J. D. Lovrenciear laments, 'nothing is now making any sense anymore'

1MDB makes a fool of every citizen, institution including Parliament 

'The latest revelation by Bank Negara Governor is spine chilling. Hot on its heels we also learn that the two top guns of 1Malaysian Development Bhd (1MDB) snubbed the Public Accounts Committee (PAC) by asking for a 30-day grace period.

And if that is not enough the Prime Minister Datuk Seri Najib Razak hollers all the way from Japan that the duo will not run away and will keep their date with PAC.

Add to that the fact that the head of PAC actually granted the 30-day grace to the duo.'

- See more at: http://www.themalaysianinsider.com/sideviews/article/1mdb-makes-a-fool-of-every-citizen-institution-including-parliament-j.-d.-l#sthash.zktRJipt.dpuf

In my humble opinion 1MDB has all the ingredients of a con job, but just because it was initiated by none other than the PM cum Finance Minister, it could override any of the rules of our institutions which are meant to prevent such fraudulent activities.

PM is the highest authority in Malaysia, so who else can we turn to? Not even his former mentor, Tun Dr Mahathir could control him now. Being forced into a corner, Najib has broken his long elegant silence by openly attacking Dr M's past mistakes and need for his support when challenged by Tengku Razaleigh. With Anwar Ibrahim safely behind bars in Sg. Buloh, and with the help of Home Minister and IGP in enforcing the law under Sedition Act and OSA, any potent protest could be nipped in the bud. Even if the judiciary appeared to be partial in their judgments, any criticism could be considered seditious.

1MDB started with only Rm1 million capital, yet it could borrow billions because of guarantees provided by government. It was given choice lands at very low prices which could then be revalued to cover shortfall in earnings, as well as sold at market price, at short notice, to a trust fund so that it could meet an imminent payment on a loan. That 100% of selling price was paid upon signing S&P Agreement was unusual. Other dubious deals include equity converted into loan to avoid external auditors' queries, and cash transferred to a bank in Singapore was transformed into 'assets' and then 'units'. Auditors were changed twice within 5 years. The silence from the relevant authorities was deafening.

Yet, the former and present CEO of 1MDB could avoid being present at a PAC meeting, and allowed a delay of 30 days! If everything had been above board, why the necessity to need so much time to answer to PAC?

To everyone else, 1MDB was a big mistake, but to Najib, he has to salvage his pride by using all his powers to save the company from bankruptcy. It is going to be use of good money after bad, and the 11th Malaysia Plan is just the means for him to do so.
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Understanding the role of the external auditors

'The argument that because 1MDB's accounts have been signed off by auditors meant that no fraud has occurred and that money was not missing is flawed. It shows that these people do not know what they are talking about.

They have badly misinterpreted, deliberately or otherwise, the role of external auditors and they do not understand the meaning of an auditor's report when the auditors sign off the financial statement of a company.

There are no auditors in this world who will agree that their signing off on an account can in any way or form be interpreted to mean that they confirm or guarantee that the accounts are completely true, accurate and do not contain any misstatements, by fraud or error.'

- See more at: http://www.themalaysianinsider.com/malaysia/article/why-auditors-cannot-guarantee-there-was-no-fraud-at-1mdb#sthash.AvPRQz8A.dpuf

'According to The Edge, EY withdrew from the audit because it was unable to get a satisfactory explanation and gain access to information on the joint venture, particularly the US$700 million loan.

When KPMG completed the audits, it was found that the status of US$1.2 billion had changed from equity capital to a loan to PetroSaudi Holdings in the form of Islamic Murabaha notes, which guaranteed an 8.7% annual return.

Citing accountants, The Edge said the equity capital was changed to a loan so that 1MDB’s auditor need not scrutinise how the money was used.'

'If it had remained as equity capital, KPMG would have insisted on seeing evidence of the money, how it was used and why the US$700 million debt was charged to the joint venture.

But as a loan to an external party, it only required a copy of the loan agreement with PetroSaudi Holdings.'

'2010/2011

After the joint venture fell through, 1MDB lent PetroSaudi Holdings another US$500 million in 2010, and another US$300 million in May, 2011, for reasons it has never disclosed.

The total 1MDB had lent to PetroSaudi Holdings was now US$2 billion – money which 1MDB itself had borrowed at a high cost.

This prompted The Edge to question 1MDB’s actions, given that its mandate was never to act as a lender of cash.'

“One can only surmise that it became a lender in order for its audited accounts for FY March 31, 2010, 2011 and 2012 to be approved without qualification, and without having to show to KPMG that it was in control of the money,” said The Edge.

'Meanwhile, the audited accounts for the financial year of 2013 were delayed by a year because KPMG declined to continue as auditors and was eventually replaced by Deloitte.

Deloitte promptly qualified all of 1MDB’s RM13.9 billion of “investments held for sale”, including its shares in the Caymans, as Level 3, the lowest of three levels of assets in the fair value accounting hierarchy.

The Edge said 1MDB was awarded that level because there was no openly and transparently obtainable verification of the fair value of the assets.'

“What can be surmised from the events of the last five years is that 1MDB kept entering into deftly structured transactions timed to avoid vigorous scrutiny by its external auditors about the money,” The Edge said.

“And although it claims to have made gains of US$488 million from the original sum of US1.8 billion, it is not wrong for us to ask it if is just a case of being paper-rich, but cash-poor – that is, are the figures mere accounting entries not fully backed by cash or liquid assets?” – March 1, 2015.

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We thought we had the last straw... but is there going to be a tipping point within Umno?

