:Najib UMNO’s Corporate-Power Tool : the corporations that have recently inflicted terrible losses

The EDL buyout deal is widely expected to cost the government RM1 billion and could potentially push the country’s public debt levels closer to the legal ceiling of 55 per cent of gross domestic product (GDP).

The country’s debt currently stands at about 53 per cent of GDP.

Malaysia has seen the proliferation of toll highways since the 1980’s during the country’s headlong rush into privatisation.

The tolls concessions, many of which have been criticised as being sweetheart deals, came back to haunt the Barisan Nasional, however, as bitter opposition to toll rate increases helped contribute to record losses during Election 2008.

The Najib administration has attempted to tackle the unpopularity of tolls by working with concessionaires to reduce and, in some cases, abolish tolls outright along some tolled roads in and around the nation’s capital.

However, the moves have not prevented more toll controversies from surfacing, including the recently proposed sale of the RM1.7 billion Maju Expressway (MEX) that was built using government assistance, which appeared to give owner Maju Holdings a profit of between RM600 million and RM1 billion after just four years of operation.

The government has since denied approving the sale of MEX.

The proposed RM7 billion West Coast Highway has also come under scrutiny from the opposition due to the interest subsidies, lengthy concession periods and soft loans being given by the government.

A government takeover of the Eastern Dispersal Link (EDL) could undermine future toll projects given as concessionaires must be mindful that the government could reverse support due to public pressure, said RAM Ratings chief economist Yeah Kim Leng. This comes after reports on Thursday that the RM1 billion EDL, which has not been allowed to collect any tolls since it opened in April, will be taken over by the government ― a move that could potentially utilise taxpayer funds and increase the country’s public debt levels.

Yeah said future highway operators now needed to be mindful that government support for toll collection was fluid.

“It makes it more difficult for future projects,” he told The Malaysian Insider when contacted yesterday.

Yeah added that for government should first gauge the public’s willingness to pay the proposed toll for such future projects, as well as determine if taxpayers would agree to foot the bill for privatisation deals.

The Malaysian Insider reported last December that the RM1 billion highway built by Malaysian Resources Corp Bhd (MRCB) would force motorists making roundtrips to Singapore via the Johor Causeway to pay about five times more than the present rate of RM2.90.

The decision to bar the collection of tolls when the EDL opened was widely seen as a move to avoid a public backlash in the Umno stronghold state in the run-up to the general election.

The steep increase in tolls would have provided fodder for the opposition, especially PKR, which held its national congress in Johor late last year to signal its ready to take over the state despite not winning a single seat in the Umno fortress during Election 2008.

Over 50,000 vehicles cross the bridge daily, mostly Malaysians living in and around the state capital who commute to the island republic to work.

The lack of revenue prospects since the new highway opened, however, caused the Islamic bonds issued by EDL’s owner ― MRCB Southern Link Bhd’s ― to be downgraded by RAM earlier this month.

Malaysia has seen the sprouting of privately operated toll highways since the 1980s and tolls were a major issue during the last general election.

The Najib administration has attempted to address public unhappiness over tolls, and either reduced rates or completely abolished tolls at several highways in and around Kuala Lumpur.

PLUS Expressways Bhd, which operates the North South Expressway, was also taken over by the UEM Group, a government-linked corporation, and national pension fund EPF for RM23 billion in 2010.

After the takeover, PLUS Expressways said it would agree to lower toll hikes and forego compensation in exchange for a longer concession period.

The latest toll project to come under scrutiny from the opposition is the West Coast Expressway being built by Kumpulan Europlus for RM7 billion, due to its interest subsidies and RM2.24 billion soft loan from the government.

Bankia holds 10 per cent of Spain’s bank deposits and was unable to raise enough capital to cover losses [Reuters]
Speaking with financial advisory clients, find the most misunderstood concept is the difference between nominal returns and real returns. And Wall Street brokers and bankers are very quick to take advantage of this situation.

Simply stated, a nominal return is the annual percentage return a security or asset earns each year in total. It is the annual return you see stated in the newspapers or online for any particular asset. The real return from holding that asset or security is this nominal return less the current inflation rate. People speak of what an asset’s “real” return is after adjusting for inflation.


