Summary: This is my final piece on 1MDB. I propose the following solutions: Close down 1MDB parent company; break it up into independent operating entities; refinance the debts locally. But to do so, first the OLD TEAM got to go: the Board, the Senior Management (includes ARUL KANDA). Dato’ Jo, is so far seems to be the best person to handle it from the Government side. But there is one ACHILLES HEEL to the whole thing: THE ARABS. They could be the source of problems or solutions, depending on how we handle it. My advice is – they could be our savior and not detractor.

As I had indicated and repeated many times, as a Malaysian, I would prefer 1MDB to succeed rather than to fail. This is out of a simple notion: 1MDB is a public entity, its failure means it will borne by all of us, and otherwise, it success (or non-failure, at the least) will give us at least no harm, or better still benefits us.

Firstly, before I proceed, let me just list down the factual issues (as addressed and alluded to in previous articles, Part 1 – Part 7).

  1. 1MDB is not a private venture, it belongs to us the Malaysian public.
  2. 1MDB was setup initially to play Leveraged Buyout ventures – but failed to do so, thus far.
  3. 1MDB is currently laden with debts that are guaranteed by Malaysian Government, explicitly and implicitly.
  4. The problems of 1MDB now spreads to the US, based on US DOJ Civil Suit filing; even though it is about assets seizure, the exposé, spills the Malaysian beans to international scene. This is not of 1MDB’s actions, but by those who were purportedly linked or related to 1MDB’s transactions.
  5. 1 MDB is in full dispute with Abu Dhabi (IPIC, Aabar, Mubadala, etc). Both parties are now gearing up for a full dispute; the arbitration case in London is only a start.


Secondly, let us take everything based on ITS FACE VALUE backed by facts.

  1. The Malaysian AG has cleared Dato’ Sri Najib from any criminal wrong doings in relations to 1MDB. So let us accept this as a fact, until proven otherwise.
  2. The US DOJ Civil Suits is about assets seizure, based on criminal acts purportedly done by some individuals named. The filings reveals quite a lot of details, which we could take as facts to be proven in the court of laws. Up to now, we have to wait for the results of the suit. If it is contested, then we could see what else, factually revealed or concluded. If it is not contested, then we could take these facts as facts proven through the court of laws.
  3. The various probes on the accounts of 1MDB, such as by PAC, Auditor General, the Auditor (Deloitte or others), as established facts.




Based on the above, my own views of what could be done are summarized as follows:

  1. Dato Sri Najib to be personally off the subject of 1MDB’s “direct management”. This could be done by giving Dato’ Johari Ghani full authority to deal with 1MDB. It is his rightful duty and portfolio as Finance Minister II. Dato’ Jo background’s as former corporate guy would be beneficial and useful. He is also known to be no nonsense manager. His role to save KFC in the past was commendable. So, in short, I presumed this is already done, and let us give him the chance to so do.
  2. To focus on the dispute with Abu Dhabi. The results of the current London Arbitration will set tone for what would be the impact on 1MDB financially. It could be insolvent and all debts will become due. In short, bankruptcy, unless saved by the Government.
  3. To CLOSE DOWN 1MDB holding company, soonest possible. 1MDB has become a “pariah brand” locally and internationally. Once you are a pariah, nobody wants to deal with you, or if they will, the price you pay (for the perceived risks) is extremely high and costly.


Tactically, the following must be done:

  1. To sack all the “old members” of the Board, and disband the Advisory Board (which consists of names that are not even functional).
  2. To REPLACE ALL THE SENIOR MANAGEMENT of 1MDB and its subsidiaries. Replace them with seasoned and experienced corporate managers. Malaysia had lots of talent who could do this.
  3. Create independent entities out of the “OLD 1MDB”. TRX, Bandar 1Malaysia, etc., could become independent from 1MDB parent, and rebrand them well.

