn or take a variety of pills, patches and creams.

When you are not busy lecturing, writing and doing research, what do you do to unwind?

Nothing very glamorous – I’m not sure how I survived before the advent of DVDs and Wii. Curling up in front of the TV with a blanket and a cuppa helps keep me sane and I like to kid myself that being good at tennis on the Wii means I could have been a Wimbledon champion if only I hadn’t spent all my time reading books.

Dr Meagan Tyler is a lecturer in sociology at Victoria University, Australia. She tweets @DrMeaganTyler.