
Malaysian
Prime Minister Najib Tun Razak is in deep political trouble. That much is clear
to the meanest political intelligence, but is it terminal? The answer is
obscured by the absence so far of open intra-party revolt even though strong
words are exchanged every day and the wagons are being circled slowly,
methodically. How far this would have got him in an election year is a moot
point but that test, happily for him, is still some years away. The worries
must be mounting, however, as in the 2013 general election his ruling Barisan
Nasional coalition polled fewer votes than the combined opposition for the
first time in Malaysia’s electoral history. The political climate was a lot
more favourable then and Najib was not haunted by personal issues as he is now.
If an election were held today all bets on a Najib or Barisan victory would be
off.
The first and most obvious problem is his exposure to the scandal-ridden 1Malaysia Development Berhad (1MDB), the government’s ambitious 2009 state fund to drive strategic initiatives for long-term economic development for the country by forging global partnerships and promoting foreign direct investment. One of its major objectives was to turn the country into a financial hub, especially for Islamic banking. It is part of the larger One Malaysia programme launched by Najib in 2010 to repair the intra-ethnic and inter-ethnic fissures that nearly sank the ruling coalition in the 2008 general election.
While the
1MDB story is fascinating in its own right, for sensational disclosures it pales
beside the discovery in Najib’s personal account of a sum of $681 million
(approximately ₹ ₹4,672 crore) and his admission in January that he accepted the
money from a member of the Saudi royal family just before the 2013 general
election. It was described as a donation to help the ruling coalition and that
the money had long been returned, or all of it apart from a mere $61 million.
There was no explanation for the destination of that remnant.
The
admission came long after the event and only when there was no alternative but
to explain the genesis of that alleged donation. The pressure to come clean had
been mounting since a Wall Street Journal report on July 3 last year
said a Malaysian government investigation had traced almost $700 million coming
into the Prime Minister’s account from banks, companies and entities linked to
1MDB. According to the report the money was said to have been paid in from an
account in the British Virgin Islands, a well known tax haven and launderer of
slush funds.
Then deputy
prime minister Muhiyiddin Yasin demanded a thorough probe into the finances of
1MDB and was publicly critical of the government’s handling of the affair. A
couple of weeks after the WSJ report he was sacked by Najib on the plea
that he wanted to create a “more unified” team. A day or two after that
sacking, Malaysia’s chief secretary announced that attorney-general Abdul Gani
Patail, whose office was investigating the case, had stepped down for health
reasons. A day later Patail expressed surprise at the news, saying that as far
he was aware he was in sound health. So far nobody has called for a probe of
any sort in this connection.
In October
last year, Bank Negara, the central bank, recommended that the attorney-general
open criminal proceedings against 1MDB management for violating foreign
exchange rules. It was overruled by Patail’s successor, Mohamed Apandi Ali. The
major outcome of that until now is the announcement by Zeti Akhtar Aziz, the
country’s central banker, that she won’t be asking for a renewal when it comes
due shortly. Zeti, one of the most respected central bankers in the business,
has headed the institution since 2000.
A
ttorney-general
Apandi Ali, whose office cleared Najib of any wrongdoing in the case, has also
said the donation has no connection with 1MDB although he failed to offer any
explanation for the origin of some of the funds that flowed into Najib’s
account. The Prime Minister himself has dismissed the allegations and said that
it is time to move on since he has been cleared on all counts. As far the
government is concerned the investigation is over.
It isn’t
working out that way, however. There is so much that is opaque about the
operations of 1MDB—whose debts have run up to $11 billion—and so much that
seems questionable that the need for explanations grows by the day. A loss of
this magnitude in a government-backed company whose operations are supposed to
be overseen by the Prime Minister needs substantial answers, not the routine
denials of wrongdoing that have been forthcoming thus far. At least the nature
of the transactions should be revealed because how could a company lose this
kind of money in just four years? How
much conviction will a bland series of denials carry against the evidence that
continues to pile up?
One major advantage for Najib is that the media is mostly owned by various parts of the ruling coalition and the government exercises strict control. So 1MDB has been allowed very little traction.
