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Focus on the solution to 1MDB, not the problem

I am afraid we are missing the point about 1Malaysia Development Berhad (1MDB). We are concentrating  on the problem, not the solution. This is the wrong way to tackle any problem.

While we need to understand a problem in order to solve it, the focus must always be on the solution, not the problem. To continue to dwell on the 1MDB problem will not help its solution. It may bring political benefits to interested parties but will serve little purpose for the country.

I’m not suggesting we don’t hold those responsible for the mess in 1MDB accountable. All involved directly and indirectly in the management of 1MDB must be made to answer, especially the directors of the company, the finance minister, the Finance Ministry, and even Bank Negara. They were all involved in one way or another in decisions that have produced the situation that 1MDB presently finds itself in.

If found guilty, they should pay the price according to the law and brought to justice. Some may have to pay a high political price for their greed and utter disregard of public interest.

The amounts involved are mind-boggling and will have a contagious  effect on the economy because of the participation of major financial institutions in financing 1MDB. There is a real danger that 1MDB can affect the operations and performance of several institutions in the country, apart from the government.

There are also international implications for the country financially. My concern is that not enough attention and analysis is being paid to the potential consequences of the fallout from 1MDB. We are busy trying to score political points and fix the blame for the mess at hand.

There is need to shift attention to finding solutions to the problem, while we proceed to investigate the roles played by different people in causing the problem. Auditing the accounts of 1MDB, while necessary, is not a solution to the problem. We already know enough of the present financial status of 1MDB to proceed to look for viable solutions.

The present people involved in the company cannot be relied upon to objectively analyse the situation and come up with solutions because of conflict of interests. They are the people who created the situation in the first place. Neither do they have the capacity to handle a mess of this size.

Incremental and piece-meal attempts to deal with the situation are unlikely to produce effective results. Neither can the situation be allowed to prolong, for it has the potential to bring serious consequences. To pretend the problem is not serious and is manageable is a grave mistake, and irresponsible on the part of the government.

There are three things the government can do that can help toward finding a solution to the 1MDB crisis.

First, the government must stop being defensive and trying to underplay the seriousness of the situation. The spillover effect and the potential collateral damage must be fully appreciated.

Show leadership and moral courage

While one can understand the political sensitivity of the crisis for the government, the government needs to show leadership and moral courage to accept responsibility for its actions, even if it means paying a high political price for its mistakes. The integrity of the government is at stake. It cannot continue to whitewash the crisis through lies and half-truths.

Second, given the magnitude of the problem, we need professional expertise to study the situation and come up with strategic options to deal with the crisis 1MDB is facing. There is global expertise in financial engineering and strategic restructuring that we can hire to help deal with the situation. It will be money worth spending. We cannot expect the people who created the problem and are culpable to find a solution to the crisis.

Third, the government needs an independent group to oversee the implementation of the restructuring exercise. The Public Accounts Committee (PAC) can be the monitoring group, with the Treasury acting as the secretariat. Other professionals can be co-opted to provide additional inputs to help solve the crisis. The whole approach has to be open, professional and transparent.

The process will take time, but at least we will be on the right path. The present hide-and-seek strategy to handling the situation is not likely to bear fruit.

For the suggestion made here to work, the government must first accept that it has a crisis at hand in the shape of 1MDB, a crisis that has serious potential consequences for our financial system. It is not a small self-contained problem that the government can tackle on its own.

The government is in a tight spot and understandably wants to contain it with as little exposure as possible, given its other problems such as the Goods and Services Tax (GST). But this approach will only prolong the crisis in 1MDB and damage the credibility of the government further.

Clever manoeuvring to inflate the value of 1MDB artificially to overcome its RM42 billion debt will not work .It will only drag down other institutions in the country. This is the time the government has to own up to its mistakes and show leadership and integrity. If it does, it may have another chance at power. Otherwise, the writing on the wall is clear.

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