In May, Sarawak Report cited sources which reported that the fraudster Jho Low had been involved in negotiations between Malaysia and China to resolve the thorny issue of a Belt & Road project that he had negotiated for his boss, former PM Najib Razak, back in 2016.
On Friday, the outcome of those negotiations seems to have been announced in the form of the mighty strange claim that Malaysia has apparently “recovered” RM5 billion out of an RM8 billion loan where the proceeds went missing back in 2017/18, through an agreement to “repurpose” the missing money as a new loan.
No further details as to how such an outcome could have been arrived at have been offered so far, nor has there been any explanation as to where and how the missing RM5 billion was located and returned. The official Malaysian announcement says only:
The signing of this agreement marks a significant achievement … in achieving a partial recovery on the [original RM8 billion] loan by repurposing RM5 billion to implement NPWSS [Northern Perak Water Supply Scheme]. Thus, reducing the losses arising from the TSGP and MPP projects and ensuring that RM5 billion can be utilised to develop essential infrastructure
The so-called trans-Sabah gas pipeline [TSGP] and Multi-purpose pipeline [MPP] contracts had been agreed with the Chinese authorities at the highest levels at the same time that Najib negotiated the terms of the notoriously inflated East Coast Rail Link (ECRL), which was likewise offered to China to build as a Belt & Road project using loans raised from China EXIM Bank.
Behind the scenes, as confirmed by later court hearings, these two projects were designed to repay the debts owed by the Malaysian finance ministry-owned fund, 1MDB, through backhanders that the Chinese government had agreed the construction companies would pay in return for the inflated fees.
The ECRL contract was structured to repay the massive $7.5 billion directly owed by 1MDB itself (plus two of Jho Low’s own companies), whilst the pipelines were designated to pay the RM4 billion ($1 bn) owed by the 1MDB subsidiary SRC to the civil service pension fund KWAP.
What was particularly shocking about the pipeline arrangement was that Najib, by then desperate for cash, had further negotiated terms allowing for 88% of the contract to be paid up front to the the Minister of Finance incorporated company, Suria Strategic Energy Resources Sdn. Bhd., (SSER), without a yard of pipeline to show for the money.
China EXIM Bank duly coughed up the RM 7.81 billion (just shy of $2bn) in March 2017 to the Chinese government designated contractor China Petroleum Pipeline (CPP), after which the money appeared to evaporate. When the Harapan Government raided CPP’s Malaysian bank account the following year it found only around $150 million which it confiscated.
SSER was later fined RM18 million for breaking Bank Negara rules over such a ‘negligent’ contract involving foreign lenders.
At the time Harapan officials suspected the money may have sourced at least some of the billion dollars passed by Chinese construction subsidiaries to Kuwait from where Jho Low laundered it back into paying 1MDB debts using the son of the then Kuwait prime minister, Sheikh Sabah Jaber Al-Mubarak, as a front.
The evidence shows the money more likely came from the ECRL arrangement using subsidiaries of the contractor CCCC, leaving a long-standing mystery over the best part of $2 billion that disappeared from the pipelines which were left largely unbuilt (this was a loan on which Malaysia had contracted to pay the Chinese bank 3.5% per annum over 20 years, taking the total repayment due to over $3 billion).
Friday’s triumphant press release by the Madani government acknowledges the above facts, admitting that following the termination of the pipeline projects in 2018, “the Malaysian Government remained liable for the repayment of RM8 billion of related loans from CEXIM, even though the projects were not implemented.” And that “This remained unresolved despite efforts by the previous three administrations.”
However, the press release does not elaborate on how the RM5 billion was rediscovered after all that time in order to be repurposed in this way. Surely, if the money had still been available and waiting to be spent on the uncompleted projects in an accessible bank account, it could have been returned thereby relieving Malaysia of a huge portion of the debt burden the best part of a decade ago?
Alternatively, why would it take eight years to reach agreement with China on the decision to repurpose the loan? And, if the money was known to be ready and available, why has this never been announced? Instead, Malaysians have been given to understand for many years that since the SRC debt was not repaid by this source of income (the government paid it off) the proceeds of the loan was missing.
Now it has been ‘recovered’? And ‘repurposed’?
Sarawak Report suggests there has been a face-saving exercise, along the lines of the deal leaked to it in May as orchestrated by Jho Low. This agreement was designed to write off Malaysia’s liability for the theft of public money by its now jailed former kleptocrat PM on the basis that the entire criminal scheme had been knowingly facilitated and camouflaged by the Chinese government.
Back in 2023 Abu Dhabi agreed to reach a settlement whereby its state controlled IPIC fund paid 1MDB $1.8 billion compensation for very much the same reason i.e. to close down discussion on its embarrassing record of collusion in return for backhanders to top officials. In the case of China, the quid pro quo had been Najib’s compromising of Malaysia’s independence by connecting into into the Belt & Road initiative.
Now, thanks to Friday’s agreement, we have the details on the deal. China has now allowed Malaysia to ‘re-deploy’ RM5 billion of the missing money into another project it wants to borrow money to carry out – a water system in Perak. This time, one assumes, the money will be used to carry out the intended development work.
One other ‘win’ from Malaysia’s point of view is the sidelining of Jho Low’s apparent priority in the negotiations, which had been to link the agreement to a pardon for himself.
According to Sarawak Report’s sources, the fraudster had even entered KL under Chinese protection to supervise the talks last year whereby both he and Sheikh Sabah would see the dropping of the charges against them.
At the very same time, of course, evidence leaked out from the United States about a simultaneous attempt by Jho to buy a pardon using President Trump’s purported 250 pardons list to celebrate the Independence Anniversary in July. This too was cancelled after word got out, however reports suggest the Malaysian fraudster had offered up to $2 billion for his name to be on the list.
Could the missing pipeline money (now ‘recovered’) have played a role in that offer?
The full details of Jho’s China negotiations and pardon attempts are available in
THE CHINA CONTRACT
available online and in selected bookshops from November 12th