The last thing America needs is more Supreme Court justices who think that corporations can do no wrong. We’re still reeling from the misdeeds of AIG and Wall Street, BP Oil, Massey Coal, JP Morgan and Haliburton — just a few of the corporations that have recently inflicted terrible losses on families across America and society as a whole after capturing regulatory agencies, corrupting public officials, and flouting the law.

But the Roberts Court majority sees no evil, handing out victories by the bushel to big business. Without even being asked to do so, five Justices in 2010 overrode their colleagues in the Citizens United case and bestowed upon the CEOs the power to spend trillions of dollars from corporate treasuries promoting compliant politicians to the public in campaign season.

Yet, just when it looked like things couldn’t get any worse, Republican presidential candidate Mitt Romney selected as his top legal adviser Robert Bork, a conservative polemicist whose career has been devoted to the proposition that corporations can basically do no wrong, the courts should faithfully serve the corporate agenda, and democratic government should step out of the way.

While Bork is an authoritarian statist when it comes to the rights of individual Americans to obtain birth control or read books, have sex or watch movies that Bork disapproves of (see Borking America: What Robert Bork Will Mean for the Supreme Court and American Justice), he is a laissez-faire libertarian when it comes to the rights of large corporations to ditch environmental regulation, fire pro-union workers and generally have their way with the rest of us without regulatory restraint. He seeks hierarchical discipline for natural persons but maximum freedom for big businesses to merge with one another, purge their workers, and splurge on pet politicians.


The Bork Rule: Corporate Power Over Government, Corporate Government Over People

The key to seeing what Bork’s hand-picked judges would do on the bench is analyzing Bork’s own record as a judge on the United States Circuit Court for the District of Columbia.

In August 1987, during the controversy over President Ronald Reagan’s nomination of Judge Bork to the United States Supreme Court, the Public Citizen Litigation Group published an exhaustive and devastating report on Bork’s record as a judge.

The authors could find no “consistent application of judicial restraint or any other judicial philosophy” in Bork’s work on the Court. Rather, by focusing on split decisions, where judicial ideology is made most plain, Public Citizen found that “one can predict [Judge Bork’s] vote with almost complete accuracy simply by identifying the parties in the case.”

When the government litigated against a business corporation, Judge Bork voted for the business interest 100 percent of the time. However, when government acted in the interest of corporations and was challenged for it in court by workers, environmentalists and consumers, Bork voted nearly 100 percent of the time for the government.

Thus, what we can think of as the Bork Rule, a rule that now suffuses conservative judicial activism: Corporations over government, corporate government over people.

In the crucial field of administrative law, for example, Judge Bork “adhered to an extreme form of judicial ‘restraint’ if the case was brought by public interest organizations against a government regulation or policy. His vote favored the government in every one of the split decisions in which public interest organizations challenged regulations issued by federal agencies.” In these cases, Judge Bork defended, for example, the Reagan administration’s corporate-friendly rules relating to the environment, the regulation of carcinogenic colors in food, drugs and cosmetics, and the regulation of companies with television and radio licenses, as well as privacy rules in family planning clinics. Bork tends to vote to uphold government policy when corporations like it and consumers, environmentalists, and workers are on the other side.

In the eight split decisions where a corporate interest challenged the government’s regulatory policy or ruling, Judge Bork voted straight down the line against the government and for business — every single time.

Bork’s Result Orientation: Workers Lose, Polluters Win

What the Bork Rule means is that there is no formal integrity to his legal reasoning. The way to figure out who is going to win in a case is simply by identifying the parties. The reasoning flows out of his choice of favorites appearing before him, and this is a style of judging that is now pervasive throughout the federal circuit courts.

Consider Restaurant Corporation of America (RCA) v. National Labor Relations Board, 801 F.2d 1390 (D.C. Circuit), a 1986 case that arose, appropriately enough for Judge Bork, in the Watergate complex. Here we see Bork reaching out to overturn an administrative decision that should have been given deference by pasting a completely new doctrine onto the governing statute.

