KUALA LUMPUR: Malaysia on Thursday (Jun 21) said it will fund up to RM2.8 billion (US$697.9 million) to complete the development of Tun Razak Exchange (TRX), an integrated financial district in Kuala Lumpur from which more than RM3 billion was taken to pay off 1Malaysia Development Berhad (1MDB) debts.
Finance Minister Lim Guan Eng said the decision will "help allay concerns" of local and foreign investors on the fate of the project, which is developed by TRX City (TRXC).
"This is one example of how 1MDB used this to pay off its debts that are not related to the project," Lim said at a press conference broadcast live on local television.
“Injecting the additional RM2.8 billion, in addition to the RM3.7 billion transferred earlier to TRXC, will bring the total funding by the government to RM6.5 billion,” he said.
Lim also revealed that TRXC did not have the funds for infrastructure works to complete the project and is seeking government financial assistance.
“The alternative of not coming up with funding of RM2.8 billion and not completing the project is to pay RM3.51 billion in compensation, as well as an eyesore abandoned mega-project in the heart of Kuala Lumpur,” he explained.
“The project will also help recoup all misappropriated funds, repay all borrowings, recover all funding investments and opportunity costs, as well as potentially achieve a small surplus return. Completing the TRX will allow the full value of the project, of at least RM7.6 billion, to be realised."
Lim added that he has instructed the management of TRXC to lodge a report with the investigative panel of 1MDB and the police on the RM3 billion in misappropriated funds.
He assured Malaysians that his ministry will ensure that the injection of funds is spent prudently to protect the interest of tax-payers, as well as the existing foreign and local investors of TRXC.
TRXC FORMER SUBSIDIARY OF 1MDB
The TRX project was put under review when Pakatan Harapan formed the government after its election victory on May 9.
Developer TRXC is currently a wholly-owned subsidiary of the Ministry of Finance. The company was formerly known as 1MDB Real Estate, formerly a subsidiary of 1MDB.
TRXC was transferred to the finance ministry on Mar 31 last year because it was unable to secure land sales or bank financing, due to its association with 1MDB.
TRXC is also the owner of the two key real estate projects under the 1MDB umbrella, comprising TRX and the Bandar Malaysia development in Kuala Lumpur.
Since 2012, Malaysia's federal government had guaranteed borrowings, extended advances and provided transfers to, as well as purchased land from TRXC, amounting to RM3.688 billion.
Of this sum, a total of RM3.067 billion was misappropriated by 1MDB, mainly for 1MDB loan repayments.
As a result of the misappropriation, TRXC did not have enough money to fulfil its obligations as the master developer of TRX.
TRXC has sold parcels of land to local and foreign investors such as Mulia Property Development, HSBC, Affin Bank, Lembaga Tabung Haji, WCT and IJM, whose building would be tenanted by Prudential.
The Mulia Exchange’s 106 Tower and the Prudential building are expected to be ready by early next year.
Last year, the Malaysian Finance Ministry-owned TRX City terminated its agreement with China Railway Engineering Corp (CREC) and Iskandar Waterfront Holding on the basis that it "failed to meet payment obligations outlined in the Conditions Precedent".