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.

 

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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.

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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.

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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.