Abu Dhabi link-up with Malaysia on investing

Aabar Investments, the Abu Dhabi-backed investment vehicle, has raised US$3 billion in funds in partnership with a Malaysian company to invest jointly in projects such as energy and property.

Aabar has helped to raise $3 billion in partnership with a Malaysian company to invest in projects such as energy and property. Reuters

Aabar Investments, the Abu Dhabi Government investment vehicle, has helped to raise US$3 billion (Dh11.01bn) in funds in partnership with a Malaysian company to invest jointly in projects such as energy and property.

The cash will be used to kick-start 18 billion ringgit (Dh21.74bn) of economic projects, said 1Malaysia Development Bhd (1MDB), a strategic development company owned by the Malaysian government, yesterday.

"This success underlines investor appetite and confidence in the Malaysia-Abu Dhabi partnership as well as in Malaysia as a sustainable growth centre, enjoying peace, stability and good governance," said Mohd Hazem Abd Rahman, the chief executive of 1MDB.

Nobody was available to comment from Aabar.

The cash was raised from private placements through Abu Dhabi Malaysia Investment Company, a 50:50 joint venture firm set up by Aabar and 1MDB.

The initiative is the latest deal to emerge following a high-profile visit to Malaysia by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, last month. Sheikh Mohammed used the visit to seal a $7bn investment by Abu Dhabi in an oil storage facility in the Asian country.

At the time, Aabar and 1MDB also announced an investment agreement but details of the deal only emerged yesterday.

Abu Dhabi Malaysia's first investment could be 1MDB's Tun Razak Exchange, a planned financial centre in Malaysia's capital, Kuala Lumpur, 1MDB said. The centre is expected to generate returns of 26bn ringgit for Malaysia's economy when completed, plus 40,000 jobs.

Investments would be focused on "strategic and important high-impact projects such as energy and strategic property, which are vital to the long term-economic growth of both countries", 1MDB said.

Aabar is already invested in Malaysia through a 25 per cent stake in RHB Capital.

Reuters reported in February last year that Aabar was looking to sell the stake after it declined in value since it was bought from Abu Dhabi Commercial Bank in 2011.

Aabar has been on a strong acquisition spree in recent years, snapping up stakes in Tesla, the American maker of electric cars, the British aerospace firm Virgin Galactic and taking a $1bn stake in Glencore's initial public offering. It also has a 21 per cent stake in Arabtec, the UAE construction company.

"Aabar Investments have done this type of joint deal before elsewhere," said Victoria Barbary, director of Institutional Investor's Sovereign Wealth Centre. "This deal may be attractive because of the Islamic financing opportunities that Malaysia has through its status as the Islamic finance capital."

Ms Barbary said Aabar's strong credit rating would have helped it to raise funds for the deal.

1MDB's bonds have received an A minus rating from Standard & Poor's, which also assigned an "axAAA" Asean regional scale rating.

Malaysia is a growing Islamic banking centre, and has targeted a 40 per cent share of Islamic domestic financing by 2020. In a bid to further promote the growth, the Malaysian government is also set to release a new legal framework for Islamic finance this year.

Abu Dhabi is seeking to cement its own foothold in the financial sector by developing Sowwah Square, a Dh4bn centre for financial services.