[KUALA LUMPUR] The Malaysian government signed an agreement on Thursday to take over 1Malaysia Development Berhad's (1MDB) remaining stake in a multi-billion dollar development project, as the troubled state fund seeks to cut its debts.
The shareholder agreement will put the finance ministry in control of 1MDB's 40 per cent holding in the Bandar Malaysia project.
1MDB sold the other 60 per cent in Bandar Malaysia - a major development project in Kuala Lumpur that will include a public transport hub - to Malaysian tycoon Lim Kang Hoo's Iskandar Waterfront Holdings and its partner, state-run China Railway Engineering Corp (CREC) for US$1.7 billion in December.
This was part of a land and power asset sale plan aimed at cutting 1MDB's debt, which totalled about 50 billion ringgit (S$16.5 billion) in January, and putting a lid on its problems.
The 1MDB fund, founded by Malaysian Prime Minister Najib Razak in 2009, is being investigated for money-laundering in at least six countries, including the United States, Switzerland and Singapore.
Malaysia's finance ministry said in May it would dissolve 1MDB's advisory board, chaired by Najib, and take over its remaining assets.
A Malaysian parliamentary committee in April identified at least US$4.2 billion in irregular transactions by 1MDB. Both 1MDB and Najib have denied any wrongdoing.
The Malaysian attorney general's office cleared Najib in January of any criminal offences, saying that US$681 million deposited into his personal bank account was a gift from Saudi Arabia's royal family.
Najib said on Thursday the agreement effectively places control of the Bandar Malaysia project in Malaysian hands, as Iskandar Waterfront Holdings (IWH) is partly owned by the Johor state government. "This is very much a government project, with strong support of our partners," he said at the signing ceremony.
Najib also announced a Bandar Malaysia Fund, a special financing scheme supported by a consortium of Chinese, Malaysian and London-based banks with a total asset base of US$12 billion, to support the project's projected 25-year development plan.
He added the government will provide incentives for companies involved in developing Bandar Malaysia, including a 10-year tax exemption, eight years free of stamp duties, real property gains tax and removal of import duties for construction materials not available locally.
The Bandar Malaysia deal had earlier caused confusion after 1MDB and China Railway Engineering Corp (CREC) - a member of the consortium that bought the stake - gave conflicting figures on the value of the sale.
CREC later clarified that it valued the land at US$1.2 billion but would assume portions of liabilities and costs that come approximately to US$500 million.