ISLAMIC FINANCIAL INSTITUTION AND MARKETS

(ZCZC6952)

Lecturer:
DR. MUHAMMAD HAKIMI BIN MOHD. SHAFIAI

1MDBS TUN RAZAK EXCHANGE LAND SALE TO TABUNG

HAJI

Prepared by:
Mohd Faharizan bin Hassan ZP01849
Lily Halina binti Abdul Razak ZP01888
Nadiah binti Mahmud Nasir ZP01894
Zulkifliy bin Jamil ZP02029
CONTENTS
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No.

Contents

Pages

1.

INTRODUCTION

2.

TABUNG HAJI

3.

1 MALAYSIA DEVELOPMENT BERHAD (1MDB)

4.

TUN RAZAK EXCHANGE INTERNATIONAL FINANCIAL

CENTRE TO RIVAL ASIAS BEST

5.

REVIEW ON THE TRANSACTION

6.

CONCLUSION

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7.

RFERENCESS

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1.0

INTRODUCTION

Tabung Haji had purchase 1 plot of land from 1MDB in Tun Razak Exchange area
development for the purpose of building a residential tower. The transaction has created a storm
of protest among its depositor, public and politicians.
From point of view opposition politicians, Tabung Haji was paying far more per square
feet (psf) than what 1MDB had paid at RM64 psf when it first bought the land from the
government. This paper will review the role of Tabung Haji and 1MDB as government agency.
We also review the planning for Tun Razak Echange and also review the transaction whether it is
following Islamic principle or not. We hope this paper will give a clear picture of the transaction
as a contribution to establish Islamic Financial Hub in this region.
2.0

TABUNG HAJI
The Pilgrims Management and Fund Board of Lembaga Urusan dan Tabung Haji, more

popularly known as Tabung Haji, was devised as an economic scheme in the context of national
development. Its purpose is to provide saving services that are untained by riba and its main
strategy is to exploit the financial resources of Muslims in such a way, as to avoid the
fragmentation of wealth which is detrimental to the rural economy. The saving services that are
free from riba help Muslims perform their Hajj duty without encountering impoverishing
hardships after their pilgrimage.
In order to utilize the funds of depositors, Tabung Haji uses the wadiah Principle (wadiah
al wakalah), which requires new depositors to fill in the Depositors Personal and Nomination
Form' which includes the statement of aqad izin. The principle of aqad izin under the law of
the Tabung Haji Act means that depositors agree to save in Tabung Haji and give consent for it to
manage their savings for investment purposes. Based on the consent given by depositors, Tabung
Haji mobilizes the Funds collected for investment. The profit (if any) derived from these
investments is distributed among the depositors in the form of a bonus.
As an Islamic institution, the investment activities of Tabung Haji are carried out
according to Islamic rules and practices similar to Islamic banks and other Islamic ijnvestment
institutions. Tabung Haji's investment activcities are managed under the following shari'ah
principles:
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i) Al-Musharakah
ii) Al-Bai'Bithaman Ajil
iii) Al-Mudharabah.
iv) Al-Murabaha
v) Al-Qardhul Hasan
vi) Al-Ijarah
To ensure that the investment operations of Tabung Haji do not involve any element
which is contrary to Islamic principles, Tabung Haji uses thev services of the Religious
Supervisory Council of Bank Islam Malaysia and the National Fatwa Committee of Malaysia to
advise Tabung Haji oninvestment operations. To ensure the success of investments, Tabung Haji
has established a special panel called the Finance Advisory Council to advise the management of
Tabung Haji on investment operations. Members of this panel are successful, high caliber
businessmen, bankers and high-level government officials who are experts in finance and
economy in Malaysia.
Tabung Haji emphasizes that investment activities are not involved in anything which is
contrary to Islam. In this regard, Tabung Haji does not invest in sectors such as banking (except
Bank Islam Malaysia), Insurance (except Takaful of Malaysia) and hotels. In other words,
Tabung Haji will not invest in companies that are involved with activities which are prohibited
by Islam. AS a safeguard, Tabung Haji from time to time refers to the Religious Supervisory
Council of Bank Islam Malaysia regarding doubtful companies or sectors. The four major types
of investment made by Tabung Haji are:
i. Investment in shares (equity participation);
ii. Investment in subsidiary companies;
iii. Investment in land and buildings; and
iv. Short-term investment.
Though Haji was also established in order to enable Muslims to invest and effectively
participate in the nation's economic activities. Tabung Haji has successfully expanded its

investment activities to include various economic sectors, such as, commercial, industrial,
plantation, etc.

