This article first appeared in The Edge Malaysia Weekly on December 20, 2021 - December 26, 2021

BANK Negara Malaysia (BNM)’s acquisition of a parcel of land at RM2.07 billion from the Ministry of Finance (MoF) in 2017 has come under scrutiny again following the tabling of a Public Accounts Committee (PAC) report in the Dewan Rakyat on Dec 13.

PAC chair Wong Kah Woh, in a brief phone conversation recently with The Edge, says, “The significance of the report is that the PAC has confirmed that the land sale was for 1Malaysia Development Bhd’s (1MDB) debt [settlement].”

On his hopes from the findings of the PAC report, Wong replies, “In future, BNM or other [public] organisations should be independent from the executive.”

Then, as if to underscore the seriousness of this point, he repeats it: “Our recommendation is for all such agencies to be independent of the executive.”

In the PAC report, Treasury Secretary-General Datuk Asri Hamidon said the Cabinet gave BNM the green light to acquire the parcel, Lot 41, in November 2017.

“It was to address the mismatch between [1MDB’s] monetisation assets and obligations, so ministers agreed for parcels of land to be transferred to a SPV (special purpose vehicle Hartanah Mampan Sdn Bhd, owned by the MoF subsequently) to be sold to BNM,” Asri was quoted as saying.

PAC’s Wong, who is a conveyancing lawyer and MP for Ipoh Timur, says RM1.42 billion would have been a valuation that best reflected Lot 41, which means the price BNM paid was almost a 46% premium. The RM2.07 billion price tag — at RM823 per sq ft — was backed by an independent, private property valuation firm, Suleiman & Co. The sale first came to light in 2018, thanks to media reports on 1MDB.

The acquisition coincided with the early retirement of BNM deputy governor Sukudhew Singh, who had served 31 years in the central bank. A viral message from him to BNM staff went: “All I can say is that my life in the bank has been based on certain professional expectations, and when I find myself put in circumstances where those expectations can no longer be met, there could have been no other decision for me.”

Former BNM governor Tan Sri Muhammad Ibrahim resigned about six months after the completion of the land deal. He pointed out, however, that it was not the first time BNM had acquired land to enable the discharge of its mandates. In an internal circular sent to BNM’s employees following his resignation, sighted by The Edge, Muhammad cited the example of the central bank’s own headquarters on Jalan Dato Onn, Kuala Lumpur, which was built on three separate land acquisitions made in the 1950s and 1980s.

“The Bukit Perdana land, acquired in 2013 at a price of RM1,235 per sq ft, was also based on an independent professional valuer, upon which the ongoing construction of the Asian School of Business and the Financial Industry Training Centre [was] being done, are also the nearest examples,” he said but stopped short of pointing out that the transaction was done during the tenure of his predecessor, Tan Sri Dr Zeti Akhtar Aziz.

According to the PAC report describing the chronology of events, BNM’s board of directors received an initial offer to buy a 67.39-acre land identified as “Lot 41” from the MoF on Aug 21, 2017, and a mere three days later, the board agreed to take it up in principle.

On Oct 31, however, BNM received another letter from MoF offering a smaller parcel measuring 55.79 acres, which were still part of the initial Lot 41 parcel, for RM2.07 billion.

The reduced size, according to the report, was because MoF had to carve out 11.63 acres being utilised by the National Space Agency.

BNM approved the acquisition on Dec 7. Exactly a week later, the sale and purchase agreement was signed, with half the amount paid on Dec 19. The remaining RM1.035 billion was paid on Dec 27, and the ownership was transferred to BNM on Dec 29. The deal was concluded in a record span of four months.

It was also highlighted that BNM already owned a parcel of land adjacent to Lot 41 — named Lot 45 — which had not been utilised. So, did BNM need to spend RM2 billion for Lot 41, since it had no conclusive plans to undertake any development on the tract of land, although its initial statement on its intended use was for the Global Islamic Finance University and International Shari’ah Research Academy for Islamic Finance, which were to be relocated from Lorong Universiti to the new premises?

1MDB racked up billions of ringgit in debt for asset purchases — including power plants from Genting Bhd and Tanjung plc, controlled by T Ananda Krishnan — at above-market prices. A large bulk of the state-controlled entity’s debt was guaranteed by the federal government. 1MDB was cash-strapped partly because the listing exercise of its power assets did not take place.

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