From The Malaysian Insider

Malaysian strategic investor 1Malaysia Development Bhd (1MDB) chief executive Mohd Hazem Abdul Rahman is resigning from his job today and will be replaced by Abu Dhabi-based Malaysian banker Arul Kanda Kandasamy, sources say.

Arul, 38, will be made 1MDB group president and executive director. He has been an executive vice-president, head of Investment Banking Group and head of Corporate Finance Division, for the Abu Dhabi Commercial Bank since July 2008.

He had also served as a non-independent non-executive director of Malaysia’s RHB Investment Bank Bhd from July 2009 to May 10, 2011, and as a director of RHB Islamic Bank Bhd, apart from being a non-independent non-executive director at RHB Capital Bhd from July 20, 2009 to May 10, 2011.

His predecessor, Hazem, joined 1MDB as the chief operating officer in August 2012.

The government-linked strategic investment has been hit by controversies over its debt portfolio and for keeping RM7.18 billion in the Cayman Islands.

Deputy Finance Minister Datuk Ahmad Maslan said last year 1MDB had already brought back 60% of its funds, and the balance 40% will return to Malaysia by end of 2014 although it had registered a return of 6% to 7% as of end of last year.

1MDB chairman Tan Sri Lodin Wok Kamaruddin last month said repatriating the funds back to Malaysia would have exposed the money to fluctuations on the foreign exchange market.

This follows the decline of ringgit in the past 10 months to RM3.52 against the US dollar today.

On December 22, Lodin said to maintain a strong liquidity position with a truly diversified global portfolio, the funds were invested in a 1MDB subsidiary that was registered in the Cayman Islands.

“However, the company has already redeemed a significant portion, US$1.4 billion (RM4.87 billion), of the fund and expects to redeem the remaining amount in the coming months,” he said.

1MDB, which calls itself a strategic development company, has been criticised by former prime minister Tun Dr Mahathir Mohamad, who noted that a large part of the money raised from the issue of debt paper by 1MDB has been sent to the Cayman Islands, a move which many, including the opposition, had also questioned.

Critics have complained about the lack of transparency in how the money is managed out of the Caymans, and it has been estimated that at least RM18 billion of 1MDB’s money is parked there.

Lodin had said there was nothing unusual about companies of 1MDB’s size investing their funds in the Cayman Islands, pointing out that it is one of the largest registered fund jurisdictions internationally, with the Cayman Monetary Authority recognised as one of the leading fund regulators in the world.

To clarify, he said in 2009, 1MDB and a Saudi Arabian company entered into a joint venture to facilitate long-term economic cooperation between Malaysia and Saudi Arabia.

A joint-venture fund was set up to undertake investments on projects which would generate financial and strategic benefits to both countries but due to various factors, both parties decided against it.

As a result, he said 1MDB’s investment in the company was converted into a fixed income instrument in the form of Murahaba notes, essentially a loan, with an annual interest rate of 8.75%.

He said the loan was paid back in full, for US$2.318 billion with a profit of US$488 million, in 2013.

“Repatriating these funds to Malaysia would have exposed them to fluctuations on the foreign exchange market, as being witnessed at the moment,” he said.

The Edge Financial Daily reported last month that the depreciating ringgit would hurt 1MDB, which has a sizeable chunk of its total RM42 billion in debts in the US dollar denomination.

This chunk, which amounted to RM22.25 billion according to 1MDB’s financial statements for the financial year ended March 31, 2014, has now grown to about RM25.7 billion – an increase of about RM3.96 billion – due to the ringgit’s decline by some 6.5% in 2014. – January 5, 2015.

For more on this story go to: http://www.themalaysianinsider.com/malaysia/article/1mdb-ceo-resigns-banker-arul-kanda-takes-over#sthash.1nLLk6iT.dpuf

Related story:

Leading banker chosen to helm 1MDB for communication skills, says Rafizi

By EILEEN NG From The Malaysian Insider

PKR believes high-flying banker Arul Kanda Kandasamy was appointed as the new CEO of controversial 1Malaysia Development Berhad (1MDB) to engage and diffuse public criticism against the strategic investment firm.

The opposition party’s secretary-general Rafizi Ramli said Arul was known as a PR-savvy and effective public communicator due to his background in debating since his secondary school days.

“I believe he was brought on board to engage the public directly. There are many criticisms being heaped at 1MDB which the management cannot deflate, and this translates to political liabilities for the government and Najib,” he said in referring to Prime Minister Datuk Seri Najib Razak.

1MDB was Najib’s brainchild and he is also chairman of the firm’s advisory board.

“As such, it is reasonable to bring in Arul as he is not only an investment banker, but also understands investments related to the Middle East as many of 1MDB’s joint-ventures and businesses are based in the region,” Rafizi told The Malaysian Insider.

Rafizi revealed that he and Arul knew each other since secondary school days, when both were active in the debating circuit.

Arul studied at the prestigious Royal Miliary College while Rafizi was with the renowned Malay College Kuala Kangsar (MCKK).

“He was an excellent and impeccable public speaker,” Rafizi said.