3.0

1 MALAYSIA DEVELOPMENT BERHAD (1MDB)

1Malaysia Development Berhad (1MDB) is a strategic development company, wholly

owned by the Government of Malaysia.1MDB was established to drive strategic initiatives for
long-term economic development for the country by forging global partnerships and promoting
foreign direct investment.
Roles of 1MDB are;
i.

1MDB leads market-driven initiatives to assist the Government in propelling Malaysia

towards becoming a developed nation that is highly competitive, sustainable and
inclusive. As a strategic enabler, 1MDB continues to explore areas that can catalyse new
sources of growth and lay the groundwork for a brighter future.

ii.

1MDB maximizes social objectives in both its investment projects and CSR activities,
balancing the bottom line with benefits to society

iii. 1MDB actively seeks out strong partnerships whether in the public sector or with
private companies, NGOs and non-NGOs, internationally and locally with the aim of
advancing growth.They make anchor investments and co-invests to get high-impact
projects off the ground and catalyse private investments. Once opportunities have been
created, we build win-win partnerships through equal capital JVs capable of bringing in
FDI. Our partners bring in capital, capabilities and technology that can contribute
towards our socio-economic goals
iv. 1MDB must invest directly in human capital development for a sustainable economic
future. In our CSR activities, we initiate strategic partnerships to ensure maximum
impact with long-term benefits.
v.

1MDB unlocks the potential of our young people to enable them to make a difference
for the nation in line with our vision for a brighter Malaysia. We do this in our CSR
youth development programmes as well as recruiting and nurturing young talent within
our organisation.

1MDB is currently involved several high-profile projects such as the Tun Razak
Exchange, Tun Razak Exchange's sister project Bandar Malaysia and the acquisition of three
Independent Power Producers.
i.

Energy
1MDB owns Tanjong Energy (now known as Powertek Energy Sdn Bhd), a 75% stake in

Genting Sanyen Power (now known as Kuala Langat Power Plant or KLPP) and a 75% stake in
the coal-powered Jimah Energy.
In February 2014, 1MDB was named as the preferred bidder for Project Track 3B by the
Energy Commission. The project will involve the construction and operation of a 2 x 1000MW
coal plant on a site adjacent to the Jimah power plant in Negeri Sembilan.
These developments continue 1MDBs strategic intent towards fulfilling the countrys
long-term energy security.
ii.

Real estates
1MDBs developments, the Tun Razak Exchange (TRX) and its twin project Bandar

Malaysia, extend beyond just real estate. Strategic real estate developments are leveraged to
capture high multiplier effects and spur a vibrant economy. The projects are building blocks to
help shape Kuala Lumpur as a robust global city destination for investors and tourists alike.
BANDAR MALAYSIA, three kilometers away from the Tun Razak Exchange (TRX), is
set to have the most innovative urban solutions for liveability in a new urban ecosystem,
relooking at the relationship between people, buildings, traffic and nature in the capital city. The
urban redevelopment of the old airport in Sungai Besi is designed to support Greater KL as a
new engine of growth.
A mixed development, Bandar Malaysia will promote liveability as a distinctive urban
character for Greater KL, housing green infrastructure, sustainable housing and a range of
commercial and lifestyle facilities. The 495-acre Bandar Malaysia is envisioned to be an
inclusive, public transit-oriented city that is designed as a walkable community through a series
of safe, secure and pleasant pedestrian and cycling networks, set against a backdrop of open
spaces and greenery.
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Bandar Malaysia aims to be the yardstick for sustainable urban housing within Malaysia.
The township is earmarked to achieve the highest sustainability ratings, continuing the green
development benchmark already set by the Tun Razak Exchange. Bandar Malaysia will also
include affordable urban housing reflecting 1MDBs commitment towards promoting liveability.
Its affordable housing concept aims to provide an affordable, quality family lifestyle in the city,
emphasizing child-friendly facilities with a safe and secure living infrastructure

4.0

TUN RAZAK EXCHANGE INTERNATIONAL FINANCIAL CENTRE TO

RIVAL ASIAS BEST
Tun Razak Exchange (TRX), formerly known as Kuala Lumpur International Financial