Judge Bork’s preferred party in the case, the Restaurant Corporation of America (RCA), operated a number of restaurants at the Watergate. It fired a waitress and a waiter for “talking union” to other employees on the job in violation of a “no-solicitation rule” during work hours. The workers, in less than a minute or two, would ask fellow restaurant employees: “”would you be interested in pursuing getting a union?”

The law provides that employees can engage in pro-union speech on their own time or during work breaks, but may not do so during the work day if there is a valid “no-solicitation” rule in place that is applied across the board to all forms of employee-to-employee solicitation.

In this case, the National Labor Relations Board (NLRB) reversed the firing of the two employees as anti-union discrimination because the employees showed that there were at least six cases of far more extensive intra-office solicitation by workers going door-to-door to solicit fellow employees, all forms of solicitation that clearly violated the company rule but were nonetheless allowed. Thus, to fire the pro-union workers violated the National Labor Relations Act, which forbids interference with — and discrimination against — employees exercising union organizing rights.

But Judge Bork, pulling a rabbit out of a hat, wrote an opinion for a 2-1 panel decision reversing the NLRB decision and reinstating the discharge of the workers. (Joining his opinion and giving him the majority was none other than then-Judge and soon-to-be-Justice Antonin Scalia.) The trick here was to say that the work-day solicitations that had been allowed on the premises by RCA in the past — which Bork grudgingly conceded “violated the terms of the employer’s no-solicitation rule” — were really no big deal at all.

Bork wrote of these solicitations:


All were instances of intra-employee generosity designed to express appreciation of fellow employees on occasions such as birthdays or departures. Whatever minimal disruptive effect such solicitations may have is counter-balanced by an accompanying increase in employee morale and cohesion.


In other words, Bork changed the law to say that pro-union workers could be fired for violating a no-solicitation rule at work, even if it is discriminatorily applied against them, so long as the employer is allowing only solicitations that it believes will increase “employee morale and cohesion.” Christmas banquets, birthday parties, Boy Scout suppers, retirement dinners — all of these good forms of speech can be promoted through aggressive on-site solicitation during work hours at work, but workers can be fired for talking union, even if it takes less time to do so and it is less disruptive of actual work, because this is bad, demoralizing speech. But this distinction has no basis at all in the relevant statute — the National Labor Relations Act. A magician at corporate victories, Judge Bork invented this doctrine to camouflage a policy of blatant anti-union “discrimination” within the actual meaning of Section 8(a)(3) of the Act.

To get to this result, Bork overthrew the usual judicial deference to the expertise of the administrative board, something he insists upon whenever there is a pro-corporate ruling at stake. He ignored the plain language and meaning of the statute which makes “discrimination” against pro-union speech an “unfair labor practice.” He made up a new doctrine and rationale to advance a pro-employer purpose.

Bork’s conservative colleague, Judge MacKinnon, was so convinced that the case presented a company’s disparate enforcement of a no-solicitation rule that he dissented and castigated Bork for his opinion: “Despite the clarity of the controlling law,” Judge MacKinnon wrote, ” the majority opinion ignores it and trenches on important policymaking prerogatives of the National Labor Relations Board.” He reminded Bork of the basic principle of administrative law embodied in the famous Chevron case: “If the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.””

The same pattern of pro-corporate judicial activism characterizes a Bork opinion that became a crucial point of discussion in the hearings over his failed 1987 Supreme Court nomination. In a 1984 case called Oil, Chemical and Atomic Workers International Union v. American Cyanamid Co., 741 F.2d 444 (D.C. Cir. 1984), Bork found that the Occupational Safety and Health Act did not protect women at work in a manufacturing plant from a company policy that forced them to be sterilized — or else lose their jobs — because of high levels of lead in the air. The Secretary of Labor had decided that the Act’s requirement that employers must provide workers “employment and a place of employment which are free from recognized hazards” meant that American Cynamid had to “fix the workplace” through industrial clean-up rather than “fix the employees” by sterilizing or removing all women workers of child-bearing age.

