MORE than RM3 billion in government funds was misappropriated from the Tun Razak Exchange (TRX) project to pay off 1Malaysia Development Bhd debts, said Lim Guan Eng today.

The finance minister said the previous Barisan Nasional government, since 2012, had guaranteed borrowings, extended advances and provided transfers to, as well as purchased land from, TRX City, amounting to RM3.688 billion.

He said of those transfers, RM3.067 billion was misappropriated by 1MDB, mainly for its loan repayments.

“As a result of the misappropriation of funds, TRX City does not have enough money to fulfil its obligations as the master developer of TRX,” he said in Putrajaya today.

Despite this, he said, Putrajaya will press ahead with the project, injecting an additional RM2.8 billion to complete it.

“This decision will allay concerns among local and foreign investors that have put in billions of ringgit in TRX City.

“The 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,” he said, adding that cancelling the project would have “wide ramifications”.

“We cannot bear to see an eyesore of a massive abandoned project in the heart of KL.”

TRX City is the owner of two key real estate projects under the 1MDB umbrella, namely the the 28.3ha TRX and the 196.6ha Bandar Malaysia development in Kuala Lumpur.

Penalties for not completing the project would be a payment of RM3.51 billion in compensation claims.

Lim said he has instructed TRX City’s management, represented by CEO Azmar Talib and executive director Tan Hwa Min, to lodge a report with the 1MDB investigative panel and police on the alleged misappropriation of funds.

Both men were present at the press conference.

On who authorised the transfer of funds, Lim said: “I think that it is clear who authorised the project. I think we should let the investigative panel handle that.”

He said the RM2.8 billion injection will be made in tranches until 2024.

In addition to the RM3.7 billion transfer, the government will need to spend RM6.5 billion.

On Exchange 106, formerly known as the Signature Tower, Lim said it is 90% completed, and he expects the developer, Mulia Group, to begin repaying the amount that the government has invested.

“If (they don’t), there are clauses in the agreement (stating) they would have to let us own the entire building.”

Minister of Finance Inc is jointly developing the project with Mulia Group, with construction slated to be completed by year-end.

The Finance Ministry acquired a 51% landowner stake in Mulia Property Development, with the remaining 49% owned by Mulia Group. – June 21, 2018.