PUTRAJAYA (June 21): The Pakatan Harapan-led federal government will inject another RM2.8 billion of capital into the 70-acre Tun Razak Exchange (TRX) development in Kuala Lumpur, to avoid bigger losses.
Finance Minister Lim Guan Eng said the alternative of not coming up with a funding of RM2.8 billion and not completing the project is to pay RM3.51 billion in compensation claims for the eyesore of an abandoned mega-project in the heart of the capital.
"Apart from having to pay compensation, the government will also lose the RM3.7 billion transferred earlier to TRX City Sdn Bhd (TRXC), a wholly-owned subsidiary of the Ministry of Finance (MoF) and master developer of the TRX project," Lim said in a statement today.
The RM2.8 billion funding is required to complete all necessary infrastructure works in TRX, Lim added.
"TRXC does not have the funds for infrastructure works to complete the project and is seeking government financial assistance," he said.
"Yesterday, the Cabinet met and decided that the TRX project shall be completed, with government funding of up to RM2.8 billion. This decision will help allay concerns amongst the local and foreign investors who have put in billions of ringgit on the fate of TRXC," he said.
With the RM2.8 billion injection in addition to the RM3.7 billion transferred earlier to TRXC will make total funding by the government at RM6.5 billion, Lim added.
"Completing TRX will allow the full value of the project of at least RM7.6 billion to be realised. This will help to recoup and repay the TRXC borrowings, including the sums misappropriated by 1MDB, recover all funding investments and opportunity costs, as well as potentially achieve a small surplus return," he said.
The Ministry of Finance (MoF) will ensure that the injection of funds is spent prudently to protect the interest of Malaysian tax-payers, as well as existing foreign and local investors of TRXC, Lim promised.
TRXC, formerly known as 1MDB Real Estate Sdn Bhd, was a subsidiary of 1Malaysia Development Bhd (1MDB) and was transferred to the MoF on March 31, 2017, as advised by the Parliamentary Public Accounts Committee, because TRXC was unable to secure land sales or bank financing due to its association with 1MDB.
TRXC is the owner of the two key real estate projects under the 1MDB umbrella, comprising the 70-acre TRX and the 486-acre Bandar Malaysia development.
Lim said the federal government has since 2012, guaranteed borrowings, extended advances and provided transfers to, as well as purchased land from TRXC amounting to RM3.69 billion.
Of the RM3.69 billion of transfers, Lim said RM3.07 billion were misappropriated by 1MDB, mainly for 1MDB loan repayments.
"As a result of the misappropriation of funds, TRXC does not have enough money to fulfil its obligations as the Master Developer of TRX," he added.
Lim said he has instructed the management of TRXC, including its CEO Datuk Haji Azmar Talib and executive director Tan Hwa Min, to lodge a report with the investigative panel of 1MDB and the police, on the RM3 billion misappropriated funds by 1MDB.
"To date, TRXC has sold parcels of land to local and foreign investors such as Mulia Property Development, HSBC, Affin Bank, Lembaga Tabung Haji, WCT Bhd and IJM Corp Bhd (whose building would be tenanted by Prudential). The Mulia’s Exchange 106 Tower and the Prudential building are expected to be ready by early next year," he said. — theedgemarkets.com