There is
undoubtedly one thing going for Najib and that is his capacity to perform
miracles. Even in a country as known for corruption as India a prime minister
would be hard put to carry on if he’s caught with his hand in the till, as it
were. His own party men would round on him to save their skins. If that didn’t
happen, then the relentless wall-to-wall TV coverage would leave no place to hide.
But Najib remains at the helm though his hold may be shaky. That he has managed
this without jailing critics under the emergency laws or resorting to other
draconian measures is worth noting.
For the
moment, he has even stymied his most trenchant critic, Dr Mahathir Mohamad,
himself a former prime minister. Mahathir’s son lost his job as chief minister
of the northern Kedah state when his own ministers deserted him. It was
executed with a subtlety that left few discernible clues even to the initiated.
Everyone knew whose hand was behind it but no one could prove a thing. Najib
has also fallen back upon an old Mahathir bogey, “foreign interests”, accusing
the nonagenarian former leader of working hand-in-glove with them to “topple a
democratically elected prime minister” because he refused to implement
Mahathir’s “demands”.
One major
advantage in all this for Najib is that the media is mostly owned by various
parts of the ruling coalition and the government exercises strict control. So
1MDB has been allowed very little traction and independent agencies or web
sites are regularly monitored or shut down if they get too vocal. For instance,
the online Sarawak Report which has reported voluminously and venomously on his
connections to 1MDB can’t be legally accessed in Malaysia though no doubt many
people have been able to bypass the checks.
As far
Najib is concerned, then, the issue does not exist. Neither he nor his
government nor his party and its allies see any reason for further reference to
the matter. That is the official stance. The real question, though, is can the
government control the narrative from this point onwards? The tentative answer would be, unlikely,
because a large part of the story is out of its hands.
***
E
ven though
the Malaysian government has closed all inquiries, other governments are
looking at various parts of the story that have been enacted in their
jurisdictions. In the United States, the FBI is looking into assets owned by
Najib and his family, including luxury real estate in New York and Los Angeles,
some of which was allegedly transacted by Jho Low, a Malaysian Chinese
businessman with ties to Najib’s stepson, according to a comprehensive account
in The New York Times (February 9, 2015).
The report
said “Low has played an important role in bringing Middle Eastern money into
numerous deals involving the Malaysian government, and he helped set up, and
has continued to advise, a Malaysian sovereign wealth fund that the prime
minister oversees”. In other words, there is a possible connection to 1MDB and
if it is proved that some of the transactions involved 1MDB funds the shit
would hit the fan. Proving the link, however, will be tough because such
transactions usually follow an extremely labyrinthine route, with cutouts and shell
companies hiding the money trail.
Closer to
home, Singapore is carrying out its own investigation into transactions
allegedly linked to 1MDB. It has frozen in the last few months a large number
of bank accounts in a continuing probe of possible money laundering operations
involving 1MDB. Local banker Yak Yew Chee working at Swiss-based BSI Singapore
is said to be a key figure in the money laundering scheme.
But the
most dramatic announcement comes from the mother of tax havens, Switzerland. On
January 30, the Swiss attorney-general Michael Lauber said $4 billion may have
been stolen from state-owned companies in Malaysia and deposited in his
country’s banks. He spoke of systematic fraud “carried out by means of complex
financial structures”. The Swiss are notoriously discreet about what happens in
their jurisdiction so a statement like this is usually taken seriously. The
Malaysian reaction on the other hand amounted to a complaint that the matter
was being blown up by the Swiss rather than being brought to the government’s
attention. Lauber then pointed out that his office first got in touch with its
counterpart but finally resorted to a public statement when there was no
response from the government.
If any one
of these investigations hits pay dirt (the Swiss seem closest) it will not only
be deeply embarrassing for the government and Najib personally but also loosen
his grip on power further. He has managed to stay on the right side of his
party’s powerful division chiefs but there is no guarantee that they will stand
by him in the event of further damaging revelations. Like politicians the world
over, the principal focus of their calculus is on electability. Can they win
another term, form another government? For the moment they don’t have to think
about that (the next general election is due in 2018) so they may be reluctant
to rock the boat. But public opinion is increasingly negative if the jokes
about 1MDB, Najib and his wife Rosmah are any indication. The continuing
fallout of 1MDB serves to strengthen the camp opposing Najib and test the
patience of his supporters. They may be close to the limit.