With open attacks from ex-PM for 22 years who seems to have much respect and influence, followed by some former and present Umno leaders, Najib is still holding the most powerful position. Looking back, Tun Dr Mahathir's legacy seems not to be helping him remove Najib but in helping Najib stay on. Such is the advantage of incumbency. Umno Baru was Tun's creation and he holds membership No.1, but he gave up membership before and rejoined after Pak Lah agreed to leave. But I don't think this is going to make any difference when dealing with Najib, who seems to be under the delusion he is fighting on as a Bugis warrior!

Unlike Pak Lah who was too sensitive to direct insult, Najib seems immune to all kinds of criticisms and insults. So now it is either up to the 191 division leaders (a.k.a. warlords) in Umno to remove him, or the MPs in Parliament to provide a 'No confidence' vote, or wait until the next General Election in two or three years time.

It is obvious to many that Najib is now depending on those who depend on him for positions and opportunities for enrichment, and not necessarily the grassroots in the party. We should not take statements of support as true support because since the division leaders were last elected, the situation has changed.

We have to put up with many lies in the form of public statements by PM and other ministers, but the mother of all lies was when the cash from Cayman Islands becomes 'asset' in the form of 'units'! What a transformation via one of PM's endless possibilities!
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Bukit Beruntung must be one of the most misnamed townships

Literally, in Malay, it means 'Profitable Hill'. The big project, which must have been created out of a cosy relationship between developer and the former BN state government, is believed to have caused the developer's downfall and financial ruin. Years later, the company had to be rehabilitated  with help from the Selangor government.

At the time, the hype was that the new airport will be built nearby. But as it turned out, instead of north, it went south of KL. The impact of this major mistake in guessing the location of KLIA also caused the failure of another major project, Lembah Beringin. I can still remember the advertisement over the radio when I used to drive along NSE, which boasted that the landscape budget alone was over Rm100 million and the distance is only 36 minutes from KL! Even a dedicated entrance/exit from NSE did not help the Lembah Beringin project and the listed holding company was later taken over by a HK magnate.

Bukit Beruntung's failure was a classic example of how the location (and its reputation) of properties is so important. It could mean success breeds success or the reverse, a vicious cycle of bad reputation in terms of security, which leads to low occupation rates and low rentals, and inevitably causing property prices to drop drastically. Even free rental could not attract occupants because of many cases of lawlessness: robberies and even iron grilles were stolen.

After so many years, it is surprising that efforts to revive the place were unsuccessful, especially now that people are crying out for affordable housing in nearby Klang Valley (KL and PJ).

The latest statement by MB of Selangor seems to suggest a lack of cooperation and coordination between Selangor State and Federal governments.
http://www.themalaymailonline.com/malaysia/article/bukit-beruntung-azmin-makes-federal-government-an-offer

To my simple mind, the source of the problems seem to be security, followed by transportation, and once these twin problems are solved, the rest (purchase, rental and maintenance of properties) will follow and take care of themselves.

What is needed is a conspicuous presence of the police or even army personnel. This could be in the form of training camps or whatever necessary to have them there. There must be continuous police presence with beat bases which can prove their effectiveness in handling complaints promptly and efficiently. The place must be well lighted and if possible, with CCTVs at strategic locations.

Ideally, transportation can be served by connecting to the nearest railway station, complemented by efficient transit bus services. The rail service is under Federal control while the latter can be provided by Selangor state. For immediate results, bus services can be opened to willing operators who can provide them.

The house and apartment prices in Bukit Beruntung are so low that they are at 'a steal' prices or 'going for a song'. Present owners are just waiting for the right moment to do up their properties for either own occupation or for rental. There must be many prospective purchasers waiting to buy just before any improvement to the present dire situation.

State government could throw in some incentives like waiving outstanding assessment bills and/or lowering the rates of assessment for a limited period. Industrial lands should be encouraged with incentives to be developed. With cheap lands or factories and safe hostel accomodation for their workers, wouldn't industrialists be tempted?

Paint companies could even be encouraged to sponsor their paints to repaint public properties, in competitions or as part of their advertising expenditure.

I am sure there are many other good ideas which the public can contribute once the State  or Federal government takes the initiative, to be followed by concerted efforts by the relevant stakeholders.

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How 6% GST on prepaid phone card shows our government still favours the big boys

Before: 6% SST was included in those prepaid cards which meant the telcos paid over to the government, 57 sen for every Rm10 sold (6/106 x 10) and the public got Rm10 worth of calls. Was that correct? Why do I get the nagging feeling that we actually got Rm9.43 worth of call instead of Rm10? This especially so with the current statements and corrections which seem to confuse the public, but at the end, the aim is to shift burden to the public.

This is because the relevant ministry seems to make a big deal now that we will be getting Rm10 for every Rm10 paid.

When GST came into effect on April 1, 2015, the burden was conveniently pushed from the telcos to the public: Rm10 prepaid costs Rm10.60. There was understandably public outcry over this. Then Deputy Minister, Ahmad Maslan said it would be for only 1 month and the situation will be reversed back to the old system of having telcos absorbing the GST (used to be SST). Then even PM had to intervened and declared that only the Minister can make public statements on this.

Basically, whether the Rm10 prepaid included GST or is worth Rm10 of calls, the burden will be shifted to the public and this has been confirmed by the Minister.  In other words, either we had been getting only Rm9.43 worth of calls before (even though we appeared to get Rm10 worth) or we are still getting the same Rm9.43 despite the claim that we are getting Rm10 worth for every Rm10 paid. Otherwise, it is impossible that the telcos could shift the burden and yet able to provide the full Rm10 worth, unless there is some adjustment to the rate of charges.

Now I am not even sure if this headline allegedly based on what Minister Shabery Cheek said, 'Prepaid mobile credit - GST free unless you call' is genuine, coming from a site Fake Malaysia News. Honestly, I cannot keep up with checking everything as to whether it is real or fake.
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