I finally had thought out what i would like to write and publish. Something that I had planned to do since 2001. But I suffer from writers “syndrome of perfection” – that is I want to publish only something that is perfect. Because of that I have so many drafts of books that I seemingly could never complete. Anyhow, here I would share what I plan to do.

To develop a common theme and approach of my writings as follows

  • Objective: to relate economic issues to the general public, people’s interest on economics, business and finance.
  • What problems that I am setting out to solve? There are very few books written on the subject, in simple language – in a manner of story telling. Academic textbooks will not do, and yet too factual books with too much jargon and technical language, will also not do.
  • What confusions do I wish to clarify? There are many facts and fallacies out there; many misconceptions, confusions arising out of many reasons. We want to simplify, separate correct analysis and facts – from myths, fallacies and fictions.
  • What previously unknown or unfortunately neglected story am I planning to tell?  I would like to tell balanced story; not promoting specific agenda or ideas.
  • How is these books different from all other books? It has to be concise, not too long, since very few people are serious readers. It has to be focused and yet, general enough.
  • Why does that matter? To whom? Anyone interested in business and economics


The planned (tentative) list are as follows:

  • Story of Business (partly done)
  • Story of Risks (started)
  • Story of Asian Financial Crisis (almost done)
  • Story of Dark Finance (started)
  • Story of Islamic Finance (not yet)
  • Story of Life (partly done)
  • Story of Capital (not yet)
  • Story of the Malays (started)
  • Story of Game Theory (not yet)
  • Story of Value (not yet)
  • Story of Money (not yet)
  • Story of Dinar (not yet)
  • Story of Knowledge (not yet)
  • Story of Probability (started)
  • Story of Inequality (not yet)
  • Story of Economic Theory (not yet)
  • Story of Islamic Economic Theory (not yet)
  • Story of Laws & Regulations (not yet)
  • Story of Justice (not yet)
  • Story of Economic Management of Malaysia (not yet)

A very raw draft of “Story of Business” is here. Story of Business Draft v0 2016.08.28






SUMMARY: Islamic faith based religious violence is statistically insignificant, compared to many other occurrences of violence. But it makes big news, because of its dramatic nature, just like plane crashes compared to automobile accidents. However, Muslims should not be apologetic about it – but rather to clarify them clearly about the bias as well as the framing effects of the media, which aggravates the perception of the masses. Islam always stood on its principles, which is against injustices (Al Fitnah) – by Muslims or non-Muslims alike. Violence is the effects, but not its roots; injustices are.

The question I posed above: whether religious violence, such as ISIS of Syria & Iraq, Al Qaeda, the so called religiously “linked” violence is on the rise – begs us to dig a bit deeper into the subject matter. Furthermore, these violence seems to point out to Islamic belief as the source of these violence. First question is: is it true that violence is on the rise? Second question is: is it due to Islamic faith? Let us try to address this “scientifically” – which means that I will base my arguments based on statistical analysis, and secondly based on fundamental analysis.

Let me start with statistical analysis.

I would use studies in a recent paper by Cirillo & Taleb “The Decline of Violent Conflicts: What
Do The Data Really Say?” [Nobel Symposium 161: The Causes of Peace, June 15-18, 2016, Bergen, Norway, (Nobel Foundation)]

First, statistically we have to rely on longer historical data, say of about 50 years or more, and better still 100 years or even more. Then only, we could make statistical statements that are meaningful (which means unbiased) and “statistically correct”(which means scientifically proper).  The answer to this is clear: violence is statistically speaking violence had been on a significant decline over the last 100 years, and religious violence represent statistically “insignificant” percentage of the total violence that occurred [adjusted for the number of the world population, since 100 events based on 1 billion people is different than ones based on 6 billion people]. In another word, the World had become a safer place to live than say 100 years ago.

Secondly, religious based violence had been even on a lesser scale, as they represent statistically insignificant percentage of near 0%. The largest percentage of violence is war between nations (i.e. other reasons than religion); and war’s occurrence is considered to be “anomalies” within the data (that is it occurred in less frequencies but with devastating casualties).

Now let us address the issue of religion as the source of violence. First we cannot deny those who commit violence and claimed that it is because of religion (such as ISIS). Anyone who commits anything based on his claims to act on his religious faith – has to be taken on that “face value”. We should not say that they are wrong “religiously”. In another word, if someone claims to act based on Islamic faith – we should not be apologetic to say that they are “NOT MUSLIMS”. This is clear from Al Quran that we can’t deny anyone who says the Syahadah (the verse which refers to one Sahabah who was admonished by Ar Rasul (saw), when he killed a Musyrik who uttered the Syahadah). We have to stop at that point – not to deny a Muslim as a Muslim. What’s in their heart is between them and Allah (نحكم بالظواهر ولا بالخواطر, we judge on the Dzahir (known) and not the Khawatir (unknown)). But whether their acts are in conformity to Islamic principles is another thing altogether – as this is the domain of Islamic scholars to interpret such matter. And in the case of ISIS, majority of big scholars clearly says that what they do are Islamically wrong.

