Malaysia Seeks to Complete a $10 Billion Project Rocked by Scandal

Malaysia Seeks to Complete a $10 Billion Project Rocked by Scandal

In June, the finance minister, Lim Guan Eng, told reporters that $750 million was “misappropriated” by 1MDB from the Tun Razak Exchange, known as TRX. The Mahathir administration, he said, had nevertheless decided to invest almost $700 million more to complete the project.

“The Malaysian cabinet has decided to support the TRX project to recoup all misappropriated funds, repay all borrowings, recover all funding investments and opportunity costs as well as potentially achieve a small surplus return,” Mr. Lim said in a statement.

The Exchange 106 tower and the new financial center were particular favorites of Mr. Najib. The Tun Razak Exchange is named for his father, Abdul Razak Hussein, Malaysia’s second prime minister. Mr. Najib’s allegiance to the project helped persuade the Mulia Group, a big developer based in Jakarta, to spend $166 million for the 3.4 acres in the exchange, enough room to build the tower. Mulia owns 49 percent of the tower, the Malaysian Ministry of Finance owns the other 51 percent.

The Tun Razak Exchange was included in a $100 billion infrastructure construction campaign started by Mr. Najib in 2009 to elevate Malaysia from a middle-income country to what he called a “Top 20 nation.” Those projects included new rail lines and stations, mixed-use real estate developments, ports, highways, pipelines and energy plants.

Since the May 9 election, Mr. Mahathir, the new prime minister, has canceled or suspended most of the big projects, including two pipelines, a Kuala Lumpur metro line and two national train lines. But with the Mahathir administration’s new investment in the Tun Razak Exchange, the Exchange 106 tower will be finished on schedule before the end of the year, and the entire 70-acre development appears on a clear path to completion by the early 2020s.

Until the corruption scandal broke into public view in 2015 and its assets and responsibilities were restructured, 1MDB was responsible for land sales and development in the Tun Razak Exchange. The Ministry of Finance assumed 1MDB’s share of the project last year.

(Original source)