Bork strongly disagreed. He wrote an opinion for his colleagues apparently endorsing the view that other clean-up measures were not necessary or possible and that the sterilization policy was, in any event, a “realistic and clearly lawful” way to prevent harm to the women’s fetuses. Because the company’s “fetus protection policy” took place by virtue of sterilization in a hospital — outside of the physical workplace — the terms of the Act simply did not apply, according to Bork. Thus, as Public Citizen put it, “an employer may require its female workers to be sterilized in order to reduce employer liability for harm to the potential children.”

Of course, when an administrative agency renders an opinion that is to the liking of corporate parties, Judge Bork insists upon deference to the agency. For example, inNatural Resources Defense Council v. EPA, 804 F. 2d 710 (1986), he wrote a decision that gladly upheld the Reagan-era Environmental Protection Agency’s reliance on economic factors to weaken the Clean Air Act. The Act requires the EPA Administrator to set emission standards “at the level which in his judgment provides an ample margin of safety to the public,” a health-centered standard that the Reagan EPA suddenly diluted by granting explicit and equal attention to the economic costs to corporations of compliance with health regulation. When the NRDC challenged this radical regulatory departure from the text of the statute, Bork wrote: “we must uphold the agency’s selection of factors to employ in fleshing out its authority if we find the agency’s choice a reasonable one.” While Bork brushes off agency deference in cases where corporations are unhappy with regulatory rules, he swears by it when agency regulators are siding with corporations.

We can fully expect a Bork-infused Supreme Court and federal judiciary to continue promoting the basic infallibility of corporate power. With Bork at the helm, we will see more impunity and more unaccountability in corporate structures that are “too big to fail” and “too big to jail.”

Let’s look at an example. The stock market might appreciate 7% next year, but if inflation next year is 4%, then your real return is only 3%. Because general inflation in this example is 4%, everything that you might want to purchase is going to cost 4% more, on average across all goods and services, so the cost of living increased 4% during this year. You must earn at least 4% on your investments in this hypothetical example just to keep up with inflation and to preserve your purchasing power. Preserving your purchasing power means that you can buy the same amount of stuff at the end of the year as you could at the beginning of the year.

But what if a Wall Street broker is selling you a bond with a fixed coupon of 3% per year. If next year, inflation goes to 4% then your real return on holding that bond for the year is -1% which is the nominal return of 3% minus the inflation rate of 4%. Yes, you will see a fixed return of 3% for the year, but because it did not keep up with inflation you did not preserve your purchasing power and so you would be 1% poorer or worse off.

So, Wall Street can make lots of money during periods of moderate to high inflation. Your portfolio may increase in stated nominal value by 5% to 10%, but if inflation wipes out those returns than your purchasing power hasn’t increased at all and yet Wall Street still extracts its fees and expenses. Your real returns are zero or negative, you are actually getting poorer each year, and yet your advisor on Wall Street is clearly getting richer. This takes the concept of “pay for performance” and turns it upside down.

This is exactly what happened in the 1970s in the United States when people’s investment portfolios were growing in value at 10% per year but inflation was growing at 15% per year. People were losing 5% of their wealth or purchasing power each year, and yet they didn’t seem to mind paying their broker 1 to 2% per year in fees for this privilege.

I bring up the 1970s because I think that is what the next decade facing us today is going to look like. I expect inflation in the United States to reignite and it would not be surprising to see an average annual inflation rate over the next 15 to 20 years of some 7 to 12% per year.

Why? Because general inflation occurs in a country when a central bank like the Fed decides to print money to either help bailout it’s struggling banks or to fund its government’s annual operating deficits. This has been going on for quite some time in the United States. It should shock you to learn that there is 50 times more currency and reserves outstanding in the US today than just 50 years ago in 1962. Think of that. In essence, the amount of currency in circulation has increased 50 fold in 50 years. This means that the amount of dollars in circulation in the United States has doubled, on average, almost every eight years for the last 50 years.