Statistically speaking, violence comes from many sources – and religion is the least and the most insignificant of them (at least over the last 100 years of human history). But why does religious violence, in particular, the ones related to Islamic faith is so highly propagated (such as the 9/11 events, the ISIS, and many other spates of violence in the West)? I would analyze this similarly to the case of “airplane crashes”. The probability of airplane crash is extremely small (i.e. statistically insignificant), but the occurrence (even rarely), make big news. Why? Because despite we have millions who died yearly from automobile accidents, they are non-dramatic; but plane crash, even if it kills 300 people, is dramatic. Our human minds are biased towards dramatic events.

What makes it worse is the framing approach of the media. This framing effect magnifies the subject, and create the perception which dominates the front lobes of human brain. A such, I found many non-Muslims friend of mine views that Muslims are violent. The Muslims have to encounter this by no other way (I disagree on denial approach as explained above – that these people are NOT MUSLIMS; they are Muslims) – except first to accept that Islam stood for its principles – that is to remove injustice ( يقاتلوهم حتى لا تكون فتنة) . If injustice still dominates, and some people reacts to those injustices – it must be understood that it is the root cause of those violence. We do not need to apologize, as Ar Rasul (saw) and the Sahabah never apologizes for their actions. This is what I am trying to correct, since I saw many Muslims are apologetic to these events. What we have to say is that, factually and scientifically speaking (hence based on rational scientific argument), that these events are insignificant and it is distortion of the actual reality.

That is my view on this matter. Wallahu A’lam.




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.



SUMMARY: Malaysia do not need additional GLC of the like of 1MDB. As a country we already have too much government involvement in business through more than 450 major GLCs, and so many other smaller ones. Furthermore, the problems with GLCs is the “implicit guarantees” involved, which if we take the current debts of the government, plus the guarantees, and combined with hidden guarantees – had reached almost 100% of the GDP (note that Greece had more than 100%). This is not sustainable in the long haul. Given the drop in government revenues which had to be appended by GST, the burden on the people had increased tremendously – which calls for prudency in economic management of the country.

In this part, I will address issues related to the Economics of 1MDB affairs, with particular focus on the practice of economic management of Government linked entities.

First, we have to lay down certain principles of economic management of government “business entities” (as I would like to term it). This is different than economic management of the country such as annual budget, debts directly issued by the government, etc. – which are managed directly by the agencies within the government, in particular the Treasury. The question is why do the government needs to be in “business” through the formation and operations of business organizations owned by the government – in short, why do government need the GLCs – Government Linked Companies. They would fall under two categories: 1) as investments, and 2) for strategic reasons. Investments are mainly done through funds – such as KWSP (EPF), Tabung Haji, LTAT, KWAP, Khazanah Nasional, etc. The purpose of investments is to secure returns on investment (long term) for the public funds under the management of the government. Strategic reasons – would include ownership of TNB, Telekom, infrastructure assets and operations (MRT, Rapid, etc.) – because these are to ensure provision of services for the public. Another strategic holding is Petronas – because of management of oil and gas resources, and strategic investments in related industry.

The question is – under which category does 1MDB falls into? As I had explained before, I could not see any other economic rationale of 1MDB except being a Leveraged Buyout entity (i.e. to leverage, package the business, and sell off – with profits). Therefore it is quite safe to say that 1MDB is the only one of its kind within the GLC families.

The second principles is: Risk & Reward profiles. What kind of risk/reward profiles would 1MDB falls under? As the case of investments – generally the profile is for long-term investments (i.e. you invest for the future), hence the profile is to go for lower risk and returns, and safe (i.e. less volatilities). As in the case of strategic investments, you could shoulder more risk, and also lower returns – since the non- financial benefits to the public (in non-monetary terms) are quantifiable (e.g. TNB and Telekom). As LBO entity, 1MDB is taking right smack in the highest risk/reward profiles.

The third principle is: Governance. The basic issue of governance is process of decision making, and in particular, the business models and risk taking, and financial control of the organization. The second issue is business transparency, disclosure, financial reporting, and management of conflict of interests. Thirdly, a GLC has to ensure that the interest of the public is preserved –i.e. the Corporate Social Responsibility (CSR).

