Ex-MoF officer: Najib-signed letter of support for 1MDB’s US$3b fundraising made Malaysian govt appear weak

KUALA LUMPUR, Sept 6 — The fact that the Finance Ministry’s letter of support was needed for a US$3 billion (RM13.4 billion) fundraising exercise by government-owned 1Malaysia Development Berhad (1MDB) in 2013 showed that the Malaysian government was weak, a former ministry official said today.

The former Finance Ministry (MoF) official Datuk Siti Zauyah Mohd Desa said this while testifying in former finance minister Datuk Seri Najib Razak’s trial over the alleged misappropriation of RM2.28 billion of 1MDB funds.

Siti Zauyah, a former Finance Ministry deputy secretary-general (policy), repeatedly stressed that she was concerned about the financial implications to the country that would result from such a letter of support.

While Najib’s lawyer Wan Aizuddin Wan Mohammed suggested that financial implications cannot be avoided when a letter of support with the nature of giving a government guarantee was issued, Siti Zauyah said this depends on the credibility of the borrower and added that the country’s image would also be at stake.

Siti Zauyah’s loan management, financial markets and actuarial division (BPKA) was tasked with preparing the internal memorandum within the Finance Ministry and the Cabinet paper for the Cabinet to consider 1MDB’s banker Goldman Sachs’s proposal for the letter of support to have a binding effect for the US$3 billion bond.

When Wan Aizuddin highlighted that the Cabinet paper had said the issuance of the letter of support was necessary in order for subscribers to subscribe to the US$3 billion bond, Siti Zauyah said this was what Goldman Sachs wanted and further suggested that this appeared to portray Malaysia as being weak financially.

“Nampak sangat kerajaan kita lemah (Our government looked weak),” she said.

She said that this reflected apparent weakness on the Malaysian government’s part at that time in 2013 and also noted that a country’s credit ratings have to be good in order to be “bankable” or to show the country’s ability to repay liabilities.

“The fact that we were forced to have letter of support shows no confidence to whoever wants to subscribe the loan, to whoever who wants to provide the loan,” she said.

Siti Zauyah also said the line about the letter of support being a necessity to give investors such confidence for the US$3 billion fundraising was something she was forced to put into the Cabinet paper by the Treasury secretary-general.

The Cabinet under the Najib administration in a meeting on March 13, 2013 agreed to have the Finance Ministry issue the letter of support, and Najib as the finance minister signed the letter of support which was issued on March 14, 2013.

Siti Zauyah agreed today that the Cabinet decision was unanimous.

Wan Aizuddin then suggested: “And you accept the fact that when Cabinet gives approval, it is a collective decision, not an arbitrary decision of any minister or prime minister. Do you accept that?”

Siti Zauyah responded by saying that she was not present in the Cabinet meeting, which prompted Najib who was seated in the accused’s dock to say, ‘Ya, Allah’.

When Wan Aizuddin suggested she could say she did not know if that was the situation, Siti Zauyah replied that she did not know.

1MDB’s subsidiary 1MDB Global Investment Limited (1MDB GIL) was taking on a debt of US$3 billion when it issued the bond.

The 10-year US$3 billion bond was issued by 1MDB GIL on March 19, 2013, with a 4.4 per cent interest on the US$3 billion sum to be paid until 2023.

The prosecution had on the first day of Najib’s trial said it would show that 1MDB GIL had on March 19, 2013 only received US$2.721 billion of the US$3 billion funds it raised with the balance paid to arranger Goldman Sachs as fees, and that over US$1 billion of the US$2.721 billion was paid to the two funds Devonshire Funds Limited and Enterprise Emerging Markets Fund (EEMF) — now known to be linked to Low Taek Jho — on March 20 and March 21, 2013.

The prosecution had also said it would show that a total of US$890 million — including a US$430 million sum passing through Granton Property Holding — made its way within days from Devonshire and EEMF to Tanore Finance Corporation, and that it would also showed that Tanore had by early April 2013 transferred US$681 or over RM2 billion to Najib’s account.

Granton and Tanore are now known to be under Low’s associate Eric Tan’s control.

Najib wore a light brown suit and had a brown tie with white lattice pattern, while his wife Datin Seri Rosmah Mansor who was dressed in blue attended his trial.

Najib’s 1MDB trial before High Court judge Datuk Collin Lawrence Sequerah resumes this afternoon.