KUALA LUMPUR: The High Court today heard how 1Malaysia Development Bhd (1MDB) had sought a RM3 billion grant from the government to set up SRC International Sdn Bhd in 2010, but only managed to secure RM20 million.
Datuk Seri Najib Razak’s defence team also took up almost the whole day cross-examining a retired Economic Planning Unit (EPU) deputy director-general about the matter.
At one point Najib’s lead counsel Tan Sri Muhammad Shafee Abdullah argued that 1MDB’s request for RM3 billion to start up SRC International was not “a hare-brained scheme”.
He said this when cross-examining EPU former director-general Dr Kamariah Noruddin, who earlier explained how 1MDB had sought the money, but EPU turned it down right from the start.
She said a government grant would have meant that the company gets the money with no obligation to pay anything back.
“It’s almost like a gift,” she said.
She said EPU only approved RM20 million as a “launching grant” for SRC International to be set up and conduct due diligence in the sectors that it wanted to get involved in.
The 61-year-old, who retired last year, revealed how Najib had forwarded a letter from 1MDB on the matter on Aug 27, 2010.
She said Najib wanted EPU to evaluate the proposal and get back to him with its comments.
The three-page letter stated that 1MDB was seeking a government grant to set up a special purpose vehicle to get strategic stakes in key resource areas.
These included the coal industry, import of uranium for a proposed nuclear energy plant the country was considering at that time, iron and steel sectors and also the oil and gas industry.
“EPU generally supported the proposal for SRC International to get involved in coal and uranium, but we did not support for it to get involved in certain sectors like oil and gas as Petronas was already established for this purpose,” she said, adding EPU also felt that certain other sectors like iron and steel should be left to the private sector.
Kamariah who said her task before retirement was to provide allocations for different ministries, testified that comments on the 1MDB application were subsequently handed to former minister in the prime minister’s department Tan Sri Nor Mohamed Yakcop.
She said it was subsequently sent to the prime minister who acknowledged receipt of the memo in October 2010.
“Najib agreed with our evaluation and wrote to us a few days after that and I was instructed to inform 1MDB about the decision,” she said.
Cross-examined by Shafee, Kamariah agreed that the proposal to set up SRC International was a serious one as the company wanted to get involved in strategic resources important for the country’s economic security.
Shafee: This proposal was not a hare-brained scheme, but a serious proposal. Do you agree?
Kamariah: Yes, otherwise it won’t be submitted to the prime minister and EPU.
Shafee: Yes, there are other proposals which would not have passed the post to get to the prime minister. This is not one of them?
Kamariah: Yes.
Shafee also asked Kamariah whether Najib, who was then also Finance Minister, had pushed EPU to approve the grant or rushed anyone over the matter.
She agreed that Najib had never done so.
Shafee: Najib agreed with your refusal to grant the RM3 billion?
Kamariah: Yes.
Shafee: He also agreed with your suggestion to only give RM20 million?
Kamariah: Yes.
Shafee: He did not push further on the RM3 billion without batting an eyelid?
Kamariah: Yes.
Shafee: In this particular case, it is another example of how he respects EPU’s views?
Kamariah: Yes.
Shafee then questioned Kamariah on the need for a company like SRC International considering that the oil and gas sector was monopolised by Petronas and the import of coal by Tenaga Nasional Bhd (TNB).
Kamariah agreed that TNB had 80 per cent control of the coal sector importing the resource from Indonesia, South Africa and Australia.
Shafee then questioned her if the iron and steel industry too were considered strategic sectors.
Shafee: Iron and steel were considered very strategic and that is why Perwaja Steel was set up and backed by the government?
Kamariah: Yes.
Shafee: So, it is not unreasonable for SRC International to also get involved in these sectors?
Kamariah: We have to look at what is happening in the industry and if there is a need for the government to get involved.
Shafee: So, out of the four proposals which 1MDB submitted, EPU supported two?
Kamariah: Yes.
Later, when re-examined by deputy public prosecutor Mohd Ashrof Adrin Kamarul, Kamariah was asked why EPU did not give the RM3 billion sought by 1MDB if the proposal was “a serious one”.
Kamariah answered: “We cannot at that juncture give the grant based on a three-page letter. The entire country’s budget is RM42 billion and RM3 billion means it is seven per cent of the entire nation’s budget.
“It would have been negligent of EPU to have done it.”
Ashrof then asked her why EPU still gave RM20 million.
To this, she said the money was given for SRC International as a launching grant and to conduct due diligence studies.
The prosecution and defence were later engaged in a mini exchange when deputy public prosecutor Datuk V. Sithambaram wanted to ask Kamariah whether there had been any increase in the supply of coal after SRC International was set up.
Shafee objected to the question and said it was not fair for the prosecution to raise the issue as what transpired in the coal industry was never raised during the examination in chief.