Finally, the fourth principle is: involvement of public monies. What is the source of the monies, and what would be the accountability structure applied for those monies.

My take on 1MDB on all of the above:

  1. 1MDB falls under a “new category”, which is Leveraged Buyout structure.
  2. Risk/reward profile of 1MDB – is extremely on the highly risky (due to leveraged nature and the sectors – energy and real estate), with potentials of high rewards (i.e. returns on equity).
  3. On the issue of governance – clearly 1MDB had failed on many counts. You could make your own judgement based on what had been exposed by many.
  4. On public monies – 1MDB claimed that only RM1 billion money is from the government was used (as equity/shareholders loans to the company); but in reality, 1MDB was funded mainly by massive reliance on Government guarantee. Hence, we could say that almost 100% of 1MDB’s financial resources and strength is from the public’s money.

All of the above, clarifies the economic management of 1MDB. Now let us focus on two main issues regarding: a) involvement of government in business; and b) usage of guarantees by government for business entities.

Why Governments Should Not Go Into Direct Business

  1. Governments could gain “unfair advantages” since it is in control of many matters in regards to awards of contracts, as well as regulatory advantage. What we economist termed as “regulatory arbitrage” as well as “monopolistic tendencies”. Both are bad for the economy.
  2. Open market business are best left for the market to operate. Because unnecessary risk taking should not be the business of governments. The IPP business – as had been done is best left as private sector concerned (as evidenced from our privatization exercises). Why do the government want to own something that it had given to the private sector? Furthermore, real estate is best left to private sectors. These are the two sectors that 1MDb went into.
  3. Government’s involvement in business crowd’s out private sector investments. In the long term, this is bad economic management.
  4. Principal-Agency problem: to be in business of “high-risk” would always invite a high “agency costs” – since management, who do not take personal risk on investments, could be reckless since they are not personally at risk; hence they could take high risk, and get rewarded (as management) for this risk, and yet will lose nothing if the gamble went sour.

In short, the 1MDB business model is against the cardinal economic principles. These kind of business model should be stopped. As a matter of record – 1MDB is not the first (and may be not the last). The lists of previous 1MDB like companies are as follows: HICOM (the baby now is PROTON), PERWAJA, BAKUN, RENONG (UEM is the current baby), MRCB (then before EPF took over), and the list could go on. Note that they were all under Tun Dr. M & Tun Daim. Our track record on these types of business had failed time and time again for various reasons (economic and otherwise).

My personal conclusion is: Government should stop any direct business involvement, except for two reasons stated before: long term investments of public money (EPF, Khazanah, PNB etc), and strategic reasons (TNB, Telekom, etc.) If the investments like 1MDB doesn’t befit any of the existing bodies, such as Khazanah, then it should not be done.

Why Government Shouldn’t Guarantee Business Ventures 

If a business venture is viable, it do not need government guarantee; and if government guarantee is needed, it must be for the sole reason that it is not viable on its own. Furthermore government guarantee is given only if public interest is involved (i.e. risks that could not be covered by the nature of the business). Hence, it should be given extremely selectively, with lots of due care and process (such as involvement of the Parliament).

In case of 1MDB, the explicit guarantee given by the Government is somewhere around RM30 billion – for its business ventures. So on this count, the guarantees are wrong as a matter of principles of economic management by the government. This is the explicit part.

The implicit guarantee is even more dangerous. Since 1MDB is seen as 100% government owned, all the creditors of 1MDB would assume that it is taking “government risks”; hence banks could finance contractors, suppliers based on that assumptions. All these creditors – assumed the implicit guarantees of the government. To undertake developments of TRX and Bandar 1Malaysia would involve these kinds of risks – which if anything go wrong, will fall squarely on the government (hence the public). Similarly any borrowings by 1MDB (not guaranteed by the government) carry this implicit guarantee. In short, the final tally of “guarantees” to 1MDB will go way beyond the current RM50 billion or so debts and creditors compiled to this date.

Government really needs to get out of this guarantee business – as it is a source of economic disaster, as it had shown in the US and elsewhere.

Quick Take on Malaysian GLCs

How many GLCs are now currently in operations? All in all, there are almost 450 GLCs which are currently in operations. These are GLCs under the Federal Government only. If we take the state governments into considerations, then the numbers could be a lot more – few thousands at least. On the federal level GLCs accounted for more than 30% of KLSE market capitalization, and in the bond market, I couldn’t have my figures computed in terms of percentage of total bonds outstanding which are due to the GLCs. But the figure could well be above 30% as well. In short – our government is in business in a very big time.

