It came as a rather weird revelation today in the The Edge’s Financial Daily that 1Malaysia Development Bhd (1MDB) did not have any letter of support for their debts.
In a written reply, Prime Minister Datuk Seri Najib Razak said that the Ministry of Finance had no legal obligation to cover 1MDB’s US$3.5 bil bonds to International Petroleum Investment Co (IPIC) for giving the former US$1 bil last year.
If this is indeed true, then where does the debt stop? Who would in the end be responsible for settling the debt?
Since 1MDB is already in talks to transfer all assets to MOF Inc, wouldn’t that mean that in the end the government through the Ministry of Finance will still be saddled with 1MDB’s liabilities along with their assets?
Meanwhile in other news, the Monetary Authority of Singapore (MAS) has withdrawn the operating license for BSI, which was embroiled in monetary transfers for 1MDB.
Thus, is the move by the government now under the Najib administration still denying that there was any wrongdoing under 1MDB?
It is safe to say that any denial even now will have huge consequences on the vote, especially in the urban areas.
The reason behind this can be summed up in one word – taxes. While the rural Malaysians will be dealing with only the Goods and Services Tax (GST), a government laden with increasing debt through 1MDB will pilfer tax ringgits generated by taxation of urbanites.
Income taxes, sin taxes and duties, and even the increase in corporate taxes will impact urbanites more than rural populations.
That being said, if this administration continues to continue the way they are – today even announcing that household debt has gone over RM1 trillion – we are looking at a huge debt laden future which will require higher taxes and lesser government expenditure to bail us out.
If this does not worry anyone, then I honestly believe they haven’t thought it through.
Cuts would have to come out of the civil service, government sponsored projects.
An increase in taxes would mean that companies will in fact choose to let go of employees in a market where jobs are scarce and employees are picky.
All these factors will create an unease in the general population, especially coupled with the fact that the political leaders just recently upped the funds in their own wallets.
If this resentment continues to boil, wait till it boils over. If that happens, there will be unrest and both sides of the divide will suffer.