Dubai: China may be attempting to acquire Malaysian assets in exchange for financing state-owned investment fund 1MDB’s multibillion dollar dispute against International Petroleum Investment Company (Ipic), according to the Financial Times.
Abu Dhabi-based Ipic is claiming approximately $6.5 billion (Dh23.85 billion) in arbitration to settle a dispute stemming back to May 2015, where the Abu Dhabi government-owned agreed to provide the Malaysian fund $1 billion to settle some liabilities in exchange for a transfer of assets and assume interest obligations on $3.5 billion of debt. 1MDB defaulted on its repayments in April 2016.
The Financial Times claimed on Wednesday that China “had been approached” to help 1MDB clear its debts, with the newspaper claiming one source had suggested the deal would involve swapping “assets for financing”.
Malaysian Prime Minister Najeeb Razak, who is currently embroiled in a corruption scandal involving the same fund, travelled to Beijing in October of this year on a state visit to promote economic and military ties, with insiders suggesting the premier’s right hand man, Jho Low, has been in China for the past three months.
China has purchased stakes in several key 1MDB-owned projects over the past year, aiding the embattled fund in its bailout attempts.
James Chin, Director of the Asia Institute at the University of Tasmania, suggests that with Malaysian government under intense pressure and the stock market rapidly losing value, China sees an opportune moment to exert influence over its neighbour and build on Premier Xi Jinping’s aspirations for a “maritime silk road”.
“China have already purchased a controlling stake in Bandar Malaysia [a 1MDB-owned urban development project] for $1.7 billion, which will eventually become a terminal along the route,” Chin said.
China is Razak’s preferred partner in his 1MDB bailout attempts due to their “willingness to pay premium dollar for Malaysian assets, based on prospective prices once China has realised its vision for Asia. They are not paying 2016 value, they are paying 2030 or 2040 value”.
Chin says China are currently assessing the value of Malaysian assets in preparation for a deal and believes “Najeeb Razak’s plan is to use the financing to pay for the costs of arbitration with Ipic, and then turn his focus to quelling unrest at home over the increasing influence of China and stabilising the economy”.
Investigation into 1MDB are ongoing in numerous countries, including majoring investigation in the US, Singapore and Switzerland. Najeeb has frequently denied any wrong doing and was cleared by Malaysia’s attorney general in January.