Is this good for the economy? The answer is again yes and no. These GLCs provided income to the government – which could be in the range of tens of billions in dividends as well as corporate taxes. The main problem that I see is the crowding out of the private sector participations and investments; issues of monopolistic rent and quasi monopolistic rent. It is hard for private sector to compete against GLCs because of the advantages it holds over its competitors.

Quick Take on Malaysian Government Contingent Liabilities

First question: how much is the debt and liabilities of the Malaysian Government? Total direct debts of the government today stood RM 582 billion. And total guaranteed debts currently stood at RM172 billion. In total, RM754 billion. I am not so certain whether the guaranteed debts include the figures of 1MDB guarantees (of RM30 billion, approx.). Our GDP currently stood at RM1,157 billion, which means the combined liabilities now stood at about 65% of our GDP.

Are we in the danger zone as far as debts and liabilities are concerned? The answer is yes and no. There are countries which have debts even more than 100% of its GDP (Greece is an example). Debts/liabilities are only dangerous when the country’s economy is weak. So far, our economy has shown its resiliency. So far that’s not my worry. What worries me is the “hidden guarantees” or “implicit guarantees” (as I called them earlier).

Implicit or Hidden Guarantees

We must understand that under our privatization programs, the government undertook massive commitments to implicitly guarantee in forms of various performance to be made – such as increase in toll rates, electricity rates and tariffs, and so on. The current spate of issues between the IPPs and TNB is a clear example. This is not to mention the preferential treatment and commitment we gave to Proton, KTM, public transport (MRT, Putra, Star, Rapid, and so on), and various other similar projects. I don’t have the time to do detail calculations – but I could safely say that the total contingent liabilities for all of these issues combined could well be in the range of RM300 billion, and is still on the rise, as more new projects such High Speed Rail, East Coast Railway, and so on are currently being planned.


In conclusions, Malaysia do not need additional GLC of the like of 1MDB. As a country we already have too much government involvement in business through more than 450 major GLCs, and so many other smaller ones. Furthermore, the problems with GLCs is the “implicit guarantees” involved, which if we take the current debts of the government, plus the guarantees, and combined with hidden guarantees – had reached almost 100% of the GDP (note that Greece had more than 100%). This is not sustainable in the long haul. Given the drop in government revenues which had to be appended by GST, the burden on the people had increased tremendously – which calls for prudency in economic management of the country.



Summary: 1MDB is only a sample of what could go wrong. Providing government guarantees to business ventures is the root of the problems. Political will is needed to change this by WALKING THE TALK. The society need to rid of “Shadowy Business Structures” as they are the “dark world of finance” – which could only means future troubles. The dark world of finance is the roots of financial crisis (e.g. US Subprime), it needed to be eliminated. This should be the focus of our politics – to have the POLITICAL WILL to do it (by ALL SIDES of the political divides).

The biggest mistake of how we all treat the 1MDB affair is to politicize it.  In this piece, I will focus on what are the possible solutions that could be done to turn around the company, and to make sure that it could become something that: 1) makes money (instead of losing money), 2) benefits the people of Malaysia (instead of becoming a burden), and 3) succeed as a business venture.

I will divide these writings into 3 sections (for easiness of reading and easier to follow the logics of my discussions).

Part I – the Politics

Part II – the Economics

Part III – the possible solutions to 1MDB

I have to start to lay down the politics and what are the possible solutions that we as a society could take (Part I; then followed by economic analysis – to make sure that I back my arguments with economic arguments, facts and figures (Part II); and finally to zoom in specifically to 1MDB (Part III). I took this approach mainly to emphasize that 1MDB is ONLY one of the problem that we face. Before we can address 1MDB as a company specifically, we have to address first the roots of problems – politics and the economic management  (Part I and II). Then only when we deal with 1MDB, it is based on clarity rather than pure speculations.

Before I jumped in to the Politics, let me state clearly: I am not attached or linked or have any leaning to any political parties or siding with any sides of the various political divides. This make my stands clear – since some would label me as UMNO (from my past association with UMNO), and some would label me as an opposition (from those who believe that I am with Dato’ Seri Anwar Ibrahim). As Treebeard (Lord of the Rings) have said: I am on nobody’s side; my true side is for my own welfare, and the welfare of my children and grandchildren.