***
The Barisan
Nasional coalition of parties representing the three major ethnic groups has
governed Malaysia without a break since independence in 1957. The largest of
these is the United Malays National Organisation (UMNO), which leads the
coalition, second comes the Malaysian Chinese Association (MCA) and the
smallest is the Malaysian Indian Congress (MIC). Over the decades their hold on
their respective constituencies was steady despite occasional hiccups, caused
especially by the multi-ethnic but Chinese-dominated Democratic Action Party.
In the Malay camp was the UMNO breakaway Parti Se Islam Malaysia (PAS), which
formed the first opposition government in the eastern state of Kelantan. These
were, however, exceptions to the Barisan rule. But the 2008 election changed
all that, perhaps permanently.
The opposition has failed to exploit it properly as it suffers from several disadvantages. The most serious is the absence of its most influential leader, Anwar Ibrahim, a former deputy prime minister.
The results
were a brutal wake-up call. For the first time ever the ruling coalition failed
to get a two-thirds super majority in Parliament and the somewhat hurriedly
cobbled opportunistic opposition group took 82 seats. The MIC and MCA suffered
a grievous erosion of their voter base and even UMNO suffered serious damage.
It was a far cry from the four-fifths brute majority won in 2004.
Worse
followed in 2013 when, again for the first time, Barisan polled less than 50
per cent of the popular vote. The opposition front which made gains everywhere,
including the eastern states of Sabah and Sarawak, took that honour with a
little over 50 per cent of the popular vote. The ruling coalition has lost
further ground since then, in light of the continuing recession and region-wide
slowdown. Najib’s ambitious venture to paper the divide has had the opposite
result in the wake of the scandals that have engulfed 1MDB and its chief
patron.
But the
opposition has failed to exploit it properly as it suffers from several
disadvantages. The most serious is the absence of its most influential leader,
Anwar Ibrahim, a former deputy prime minister, jailed a second time in a case
of sodomy. Few even among his opponents believe in his guilt but he is in jail
and there is no one of his stature at large to help reconcile the differences
among the various parties. It is an uneasy grouping of mutually opposed agendas
kept together only by the common enemy, Barisan Nasional. Anwar’s presence gave
them a sense of purpose, which is missing at the moment. The death of Pas
supremo Nik Aziz last year was also a body blow to the grouping. His loss robs
them of a charismatic and universally respected individual whose successor is
not just abrasive but also a divisive personality.
The phrase “dead man walking” has been used to describe his situation. The longer the questions around him remain unresolved the bigger the problems for his party and the ruling coalition.
The other
problem is that Malaysian law is extremely strict about protests against the
government. Anti-government rallies are par for the course in Thailand, the
Philippines and even Indonesia but not Malaysia. The government’s reluctance to
permit protest rallies means the opposition has to adopt an insurgent strategy
with surprise gatherings called, like online-inspired flash crowds. It is not a
model made for coherence or systematic action. The only time opposition
sentiment can be accurately gauged is after an election. On balance, however,
it is probably building up against the Prime Minister.
One of his
biggest problems is that the near-term economic prospect is unpromising.
Faltering growth has made nonsense of all GDP calculations and the steep fall
in oil prices, in addition to sluggish exports, has compounded the woes. In
this sombre scenario it would be doubly upsetting to hear confirmation of
earlier reports of systematic fraud involving billions of dollars by a company
backed by the government. The public mood could turn against the rulers very
quickly.
A divided
UMNO, jumpy coalition partners and economic uncertainties are not new but the
addition of a leader suspected of corruption and a development company involved
in massive fraud may be too much to take. The phrase “dead man walking” has
been used to describe his situation. At the moment he has two options, to hang
on, or to cut and run. He has chosen the former but the longer the questions
around him remain unresolved the bigger the problems for his party and the
ruling coalition.