And recently, Ben Bernanke is accelerating the process. He has seen fit to triple the amount of US dollar currency and reserves outstanding just in the last five years. Given that the country is facing trillion dollar plus deficits with no appetite from Congress to either cut spending dramatically or increase taxes it is only logical to assume that this counterfeiting will continue. And that’s just what it is, counterfeiting. What else do you call it when an entity like our government prints new paper currency in the basement of the Federal Reserve to pay for goods and services that are consumed by the government? And the trillion dollar deficits will only get worse as Social Security and Medicare become more cash flow negative in the future.

And now the government’s hands are pretty well tied. Because our country’s total debts of $16 trillion exceed its total annual GDP it will be difficult for the US to continue to borrow more in the future to fund its deficits. I don’t see the United States defaulting on its debts so the only way out is to print more currency. It would not surprise me if the Fed printed 3 to 5 times more currency over the next 10 to 15 years meaning that we can expect inflation to explode and prices to increase some 200 to 400% over this time period.

Just like in the 1970s, we could be looking at inflation rates and interest rates of 10 to 15% per year or greater. And Wall Street will love this. They will be able to justify their exorbitant fees of 1 to 2% of your total portfolios assets each year by reporting that your portfolio had grown in value by some 8 to 10% per year and with the unsuspecting investor not realizing that because inflation was actually in the 10 to 15% range he had lost wealth or purchasing power every year.

This is the world we are heading into. Wall Street will continue to extract 1 to 2% of your wealth each year for fairly worthless investment advice but will tell you your nominal yields are positive and growing so if you don’t adjust for inflation you’ll think you’re better off when you’re actually losing money and purchasing power.

And it doesn’t take very long to lose everything if you’re paying a broker 1 to 2% a year to do nothing. You can lose half of your wealth and purchasing power in 20 years if your broker is taking 2% a year in fees and after inflation you are not generating any real return.

And please don’t take comfort in the fact that many brokers tell their clients that their accounts are no-load in nature and have no fees and expenses attached to them. This is another way Wall Street rips off small investors, by lying about all the hidden fees and expenses that they charge. We will examine how they hide their fees and expenses in a future release from the Ethical Investor.

20 Ways Wall Street is Ripping Off Small Investors

Providing nominal returns, not real returns.
Encouraging too much diversification, if that’s possible.
Hiding fees and expenses.
Turning you into a passive investor.
Convincing you that money markets are the same as cash.
Telling you that bonds are safer than equities.
Explaining that in the long run equities outperform bonds.
Simply by lying about their products.
Convincing you that their bank is a large, stable, safe operation to deal with.
Recommending products that have enormous sales commissions attached to them.
Cheating you on bid/ask spreads.
Selling you what they don’t want.
Measuring your success in dollars.
Lending your securities to others.
Ripping your eyes out if you ever try to close your account.
Grabbing any slight positive real return for themselves.
Sticking toxic waste to small investors.
Pretending they can pick stocks.
Acting like they are your best friend and they have your best interests at heart.
Knowing next to nothing about the value of holding real assets like gold and real estate.

Many feel that Greece’s fate, including its continued membership of the eurozone, rests in the hands of the Troika — officials from the European Commission, European Central Bank and the International Monetary Fund charged with evaluating Greek’s reform efforts, its financing needs and how they should be met. But this is not the entire story by any means.

The country’s fate is also closely linked to what happens in Italy and Spain, and in a manner that is yet to be sufficiently understood by many.

Domestic political stability and economic reforms are clearly critical for Greece’s continued membership of the eurozone. Many are thus interested in how the Troika, acting on behalf of official creditors, will react to the government’s request to stretch out the budgetary adjustment over an extra couple of years.

Will they agree? If they do, how will the accompanied structural reforms be tweaked? And who will pony up the additional financing, either explicitly or through indirect methods (such as the refinancing undertaken recently by the ECB?

Important as they are, these questions are just part of the required analysis. You see, Greece’s triple problem — of way too little growth, much too much debt, and a political elite that has lost popular credibility and legitimacy — cannot be solved by adding a couple of years to the adjustment program and finding a bit more money.

A sustainable solution requires a major reset of the country’s parameters — economic, financial political, and social.

Domestic conditions are of course key here. Without common vision and a sense of shared responsibility — both of which are lacking in Greece today — it is virtually impossible for the country to regain its employment engines, realign its cost and revenue structure, and regain Eurocentric and global competitiveness.