District (KLIFD), is a development to create one of the most liveable financial districts in Asia. It
is being built upon 70 acres of prime real estate in Kuala Lumpur, Malaysia, and will feature
office spaces complemented by world-class residential, retail and leisure spaces with the concept
of a unique work-live-play experience. 1MDB officially launched the Tun Razak Exchange
(TRX) on 30 July 2012.
The Tun Razak Exchange is described to be designed with the future in mind and will
incorporate technologies including district-wide digital connectivity, enhanced energy, water and
waste management systems, and e-services in residential and commercial properties.
Government launched the TRX with a gross development value of RM26bil as an
initiative to promote Malaysia as an international financial hub and to attract foreign direct
investment. TRX will provide new investment opportunities by connecting the business
community with the global market. TRX is expected to attract 250 international financial
services companies and offer 40,000 knowledge and skilled job opportunities.
Property consultancy C.H. Williams Talhar & Wong said the TRX could create new
demand for at least 6 million sq feet of new office space, which will buy the office property
sector.
The project is seen as a strategic priority by Malaysian Prime Minister Najib Razak who
assembled a special task force led by the Minister in charge of the Economic Planning Unit to
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assist with facilitating investments and business operations. Several government incentives
including income tax exemptions, stamp duty waivers and cost rebates have been introduced to
attract international corporations and expedite the process of setting up businesses within TRX.
It will also be an Islamic hub, reflecting Malaysia's existing status as one of the key
centres for Sharia-compliant business in the world. The Tun Razak Exchange hopes to be to KL
what Canary Wharf is to London, or Battery Park to New York: a world- class financial district.
The TRX has been identified as one of the many high-impact public-private partnership (PPP)
projects that will help to drive the economic transformation agenda.
TRX is strategically located at the southern gateway to Kuala Lumpurs city centre
flanked by main arterial roads and is a natural extension to the Golden Triangle the citys
commercial, shopping and entertainment hub. The district will also high accessibility with a
dedicated Mass Rapid Transit (MRT) underground interchange planned to be the largest in
Malaysia, nearby RapidKL stations, new highway connections and direct routes to Kuala
Lumpur International Airport.
The Master Plan includes a total of 25 buildings and over 21 million feet of total building
Gross Floor Area (GFA) spread across office, residential, hotel, retail, F&B and cultural
offerings. TRX has a development period of 15 years to be completed in phases with the initial
Phase 1 slated for completion in 2017. Upon its completion, the district is expected to contribute
towards job creation, attracting knowledge-based talent, increasing the number of world leading
companies to the city, and drive greater economic growth for the country. This national project
will vastly support ETPs goal to raise Malaysias Gross National Income per capita to
USD15,000, create 3.3 million jobs and secure USD444 billion in investments by 2020. The
signature tower which will be the landmark of the TRX will have a height of 380m.
In June 2014, the international property and infrastructure group, Lend Lease, was chosen
by 1MDB RE to be a major investor partner in Phase 1 to develop the Lifestyle Quarter in TRX,
which will consist of a 2 million feet retail mall seamlessly connected to TRXs multi-layer

central park, three residential towers and a hotel. An official signing ceremony was held to
officiate the joint venture partnership between 1MDB RE and Lend Lease.
5.0

REVIEW ON THE TRANSACTION

i.

Legality the transaction Tabung Haji buy land from 1MDB

Bay or the contract of sale can be described as the exchange of property for property,
or the exchange of goods or properties and it therefore includes, besides sale proper,
barter (Bay al-Mukdyada) and currency exchange (Bay al-Sarf).
The Quran approves the sale to the extent that no element of Riba is involved: Allah
permitted trade and forbidden Riba (Sura al-Baqarah, 2:275). Generally speaking, Riba
is any unjustified increase of capital for which no compensation is given, or unlawful
profit (for example: any accrual / interest on the loan of money), as opposed to lawful
profit. Western understanding often translates it to usury (excessive interest), or even any
interest at all.
A sale is concluded by a formal offer and acceptance. The redaction of a contract is
encouraged. It, however, can also be perfected by the simple exchange of the goods and
the price sealing the transaction through mere execution (Bay al-Muatah or Bay alMuawadah).
General conditions of sale:
1. The parties must be persons of sound mind and reason. Lunatics or minors who
have not yet attained the age of intellectual ability therefore are excluded.
2. There must be mutual consent and clear consistency between offer and
acceptance.
3. There should be unity in session. When the meeting is broken and the parties split
without consent, this equals a refusal of the offer, unless otherwise agreed upon.
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4. The subject of the sale must be property of legal tender (intoxicating elements,
pigs, dogs and carcasses are excluded).
5. The subject of the sale must exist at the time of the sale and must be owned by, or
at least in the physical or constructive property of the seller.
6. The sale must be instant and absolute. A sale attributed to a future date or
contingent on a future event is void. The delivery must be certain and should not
depend on a contingency or chance.
7. The subject of the sale must be properly identified, excluding uncertainty of the
object, quality and quantity.
8. The price of the sale must be certain.

