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Given the recent announcement of the US Department of Justice’s (DoJ’s) investigation into 1 Malaysia Development Berhad (1MDB) and the alleged corrupt practices in the company, the signing of the Memorandum of Understanding (MOU) of the high-speed railway (HSR) is troubling.
The first issue involves the terminus of the HSR in Kuala Lumpur called Bandar Malaysia. 1MDB used to own Bandar Malaysia but sold 60% equity (RM7.4 billion or SGD2.5 billion) to a joint venture between China Railway Engineering Corp (CREC) and Iskandar Waterfront Holdings (IWH).
The CREC also announced that it was committed to investing an additional (RM8.1 billion or SGD2.7 billion) to building its regional HQ in Bandar Malaysia. The announcement was made at a ceremony officiated by Malaysian Prime Minister Datuk Seri Najib.
It was further reported that the CREC-IWH conglomerate would bid for the HSR project as CREC says that it would be “prepared to be involved in every aspect of the HSR development from design, construction, investment up to operations”.
This puts the CREC bid in pole position to secure the HSR contract even though railway companies from Korea, Japan, France, Germany, Spain and Taiwan have also shown interest.
Since then, however, there have been more revelations about 1MDB dealings.
This has led to the Monetary Authority of Singapore (MAS) announcing in July 2015 that it was looking into the dealings of 1MDB and pledged “tough action” if banks in Singapore were found to be involved in the growing scandal in 1MDB.
In May this year, the MAS shut down BSI Bank in Singapore for alleged money laundering practices. Last week, Singapore authorities said that DBS and the Singapore branches of Standard Chartered Bank and UBS were being investigated in connection with 1MDB. This came after DoJ announced its seizure of 1MDB assets in the US.
Knowing all this, PM Lee Hsien Loong saw it fit to travel to KL to sign the MOU with Mr Najib last Tuesday, 19 July 2016.
The SDP raises the following questions:
Why the rush to put pen to paper given the controversy embroiling 1MDB and the political uncertainty building up in Malaysia? Has the Singapore government exercised due diligence in proceeding with the HSR project?
How comfortable is PAP with the fact that CREC (owning majority control of Bandar Malaysia) is also bidding for the HSR operations? Can the PAP assure Singaporeans that the sale of Bandar Malaysia to CREC was conducted in a transparent manner?
Does Singapore have a say in which company is awarded the contract for the HSR project? How transparent is the award process? From media reports, it seems that the tender process has not even been agreed upon.
If 1MDB is crippled by the impending actions taken by multiple jurisdictions, how will the project proceed and what, if any, are the contingencies?
Transport Minister Khaw Boon Wan said that it is time to “pause and celebrate” the green light for the project. Given the circumstances, this might be premature.