A week ago, my oral question to the Minister of Finance has revealed that its little-known subsidiary, SRC International had invested in “Gobi Coal & Energy Ltd, an energy company based in Mongolia. The investment was made jointly with international investors, with each owning 50%.”
However, the Minister refused to provide any other details, other than saying that “every investment by the joint venture company is conducted in accordance to good business practices by taking a long-term perspective and considering the short-term volatile nature of market prices. At the same time, the company expects the prices and return on investment will increase in the longer term for natural resources.”
I had asked an additional question on Monday this week for the specifics of the RM3.81 billion investment which was mentioned in the SRC International financial statement for 31 March 2014[i].
This was the amount listed as “investment portfolio outside Malaysia” and classified as “available for sale investments”. The report wrote that “the Group’s investment portfolio outside Malaysia consist of open-ended funds, quoted shares, bonds and time deposits”.
Therefore I asked in my question on where were these investments and who were the investment managers. I also asked on the nature of the investment.
However, once again the Minister’s reply was heavily short on specifics. He only explained that the investments were in the “coal and natural resources sector” and that “SRC International conducts its investments directly or via joint ventures with international investors.”
Despite the brevity, the Government’s official reply raises a major contradiction with the audited report. This is because Deloitte Malaysia has classified this amount as an “available for sale investment” involving “open-ended funds, quoted shares, bonds and time deposits”.
The international auditors did not describe any part of the RM3.81 billion investment as a long-term joint venture with any international investor. Surely if such a major multi-billion ringgit investment had been in place, it would have at the very least been briefly described in the audited accounts. Instead, there was not a single mention of Gobi Coal & Energy Ltd in the financial report.
After all, the financial did itemize a separate investment by SRC International to form a 50:50 joint venture with Aabar Investments where the Company had invested RM184 million in 2013 and lost RM89 million of its value in 2014.[ii] (which is a mini-scandal on its own!)
The discrepancy between the Government’s reply and Deloitte’s report which was signed off on 5 November 2014 is both stark and shocking. Now, nobody knows exactly what has happened to the RM3.81 billion. It looks like there might have been tampering and cover up in the presentation of the SRC International financial report.
Malaysians are extremely concerned because SRC International had secured a RM4 billion Islamic loan from Kumpulan Wang Amanah Persaraan (KWAP) which was guaranteed by the Federal Government. This loan was disbursed in two tranches in August 2011 and March 2012.
More worryingly, the Company is led by Nik Faisal Ariff Kamil who has recently gained infamy as a loyal sidekick of Jho Low. He followed Jho Low in UBG Bhd as the Executive Director of Investments in the late 2000s before also becoming the Chief Investment Officer of 1MDB. At 1MDB, as the email correspondence exposed in Sarawak Report revealed, he was the point man for Jho Low to coordinate multi-billion ringgit transactions, specifically the acquisition of UBG Bhd by PetroSaudi International (Seycelles).
The circumstances around SRC International and 1MDB are perhaps just too similar, coincidental and suspicious to be ignored. The Public Accounts Committee (PAC) must urgently investigate the shenanigans in SRC International with the assistance from the Auditor-General. These multi-billion ringgit scandals must be immediately prioritized as they made the routine purchase of RM1,940 marine binoculars for RM56,350 look like child’s play.
Malaysia has faced enough of international scandals and embarrassments on its shockingly lack of corporate governance. We do not need another multi-billion ringgit scandal to make us the butt of jokes in the international diplomatic and financial community.
[i] SRC International Sdn Bhd Financial Report March 2014 pp46
[ii] SRC International Sdn Bhd Financial Report March 2014 pp44-45