9. The sale must be unconditional, unless such a condition is recognised as a part of

the transaction according to the usage of the trade. The terms of the sale must be
stated clearly.
10. If no modes of payment are stipulated, they are assumed to be cash and
immediate. The payment of the price can be postponed to the future and in
instalments. This aspect will be useful for financing transactions.
11. The goods must be free of rights of others (eg, mortgage), though the Hanafi
allow such sale subject to prior permission of the mortgagee.
Tabung Hajis Board of Directors, Prof. Emeritus Tan Sri Dr Abdul Shukor Husin, who
is also the Chairman of Universiti Sains Islam Malaysia (USIM) Board of Directors and
the Chairman of the National Fatwa Council for Islamic Affairs said, In a sale, buyers
do not determine the price and we have no right to dispute an offer price. In an Islamic
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trade, a seller sets a price and if the buyer agrees to it, and the item and payment changes
hands, that is considered a trade,
Tabung Haji bought the 1.56-acre plot land in the Tun Razak Exchange (TRX) project at
RM188 million in April with a plan to build a residential tower. According to the
transaction, it is clear that the transaction has followed the Shariah rule.

ii.

Role of Tabung Hajj as a collector from depositor

In order to utilize the funds of depositors, Tabung Haji uses the wadiah Principle
(wadiah al wakalah), which requires new depositors to fill in the Depositors Personal
and Nomination Form' which includes the statement of aqad izin. The principle of
aqad izin under the law of the Tabung Haji Act means that depositors agree to save in
Tabung Haji and give consent for it to manage their savings for investment purposes.
Based on the consent given by depositors, Tabung Haji mobilizes the Funds collected for
investment. The profit (if any) derived from these investments is distributed among the
depositors in the form of a bonus.
In the case of buying of 1MDB land, the depositor should not be angry with the decision
made by Tabung Haji since Tabung Haji Act gives the power to management to utilize
the collection for investment. Moreover, buying a land is one of the scopes of investment
given to Tabung Haji.

iii.

Bussines decision making on the transaction

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Picture: Location and land price comparison near TRX area

Prime Minister Datuk Seri Najib Razak has defended Lembaga Tabung Haji's purchase of
a piece of land from 1MDB, saying that it generated RM170 million in profit. He said the
land purchase was a profitable move that benefitted those keeping their money in the
pilgrims fund.
If all goes to plan, in perhaps 14 years that construction site will be a glittering new
financial centre, with the office buildings, retail facilities and leisure and lifestyle options
to rival the great Asian financial hubs of Hong Kong and Singapore.
It will also be an Islamic hub, reflecting Malaysia's existing status as one of the key
centres for Sharia-compliant business in the world.
Dato' Azmar Talib, the chief executive of the real estate business of 1 Malaysia
Development Berhad (1MDB) said "Policymakers have identified Malaysia's financial
sector as being ripe for expansion. TRX is a strategic response to this and aims to help
Malaysia realise its potential as a regional International investors are studying an
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information memorandum recently sent out by 1MDB to attract financial commitment to

the project, estimated to have a gross development value of about US$8 billion.

6.0

CONCLUSION
Based on our study, we know that the decision to buy piece of land at Tun Razak

Exchange done by good reason. As one of the Islamic financial institution in Malaysia, Tabung
Haji should be a part of the player to develop Islamic Financial Hub in this region. From the
transaction, neither party are loss but the situation are win win situation, where 1MDB get profit
in a short term while Tabung Haji will get profit for a long term. Tabung Haji can proceed the
decision because the investment will get benefit to depositor for next three year.

6.0

RFERENCESS

http://www.theedgemalaysia.com/business-news/167697-najibs-speech-on-10mp.html
http://www.1mdb.com.my/
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http://www.themalaysianinsider.com/malaysia/article/3-lessons-from-1mdbs-trx-land-saleto-tabung haji
http://www.themalaysianinsider.com/malaysia/article/najib-defends-tabung-haji-land-buyfrom-1mdb-says-profitable#When:12:59:52Z
http://www.lawgazette.com.sg/2010-09/feature3.htm
http://www.malaysiandigest.com/news/552964-tabung-haji-sells-1mdb-land-to-avoidfurther-slander.html
http://www.themalaysianinsider.com/malaysia/article/3-lessons-from-1mdbs-trx-land-saleto-tabung-haji
http://www.tunrazakexchange.com/what-is-tun-razak-exchange/
https://info.march2freedom.org/2015/05/14/why-is-1mdb-selling-trx-land/
http://greatermalaysia.com/2015/07/03/3-facts-najib-defends-tabung-haji-land-buy-from1mdb-says-profitable/
http://rafiziramli.com/2015/05/dato-seri-najib-ada-kuasa-hentikan-pembelian-tanah-1mdboleh-tabung-haji-pulangkan-wang-tabung-haji/
http://chedet.cc/?p=1702

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