With that let me jump right on to the political analysis, “without fear or favor”

  1. We as a civil society should not prolong 1MDB as a matter of politics. The longer it dragged on, it could become what we economist called “self-fulfilling prophecy”. That is it will go down in the path that we wish to happen by pushing it to be exactly as we wish. This is exactly what some wants it to be, that is for 1DMB to go bust, so as to make it as the reason for the downfall of Dato’ Sri Najib.
  2. We have to understand, with as little bias as possible, based on clear facts and figures, the roots of the problem (which actually are lost in the heavy politicking going on). At the root of the problem is “providing government guarantees”, which for all the years since mid-80’s had been the practice of our federal and now even the state governments. Guarantees are in two forms, “explicit” and “implicit”, explicit guarantee is already problematic, and implicit is even worse. The recent US sub-prime financial crisis of 2008 already shows how much of a time bomb these guarantees are. And for those with so-called “Shari’ah tendencies” – government guarantees is purely incompatible with the “Maqasid (purpose) of Shari’ah”. I had not seen any evidence of Islamic government of the past providing financial guarantees to business ventures.
  3. We have to give constructive ideas and solutions, regardless of political leanings. Non constructive criticism only push something to doom, instead of avoiding it. Many wars of the past, could be avoided if society had taken a different path of solving issues. But many chose the path of war, which is destructive. The US political leaders, in the sub-prime crisis realized the magnitude and scale of the problem, decided to combine the forces from all political divides, to take the bull by the horn and wrestled it to the ground. They had the political will, and the society as a whole also had the political will to do so. We as a society need to change our outlook and approach. Our leaders (from all sides), need to be constructive, rational and clear minded – for the benefit of the society at large.
  4. We have to be extremely cautious with politicians and political statements from all sides of politics. But economics is something real and it will really bite. Politicians say what they don’t really meant, and do what they don’t really need. Dato’ Sri Najib had to defend 1MDB, as it is a must for him – because of the political pressure applied upon him (he has no other choice, except to do that); But is it really necessary for him to take it as his personal matter? Or is it that we as a society push him to take it so that it will be his doom (as some wishes it to be)? And on the side of the coin, are the opposition (including Tun Dr. M, Tan Sri Muhyiddin, PKR, DAP, etc.) sincere in their criticism? To be factual, Tun Dr. M is the Father of Inventor of these so-called government guarantees of projects, Dato’ Seri Anwar (of PKR), Tan Sri Muhyiddin, and everyone else, were part of that Malaysia Inc. I, which were further perpetuated and expanded by people like Tan Sri Nor Yakcop (in Malaysia Inc. II). And now DAP is continuing the same thing for Penang projects, Pakatan is continuing them in Selangor. We the public are blind by our so-called political zeal. Isn’t 1MDB is just part of a bigger problem of all our practices, if I may say?
  5. Be aware of “The March of Folly”. A small crisis could grow to be a full scale crisis if we (from all sides of the divide) keep continuing marching on the path of doom and destruction (March of Folly). As it stood today, we the Malaysian society as a whole, are treading on this path of folly. We succumb to all sides of political divide to further tread a downward path of economic malaise – by acceding to politicians, who are ALL (both sides of the divides) hungry for power and positions. None of them tell us clearly WHAT THEY WILL DO (differently), if they got into the positions of power. Furthermore, we should look upon qualities of leaders who will WALK THE TALK. But instead, it is proven that almost none are willing to do that, if the path is not personally advantageous to him. As clear example, Lim Guan Eng should have taken a leave from the Penang CM post when he was charged; but instead he took the path to stake the whole democratically elected Penang state government as his personal “gamble”. This is outright undemocratic in spirit (if not in form). For me as an example, I resigned from all my ABRAR posts when I was charged by the Securities Commissions in 2000, and I spend the next 11 years fighting in the court until the Appeal Courts decided in my favor 3-0 (the Sessions Court judged me guilty in 2003, and then the High Court reversed the decision in 2006, and finally the Appeal Court rejects the appeal by the SC to overturn the High Court decision by a unanimous decision of the 3 member bench, in 2010). Some have said that my charge was politically motivated by Dr. Mahathir’s government as a crackdown on Anwar’s supporters. That’s the politics, but the economics of it is to “destroy the whole Abrar Group”, which what really bites. Regardless of what will be the damage to you personally, you must walk the talk. The folly in my case is to destroy a full-fledged Bumiputera organization, due to political expediency ( I state my case because I am only one of the sample, there are so many others face the same fate). What further destruction that we wish to happen now, so that the politicians could further expand their political expediency? Should we all cry loudly “enough is enough”.
  6. We should be interested in the solutions offered to 1MDB rather than the doom of 1MDB. Why? If we think that 1MDB is public asset (which is factually true), then we should be interested in how to SAVE 1MDB, not its destructions. For example, if we think that the whole (gross) assets of 1MDB of say RM50 billions, which translates to “your assets” of RM1,666 per person (and for me X13 for my whole family = RM21,666); how this could be preserved instead of becoming negative say -20,000 (if it ever becomes a full liability, instead). This is what we should be interested in hearing or knowing. And for those who are so interested in getting Dato’ Najib to be out: what would they do instead of Dato’ Najib, to make good of “our stakes” in 1MDB. If their interest is to make sure that “my family assets” to become minus RM20,000 ( total loss of RM40,000 and we could be counting for more), then I should be extremely cautious.