Yet it is not all about internal challenges. Greece’s continued membership of the Eurozone depends also on the evolution of the situation in Italy and Spain — two countries that will have an important impact on what the Greek reset looks like and when it would occur.

If the situation in Italy and Spain were to deteriorate further, Greece would get even less sympathy from the Troika; and certainly less money.

Any relaxation in policy conditionality would be viewed by the Troika as giving the wrong signal to other vulnerable Eurozone members. And creditors would be even more reluctant to pour good money after bad.

With the social fabric of Greek society already highly stressed, the government there would find it even more difficult, if not impossible, to implement an approach that promises the population greater austerity and pain. A disorderly exit (or “Grexit”) from the eurozone would only be a matter of time. To make things worse, it is likely that this would occur in the context of an increasingly unstable Eurozone.

What if collective European efforts were to succeed in stabilizing Italy and Spain? You may think that this would be unambiguously good for Greece as a more robust Eurozone would be more willing to support its weakest member. But it is not that simple.

The stronger the eurozone firewalls protecting Italy and Spain, the greater the inclination for some European officials to de facto push Greece out.

This is not just about the difficulties that Greece faces to deliver on its policy commitments, regain competitiveness and create jobs within the confine of the single currency. It also goes beyond the realization that Greece would require another major debt restructuring which, this time around, would likely involve money owed to official creditors.

There are several member countries that believe that Greece never belonged in the Eurozone to begin with. Moreover, its membership was enabled only by questionable numbers.

Up to now, their desire to create conditions that would accelerate a Grexit has been held back by the fear that this would significantly disrupt other peripheral economies — something that strong eurozone firewalls would overcome.

Greece’s future thus depends on the outcome of both domestic events and developments in Italy and Spain. Greek officials should certainly hope that collective European action will succeed in stabilizing these other two countries’ economies. But they should also realize that too great a success could, ironically, map into a higher probability of a Grexit.

It could well be that continued muddle through for the eurozone as a whole, rather than full resolution or fragmentation, is what would deliver the most official support for Greece. This may be attractive for the current Greek government. It certainly won’t be for the rest of the eurozone.

Spain’s banks are at the heart of the euro zone debt crisis, but the rescue has not cleared up doubts over the country’s finances and the government is now under pressure to ask for a full sovereign bailout like Greece or Portugal.Spain has overhauled its banks for the fifth time in three years on Friday to secure up to 100bn euros ($125bn) in European aid for lenders crushed by bad loans from an extended property market crash.

The government created a so-called bad bank to take over tens of billions of euros in defaulted loans and unsaleable
property and to accelerate the clean-up of the banking sector, Economy Minister Luis de Guindos said.

At least four Spanish banks, all of which have already been taken over by the government, are set to receive aid money under the rescue measures.

The bad bank will begin operating in late November or early December, exist for between 10 and 15 years, and is intended to be profitable over that period so that Spanish taxpayers do not bear the burden of the bank rescue operation.

“The prices of these assets (that banks transfer to the bad bank) must ensure that the entity does not generate losses during its lifetime, something that is very important to minimise the impact on taxpayers,” said de Guindos.

De Guindos also announced new rules for quicker and easier government takeovers of problem banks, a cut in pay for executives at banks that have been rescued by the state, and rules that will stop banks selling complex securities to unsophisticated investors.

Spain asked for a European rescue for its banks in June after it took over Bankia, a large lender that was particularly exposed to the property market, and found that it needed 19 billion euros to cover its losses.

De Guindos said Bankia could get emergency liquidity from the government before the European rescue funds are disbursed.

Despite the aid for the banks and an aggressive government drive to cut the public deficit, Spain’s borrowing costs remain painfully high.

The economy is contracting and a quarter of workers are jobless, which means tax revenue is falling and this is undercutting the austerity driv

1Malaysia Development Bhd’s push into the property sector is raising concerns about the company’s rising debt and a possible commercial property glut in KL.

