KUALA LUMPUR: The issues surrounding 1Malaysia Development Bhd (1MDB) did not have a directly effect on domestic investments, the Dewan Rakyat was told today.

Deputy Finance Minister Datuk Johari Abdul Ghani, however, noted that negative sentiments could play a role. “If we were to relate 1MDB directly with the ringgit’s fall, it is inaccurate.

But if (we look at) negative sentiments, then yes. “Whenever there is negative sentiment, it will somehow affect domestic investments, and investors do not like uncertainty,” he said.

He said apart from investor sentiment, other factors which contributed to currency depreciation included the global economy and high demand for the (US) dollar, which would put a pressure on the ringgit.

“1MDB’s failure to list its assets through an initial public offering (IPO) and secure bank loans to develop its land was due to the negative perception locally and at international level.

Due to this, banks were reluctant to approve loans for this purpose. To overcome these challenges, 1MDB had carried out strategic reviews and had to implement a rationalisation plan to restructure its debts of about RM42 billion.

“It is done through, among others, selling its stake in Edra Global Energy Bhd with a total price (including debt assumed by the buyer) more than RM17 billion; selling of Bandar Malaysia assets which will bring between RM10 billion and RM15 billion revenue; as well as the binding term sheet executed with International Petroleum Investment Co (IPIC) that would see a further reduction of RM16 billion in debt,” he said in reply to a question by Siti Zailah Mohd Yusoff (Pas-Rantau Panjang).

Johari said 1MDB was faced with the issue of an unsustainable business model with its accumulated debts caused by cash flow “mismatch” as the strategic development company failed to be publicly listed.

This, he said, resulted in its inability to pay for its principal loans and interests on time.-nst