Last but not the least – let me just go back to the ROOT OF THE PROBLEM – Providing Government Guarantees to business ventures and the practices of governance that we have today.

I would strongly encourages that ALL POLITICIANS should work hard to enact laws of parliament to do the following (very much in line to what the US had done post Sub-Prime Crisis):

  1. To enact laws that provides FULL COMPULSORY DISCLOSURE OF ALL FORMS OF GUARANTEES PROVIDED BY THE FEDERAL GOVERNMENT (all the explicit and implicit guarantees). Furthermore, we must have a clear cap or ceiling on the total  guarantees (including implicit guarantees). If possible, NO GUARANTEES to be provided to ANY FORMS OF BUSINESS VENTURES. This has to stop. [In the next article, I will provide the factual details (to my ability and knowledge) the full extent of these guarantees, as of today].
  2. To enact laws that ELIMINATES ANY FORMS OF FORMATION OF “SHADOW FINANCIAL ORGANIZATIONS” BY THE GOVERNMENT. (Note that 1MDB is only ONE of the MANY. Actually, many were formed during Tun Dr. M’s time, which in effect are still operating till today). The same practices are done by State of Penang, Selangor, and Kelantan (which are in opposition control), and off course all the BN controlled states (with Sarawak on top of the list), followed by Johor, Pahang and so on. In short, to eliminate any forms of the “Dark World of Finance” to be operated by any level of governments. I have to say that, as of today, we have these forms of “shadow financial structure” to be endemic within the whole country. Anybody who came to power will find extremely lucrative and convenient to continue with them as it serves them well. This is one of the major avenues of corruption to take place, albeit in hidden forms due to the “dark and shadowy” nature of its structures.
  3. To find ways to “STRIP OF INDIVIDUAL POWERS” of government officers. We inherit the British systems of power structure, whereby the Chief Executives (the Prime Minister, Chief Ministers, and followed by all the “little Napoleons” below them) had almost TOO MUCH POWERS vested in them, individually. They are good for effectiveness and inefficiencies of government operations. But Tun Dr. M had make it all to be “personal fiefdom” all the way to the bottom (right to Yang Dipertua Majlis Perbandaran and Ketua Kampung).

For PART A and B above, it would require ALL PARLIAMENTARY members to come together, by-partisan, to get such an Act in place. If that’s is impossible, then WALK THE TALK. Any level of government, such as State Government, or even units or divisions of Government COULD VOLUNTARILY, EVEN NOW, to perform it with full sincerity and intention for the sake of the people. Don’t come with lame excuses, if you really believe in it. My dear friends, all of this can be DONE even WITHOUT ANY NEW LAWS to be enacted. What’s needed is CLEAR POLITICAL WILL. Hence, I challenged the State Governments which are controlled by the Opposition to be first to do it (since they complaint the loudest). That would augur well for the public and show that they are sincere in what they say.

For PART C: it is an uphill battle. Nobody wants to let go positions of power, since it is extremely convenient (and useful). It will take real political guts and determination, as the rot has gone down to the bottom. Obama couldn’t change the US (despite the motto of his original campaign of “Change We Can”). For me, I want to see any real leader among us who is willing to do this – VOLUNTARILY. Then he is a man of WALK THE TALK and hence a true leader that’s worthy of leadership.

With this background, I will then focus on the economics, which is the next part of this set of writings.


These stories as I would like to call it are real and non-fictional, even though not much had been written about it. It is another sad story from the Dark World of Finance that took place from the late 1990s and continues on till today. The after effects of the saga affected Bruneians till this day. I have to mentioned some names, of which you could verify their their identities; and I kept many other names not mentioned for the sake of protecting their identities. But for one they are real people (non-fictional), and my accounts here are from first hand source. How I did get involved deeply on the subject is something that I will not reveal. The purpose of me writing here is for the benefit of taking the lessons for future generations (hopefully, if we ever learn).