Financially, the following must be done:

  1. Debts to equity conversion or replacement. With only about RM1 billion equity (or quasi equity), is far too low, and the debt/equity ratio to be unsustainable. A combined equity of at least RM5 billion or more would be proper.
  2. Reduction and replacement of government guarantees. A program to reduce the amount and government guarantee exposures must be undertaken.
  3. Bonds or Sukuks, etc., could be raised locally to refinance and repay the US Dollar Notes. However, the structure must be well done, to allow market confidence as well as to get the most competitive pricings. With prime real estate as its base (assuming Edra or energy assets are no longer an issue), the possibility of getting the right structure and rates are good.
  4. Future financial needs are done in Ringgit, using the local financial market as the prime source.


So far, all of the above are direct from any “standard” financial play book. Nothing extra ordinary. The only thing is the WILL TO DO SO. I sincerely hope that Dato Jo, would do the above, or some variations of similar measures. With all due respect to ARUL KANDA, his measures for 1MDB fall far too short, and I would say that he is already becoming an “interested person” and hence not free to do and execute the above or any new measures, impartially. He is already part of the “OLD 1MDB brand”. He need to go.

Lastly but not the least, there is one ACHILLES HEEL in all of these, the ARABS. Now let me comment on this issue:

  1. The ARABS are major investors in Malaysia. Abu Dhabi is only one of them. We have Al Rajhi Bank, Kuwait Finance House, the Qataris, the Saudis, and so on. The United Arab Emirates played prominently in our investors’ scene, for example, Bank Islam shares owned by UAE entity, Mubadala in Bandar Seri Iskandar, the same for the shares in RHB Bank, the same for Oil & Gas sector, and many others.
  2. We could be risking the whole ARAB investors, just to save 1MDB. The 1MDB fallout could signal a long term withdrawal of the ARABS. I was once advised by ADIA’s senior ranking official: “Dr. Wan, we want to invest in Malaysia, as much as we could; you do not need to lay us the “RED CARPETS” (i.e. special treatments), but please do not put on the “RED TAPES” (i.e. problems and obstacles).
  3. The financial wealth and muscle of the ARABS could be larger than Malaysia’s own clout in international politics. The long term risk that we could get is by going at odds against them, instead of working with them, could not bode too well for Malaysia in the long term. We could gain more than lose, if we work with them.


My personal knowledge and experience with the ARABS clearly tells me that so far, we are on the wrong track as far as our dealing with IPIC. My experience also tells me that the arbitration in London between 1MDB and IPIC is not the last and definitely not the least. Statements such as “we are confidence that we will win the case” is pure hubris. At best, our odds is at 50%, same as IPIC’s. Currently both sides are “building up their case” – which means more damages and revelations. Both will be spilling their beans in front of others – to no good.

ARABS are known for what I called “TENT DIPLOMACY”. I had participated in so many of them, to tell you with confidence that it is the best way to solve issues with them. What it means is private discussions to solve issues, sincerely among “friends” in most friendly manner. It also involves a lot of gives and takes. But it would require people with experience and knowledge to be able to do so. Tent diplomacy is not an open forum; when it’s done, nothing of the details should come out to the public (media). ARABS are personally, media shy (except for Prince Waleed of Saudi Arabia, and he is another breed apart).

Just to give you an example – when Dubai was in serious debt troubles (after 2008 crisis) of more than few hundred billions. There were so much noise and brouhaha, it finally went down in total silence and all parties (i.e. debtors) were paid. This was done within just less than 3 months or so. How was it done? The answer is the tent diplomacy between Dubai and Abu Dhabi. Today, Dubai is back in its growth again.

My sincere take is: Abu Dhabi and the ARABS should be our friend and not enemy. They should be part of the solutions and not the problems. Remember one more thing about the ARABS – they are like CAMELS. They could survive “long journey without water”. Their key people are permanent rulers (not elected). Hence, they could wait to outlast you. They will not die or unfold because of 1MDB, but 1MDB could, because of them. So, I am sure they will prepare for this path. A path that I would not take. So my advice is: use TENT DIPLOMACY. Make the ARABS as part of the solution and not the problems. But these could not be done by ARUL KANDA or the OLD team that managed 1MDB. It needs fresh team and with the right actions and solutions.


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