The Malaysian Insider had reported today that Arul will take over the CEO post from Mohd Hazem Abdul Rahman, who quit today.

Mohd Hazem, joined 1MDB as the company’s chief operating officer in August 2012.

Arul, 38, will be made 1MDB group president and executive director. He has been an executive vice-president, head of Investment Banking Group and head of Corporate Finance Division, for the Abu Dhabi Commercial Bank since July 2008.

He had also served as a non-independent, non-executive director of Malaysia’s RHB Investment Bank Bhd from July 2009 to May 10, 2011, and as a director of RHB Islamic Bank Bhd, apart from being a non-independent non-executive director at RHB Capital Bhd from July 20, 2009 to May 10, 2011.

Rafizi, who is one of 1MDB’s staunchest critics, also believes Arul’s appointment was a sign that Najib is not going to wind up 1MDB or allow the firm to share the same fate as the National Feedlot Centre (NFC), a cattle-rearing project, which had allegedly abused federal funds.

Najib had come under fire from within his party Umno, including influential former prime minister Tun Dr Mahathir Mohamad, as well as opposition politicians, over 1MDB’s heavy debts, its use of money and its opaque operations.

Penang Umno leader Datuk Seri Khairuddin Abu Hassan had lodged a police report late last year against the company over its alleged dubious financial activities and massive borrowings.

“It is obvious the PM is not going to surrender, and is in fact taking this proactive move to tell his detractors he is not going to shut down 1MDB.

“The fact that they are bringing in Arul means they are willing to do the sales pitch directly with the public. So, in the next three to four months, expect to see lots of PR done through Arul,” said Rafizi.

The Pandan MP said Arul would have his work cut out for him as he believes a lot of the company’s investment decisions were not made by the CEO alone.

“I doubt with Arul on board, he can influence 1MDB’s investment decisions. He would have to do lots of defensive work for decisions made by someone else, it’s a tough job,” he added.

The government-linked strategic investment firm had been hit by controversies over its debt portfolio and for keeping RM7.18 billion in the Cayman Islands.

Deputy Finance Minister Datuk Ahmad Maslan said last year 1MDB had already brought back 60% of its funds, and the balance 40% will return to Malaysia by the end of 2014 although it had registered a return of 6% to 7% as of the end of last year.

1MDB chairman Tan Sri Lodin Wok Kamaruddin last month said repatriating the funds back to Malaysia would have exposed the money to fluctuations on the foreign exchange market.

This follows the decline of ringgit in the past 10 months to RM3.52 against the US dollar today.

On December 22, Lodin said to maintain a strong liquidity position with a truly diversified global portfolio, the funds were invested in a 1MDB subsidiary that was registered in the Cayman Islands.

“However, the company has already redeemed a significant portion, US$1.4 billion (RM4.87 billion), of the fund and expects to redeem the remaining amount in the coming months,” he had said.

Dr Mahathir had repeatedly criticised the company, noting that a large part of the money raised from the issue of debt paper by 1MDB has been sent to the Cayman Islands, a move which many, including the opposition, had also questioned.

It has been estimated that at least RM18 billion of 1MDB’s money is parked at the Caymans.

Lodin had said there was nothing unusual about companies of 1MDB’s size investing their funds in the Cayman Islands, pointing out that it is one of the largest registered fund jurisdictions internationally, with the Cayman Monetary Authority recognised as one of the leading fund regulators in the world.

To clarify, he said in 2009, 1MDB and a Saudi Arabian company entered into a joint venture to facilitate long-term economic cooperation between Malaysia and Saudi Arabia.

A joint-venture fund was set up to undertake investments on projects which would generate financial and strategic benefits to both countries but due to various factors, both parties decided against it.

As a result, he said 1MDB’s investment in the company was converted into a fixed income instrument in the form of Murahaba notes, essentially a loan, with an annual interest rate of 8.75%.

He said the loan was paid back in full, for US$2.318 billion with a profit of US$488 million, in 2013.

“Repatriating these funds to Malaysia would have exposed them to fluctuations on the foreign exchange market, as being witnessed at the moment,” he said.

The Edge Financial Daily reported last month that the depreciating ringgit would hurt 1MDB, which has a sizeable chunk of its total RM42 billion in debts in the US dollar denomination.

This chunk, which amounted to RM22.25 billion according to 1MDB’s financial statements for the financial year ended March 31, 2014, has now grown to about RM25.7 billion – an increase of about RM3.96 billion – due to the ringgit’s decline by some 6.5% in 2014. – January 5, 2015

IMAGE: PKR’s Rafizi Ramli is familiar with the new top man at 1MDB, Arul Kanda Kandasamy, as they had sparred in inter-school debates while in high school. – The Malaysian Insider pic, January 5, 2015.

For more on this story go to: http://www.themalaysianinsider.com/malaysia/article/leading-banker-chosen-to-helm-1mdb-for-his-communication-skills-says-rafizi#sthash.VXLmXekm.dpuf

See also related iNews Stories at: http://www.ieyenews.com/wordpress/?s=1MDB