Brunei Investment Agency is one of the uprising Sovereign Wealth agency of 1990s. The wealth of BIA, as they are called, during those time should be in the region of US50 billion (on a conservative estimate). The one running BIA as its Chairman, at the time is H.H. Pengiran Jefri Bolkiah (later on I will use Pengiran Jefri for the sake of brevity), the youngest brother of H.H. Sultan Hasanal Bolkiah, who was then the Finance Minister of Brunei (1986 to 1998). The main source of wealth for the BIA is the Brunei oil revenue, where 1/3 of it goes to Shell (the operator), 1/3 to BIA and 1/3 to the Royal family; under the terms set by Al-Marhum Sultan Haji Omar Ali Saifuddien. Pengiran Jefri is considered among the smartest and ambitious of between the four brothers.

Under him, Brunei undertook massive development projects in late 80s and early 90s, which saw the development of Jerudong Park (the first major theme park in Asia), which opened in 1994 at a cost of US1 billion. Built upon this success, then Pengiran Jefri setup Amedeo Corporation Sdn. Bhd., named after the famed Amedeo Modigliani, the Italian painter of nude girls, of which about 300 of the paintings were bought by Pengiran Jefri.

The creation of Amedeo, is to bypass the extremely bureaucratic BIA, which hinders many projects and the speed of execution as demanded. Pengiran Hakim, who is Pengiran Jefri’s eldest son was the co-director of Amedeo, and the de-facto chief operating person is Mr. Danny Wong, from Malaysia. The question is how did Amedeo operates?

First, monies were passed from BIA to Amedeo, and from there it went to finance all the projects and operations of Amedeo. All in total, about US40 billion went through this route over a period of about 5 years. Amedeo went first on spending spree, acquiring assets all over the world, namely super luxury hotels: New York Palace Hotel (from the Helmsley), Plaza Athnee (Paris), Hotel Bel Air (California), and a string of other hotels. It also bought the Hilton in central Jakarta, Four Seasons in Singapore, and at least 11 more hotels in various locations in Indonesia and the Philippines. During the rescue of Amedeo, a calculation that was made, all these hotels could be packaged into a Hotel/Real Estate Trust, which could be easily valued somewhere around US4 billion (in early 2000 terms), at a PE of 6. This was an estimated provided by Goldman Sachs and few other financial team at the time. This is the first class of assets – namely prestigious real estates.

The second class of assets were collectibles – these were paintings (Modigliani, Picasso, and others), and then luxury cars as special collection, numbering between 2000 to 3000 cars, the most notable one is Bentley Convertible (which the patent is somewhat owned/developed under Amedeo), thoroughbred horses of around 5,000 heads, two super luxury yachts named Tits1 and Tits2 (under construction in Papenburg, Germany at the time), seven airplanes (which includes at least one Boeing 747), and numerous jewelry, watches, and others. Notable also is the acquisition of the British jeweler, Asprey Ltd. The third class of assets were projects undertaken – Brunei Imperial Hotel, Berakas Power Plant, Brunei mobile phone, various palaces in Brunei, Jalan Bukit Tengku in KL, to name a few.

All assets were purchased using cash by Amedeo, and in fact Amedeo do not have any bonds or debts raised from the market, and neither any bank borrowings. So what went wrong? What happened was like someone spending water below a dam, thinking that the dam will always be filled; but suddenly one day, the dam went dry. The dam was BIA and the spender was Amedeo. BIA’s cash were depleted. At that time then everything went haywire. H.H. the Sultan sacked Pengiran Jefri as Finance Minister and BIA Chairman, and Amedeo left in the lurch with no more cash to spend. BIA then claimed that all monies paid to Amedeo are debts owing to BIA. So the question is what’s left in Amedeo? All that were left are some the assets in Brunei (namely the Imperial Palace Hotel, palaces, luxury cars, horses, some of the paintings, etc), and Amedeo owed its contractors and suppliers to the tune of Brunei Dollar (BD) 1 billion or so. All in, the assets in Brunei is less than few billion dollars. The total amount spent by BIA through Amedeo exceeds US40 billion. Where were all the monies gone?

Amedeo and Pengiran Jefri is nothing but the same entity. In fact, all the monies that were spent or “invested” outside Brunei were not in Amedeo’s name – they all went through hundreds of offshore trusts created in Jersey or some other jurisdictions in Switzerland and Europe. All the trusts were named after various flowers, such as Lily Trust, Rose Trust, etc. While all other assets in Asia went under personal names, or held by various individuals (Bruneian, Malaysian, lawyers, etc.).