When it was first set up, 1MDB’s initial capital of RM5bn was raised from 30-year bonds. About RM3.5bn of this was invested in PetroSaudi. It later sold this for RM4.2bn and invested in Murabaha notes.

1Malaysia Development Bhd’s push into the property sector is raising concerns about the company’s rising debt and a possible commercial property glut in KL.

The company is involved in the 70-acre RM26bn Tun Razak Exchange (or TRX – previously known as the KL International Financial District) – 25 buildings and a new stock exchange – 20m square feet of floor area. It is supposed to serve as a financial services regional hub.

The government wants to remove subsidies on a host of goods, but in the case of TRX, it wants to give a host of “incentives” (notice how they are not referred to as subsidies when offered to corporations but by the euphemism of ‘incentives’) for the TRX project. These include:

exemption of stamp duty on loan/service agreements
a 100 per cent 10-year exemption from income tax.
a 70 per cent five-year income tax exemption for real estate developers operating at the exchange
Ah, subsidies by any other name… and no doubt, other property developers and owners are not jumping with joy for they could well lose business and tenants.

The Edge weekly (6 August) reported that 1MDB’s total loans and borrowings rose to RM6.8bn (31 March 2011) from RM4.4bn a year earlier. 1MDB then piled on further debt of RM11bn to finance its investment in the energy sector including buying up Ananda Krishnan’s Tanjung assets for a hefty RM8.5bn. (It is now eyeing the energy assets of Genting, Sime Darby and Bukhary’s Malakoff, reports The Edge).

When it was first set up, 1MDB’s initial capital of RM5bn was raised from 30-year bonds. About RM3.5bn of this was invested in PetroSaudi. It later sold this for RM4.2bn and invested in Murabaha notes.

The Edge also reported the firm had pumped in RM194m into properties (70 acres for TRX and 484 acres of the Sungai Besi air force base in KL) but these are now revalued at RM826m! How did this happen?

The Sungai Besi land will be turned into ‘Bandar Malaysia’ – mixed development of 62m square feet including 17000 homes of which 4000 will be ‘affordable’ (and the remainder of 13000 ‘unaffordable’?).

Both TRX and Bandar Malaysia will require RM5.4bn funding for the first phase. Now where is 1MDB going to raise the money from? The government or state-managed funds?

The following week, The Edge (13 August) carried another report saying that property players are concerned about the oversupply of office space in KL.

Let’s see, what do we have now in the pipeline:

TRX (by 1MDB)
Bandar Malaysia (1MDB)
KL Metropolis (Naza TTDI) – 1m sq feet (first phase)
KL Eco City (S P Setia) – 5.6m sq feet
the ridiculous 100-storey Warisan Merdeka tower (PNB) – 3m square feet
Current supply of office space in Klang Valley: 5m-7m sq feet per year.

At present, the occupancy rate for Grade A offices in KL is around 87 per cent.

Compare this to the time when KLCC was being built in 1997 – the occupancy rate in the city back then was a high 98 per cent. It plunged to 82 per cent soon after the towers were completed.

Are we heading for a commercial property glut in the coming years? You tell me.

The Edge weekly (6 August) reported that 1MDB’s total loans and borrowings rose to RM6.8bn (31 March 2011) from RM4.4bn a year earlier. 1MDB then piled on further debt of RM11bn to finance its investment in the energy sector including buying up Ananda Krishnan’s Tanjung assets for a hefty RM8.5bn. (It is now eyeing the energy assets of Genting, Sime Darby and Bukhary’s Malakoff, reports The Edge).

The company is involved in the 70-acre RM26bn Tun Razak Exchange (or TRX – previously known as the KL International Financial District) – 25 buildings and a new stock exchange – 20m square feet of floor area. It is supposed to serve as a financial services regional hub.

The Edge also reported the firm had pumped in RM194m into properties (70 acres for TRX and 484 acres of the Sungai Besi air force base in KL) but these are now revalued at RM826m! How did this happen?

Both TRX and Bandar Malaysia will require RM5.4bn funding for the first phase. Now where is 1MDB going to raise the money from? The government or state-managed funds?

In the process a new word enters our lexicon – subsidies is now replaced with INCENTIVES!