Malaysian central bank’s $675m purchase of state land questioned

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Malaysian central bank questioned for buying state land at market price

Questions are growing around the Malaysian central bank's recent purchase of government land for RM2 billion (S$675 million), with observers saying it is unusual for the institution to pay market price for state land.

The hefty price tag has also sparked claims that the government is raiding Bank Negara Malaysia (BNM)'s coffers to bail out troubled state fund 1Malaysia Development Berhad (1MDB), which last December forked out US$602.7 million (S$800 million) to settle a debt with Abu Dhabi's International Petroleum Investment Company (Ipic).

BNM's response this week that the buy was an "arm's length transaction" has only fuelled further disquiet over whether the financial regulator should be making such deals at commercial prices.

"It was not the government that wanted to sell the land to us. We actually approached the government many months ago to buy the land," BNM governor Muhammad Ibrahim was quoted as saying by The Edge Financial Daily on Monday.

Senior opposition lawmaker Tony Pua retorted that "Malaysians cannot be blamed for believing that Bank Negara allowed itself to be raided" with the "outrageous purchase" of some 23ha "in order to bail out 1MDB".

"Why should it be arm's length in the first place when the land was not intended for Bank Negara to make a profit," he asked, referring to BNM's stated aim to use the land for an education hub.

The government usually gives public universities land at a nominal rate, but the land purchased by BNM next to its existing Sasana Kijang complex in Kuala Lumpur's green lung Bukit Perdana works out to approximately RM823 per sq ft.

It was not the government that wanted to sell the land to us. We actually approached the government many months ago to buy the land.Bank Negara Malaysia governor Muhammad Ibrahim

Mr Pua also pointed out that even 1MDB, which continues to struggle to clear debt that hit RM51 billion in 2016, secured about 202ha of land from the government at a discount.

"The transaction raises an eyebrow, but is loosely consistent with BNM's 2015-2017 business plan of focusing on talent development for the financial industry," independent financial analyst Ryan Soh told The Straits Times.

BNM had announced the land purchase on Jan 4, while Ipic confirmed receipt of the US$600 million payment from 1MDB on Dec 27.

Despite speculation by critics and the media on how 1MDB sourced funds for the payment, the government and 1MDB have not clarified the matter.

Mr Muhammad said BNM has "acquired many (tracts of) land over many decades, and when we acquire land, we acquire at market price".

The central bank's 2014 annual report states that it had spent a total of RM112 million on land holdings as of 2013. In 2014, it spent another RM1.25 billion on an undisclosed amount of land, but has not made any further acquisitions since, until this recent deal.

BNM said last month the price tag is subject to a final survey of the land.

But when asked by The Edge to comment on speculation that proceeds from the sale were used to pay Ipic, Mr Muhammad said "that is the government's business".

The central bank did not respond to ST when asked if payment has been made and if the land has been transferred to it.