BIA then launch a lawsuit against Amedeo and Pengiran Jefri in 2000 – in its efforts to recover the investments. A deal were reached within the same year, as Pengiran Jefri agreed to return the assets, and Amedeo, under the pile of local debts went to the receivers. Arthur Andersen was appointed as the Receiver & Manager of Amedeo. However, after sometime, the deal went sour for unknown reasons, and only part of the transfers or returning of the assets went through.

During the period, before its demise, Arthur Andersen were auctioning items under Amedeo, to raise monies to pay off its creditors. For that AA went overdrive, and the total sale were about US300 million, and the bulk of the monies went instead to pay AA’s fees which were in the same region of US300 million. So almost nothing went to pay the creditors of Amedeo. This is another rip-off of grand scale by Arthur Andersen. What went off in the sale were the Modigliani paintings, some jewelries, some cars and so on. Nothing too significant.

The question is why Amedeo went to receivers? Simply because the unwillingness by anyone to deal with its creditors of a meager BD1 billion (compared to the assets of Amedeo). This allows AA to take advantage of, and nobody was a real winner, except Arthur Andersen, who walked away after that with the fees. Shortly thereafter, AA went bust with the Enron scandal of the US.

What were then proposed (yours truly is part of the team), is to form another vehicle to buy Amedeo’s creditors, through a new company called Global Evergreen S/B. The offer was to pay buy dollar for dollar for all small creditors (below some threshold figure), to get among the biggest creditor to totally waived off the claims (among them major contractor and suppliers), and make payments with cash as full and final settlement. The scheme were executed and completed in less than three months, with little cost incurred (mainly legal fees involved). And it was done with almost $600 million in savings to BIA/Amedeo. This is a far cry compared to US300 million ripped by Arthur Andersen, and yet they had done nothing significant, except paper works (which resulted in nothing), and finally they also shred most of the papers when they were terminated (similar to what happened in Enron’s case, well before Enron occurred). Anyway, most of the small creditors are Bruneian companies or entities.

Then what’s left is how to make recovery on the balance of the assets? First, I must mentioned the name “Manoukian brothers”, who were major players in “selling or supplying” the assets to Amedeo. These were unscrupulous people, who arranged for the paintings to be bought, to broker the sale of Asprey at inflated prices, and so on. We can’t tell how much really they walked away with, and yet afterwards are suing Amedeo and Pengiran Jefri for more.

The hard part is to unravel the ownership of these assets, since most were either under offshore trusts or personal names of other individuals. The papers for the Trusts were mostly lost or gone, and there were no clear papers to link the individuals holding the assets with Amedeo. The task is really an uphill battle. Pengiran Jefri was sincere in his efforts to return back the assets. In fact, it could be accounted that large sums of the monies were spent for the benefit of the Brunei royal families.

But what had happened was, there were so many people taking advantage of the situation – some running away with the assets, some trying to hive of the assets cheaply, and the lawyers (from London to Switzerland, Singapore, Malaysia, United States, Indonesia, Hong Kong etc.) were the largest gainers, as there were at one stage not less than 100 lawsuits and interlocutory suits filed in all of these jurisdictions. Lawyers were advising against settlements (which could be achieved simply by having the brothers to sit down and agreed on a settlement, since the matters could be classified as “private matters” between Pengiran Jefri and HH the Sultan). But that was not the case to be. Some of the lawsuits are still alive until today (well beyond 15 years on).

Some of the assets such as the Brunei Imperial Palace Hotel were returned, the Hilton in Jakarta today is named as The Sultan, the land next to KLCC today is the Grand Hyatt, the land in Bukit Tunku had been levelled (the ghostly remains of uncompleted building demolished, the land was under Pengiran Jefri’s personal name), bulk of the luxury cars were sold, the 5,000 horses were sold, Tits1 and Tits2 were sold, and so on. What’s still left under Pengiran Jefri is the New York Palace Hotel, Plaza Athenee in Paris and few other notable ones in Las Vegas and Bel Air in California.

All in all, the total tally of what’s “lost” is around US18 billion. This is the sad and tragic story of Amedeo Saga of Brunei. By the total count, per capita loss was at least US45,000 per Bruneian (counting the whole population of Brunei of 400,000 people). That’s what happen when this so-called sovereign wealth management went unchecked. This one won’t definitely be the last. Many more could come – since we refused to learn from the past.

What’s unique about this saga is the amount of debt to external parties was small (BD1 billion), but what cost so much is the fact that the issue was dragged for too long and too far. Much could be saved and recovered if fast and decisive actions were taken. So on the same score, 1MDB could be saved and possibly lesser losses or no losses could be achieved – only if timely, decisive, correct actions are taken. Whether that would be the case or not is something that we have to wait and see.