Tuesday, August 11, 2015

Malaysian PM's moral authority is slowly bleeding to death

After a month of extraordinary revelations, Political survival is now the No 1 priority for Najib

Malaysian Prime Minister Najib Razak is facing an uncertain future amid allegations of his involvement in a huge financial scam. In early July, the Wall Street Journal reported that $700 million was transferred through a complex web of transactions to Najib's bank accounts in Kuala Lumpur in 2013. Graphic details of the flow of millions of ringgit through banks, companies and government agencies linked to 1Malaysia Development Berhad (1MDB), into Najib's private account also came to light.

Neither the source of the money nor its final destination is clear. Handsome amounts from Najib's accounts went to the ruling Barisan Nasional (BN) coalition component parties. Apparently, the funds were used for the election campaign in 2013.

1MDB is a Malaysian government-owned development company. It was established in January 2009, to drive initiatives for long-term economic development through international partnerships and promoting foreign direct investment (FDI) focused on energy, real estate, tourism and agribusiness. Najib chairs the advisory board of 1MDB.

In 2009, 1MDB and PetroSaudi International Ltd set up a $2.5-billion joint venture to facilitate the flow of FDIs from the Middle East to Malaysia. According to reports, this joint venture was part of the financial scam, aided by middlemen close to Najib.

Allegations of financial mismanagement of 1MDB's operations have been mounting for years, especially among opposition parties. Its credentials and transparency were frequently questioned by the media as its debts rose to over $11 billion. There were allegations that 1MDB overpriced its purchases and donated the surplus money to Najib's foundation.

In early March, the government set up a joint task force to probe the alleged financial mismanagement at 1MDB. A second Special Task Force (STF) was established in July to investigate the allegations against the prime minister. The members include the attorney-general, central bank governor, police chief and anti-corruption commission. STF members were drawn from different departments supposedly in a bid to curb any undue influence on their investigation.

When the allegations appeared in local and international media, Najib responded by denying that any such funds were transferred to his account. "Accusations by the WSJ are malicious and supported by certain quarters in the country with the purpose of forcing me to quit as prime minister and president of the UMNO [United Malays National Organisation]," said the embattled premier.

Indeed, the federal political culture in Malaysia largely revolves around UMNO. Najib's UMNO is the largest component of the Barisan Nasional (BN), a coalition of 13 parties that has been in power since Malaysia's independence from Britain in 1957.

The Special Task Force has been sniffing around for clues surrounding the sudden swelling of funds in Najib's personal accounts. Bank accounts have been blocked, the 1MDB office has been raided and several arrests have been made so far.

To keep the situation under control, Najib made a drastic move on July 28 by sacking his deputy Muhyiddin Yassin and replacing Attorney General Abdul Gani Patail. Muhyiddin had asked Najib to give up the 1MDB chairmanship and was critical of the prime minister's handling of the allegations. Najib also promoted close ally and Home Minister Ahmed Zahid Hamidi to deputy prime minister and replaced four other ministers. Gani, who was heading the investigation, had likely turned up something incriminating and was apparently preparing a charge sheet against Najib.

Though the new Cabinet has stood by Najib, there are rumours of restlessness in UMNO.

In another move to stifle the media, the Home Ministry suspended two newspapers - The Edge Financial Daily and The Edge Weekly - for reports on the scandal that the ministry deemed "prejudicial to public order".

Biggest threat

Najib Razak's probable nemesis lies within his party. His greatest threat is former prime minister Mahathir Mohamad, still widely acknowledged as the architect of modern Malaysia. Mahathir, who carries considerable weight within UMNO, called upon Najib to prove his innocence by letting the Special Task Force look into his accounts, or else resign. Much now hangs on Mahathir's next move.

The opposition alliance has been making loud noises. Azizah Ismail, wife of the opposition's guiding light Anwar Ibrahim, asked Najib to go on a leave so that the investigation can proceed without any hindrance. But the loose opposition alliance is in disarray after splitting into several factions, and it has failed to capitalise on Najib's vulnerability.

In an interesting twist, the Malaysian Anti-Corruption Commission (MACC) on August 3 claimed that the $700 million transferred to Najib's account came from "donors" and not from 1MDB. It did not disclose the identities of the donors or the purpose of the contribution. Neither did it say how the money was spent. The MACC said it was referring the matter to the central bank and police. But the MACC says no charge sheet has been prepared against Najib and that it had diverted its probe away from the prime minister's bank accounts and towards a subsidiary of 1MDB.

Though this news may give some relief to Najib, it smacks of manipulation and intimidation. The dismissal of top officials earlier was a clear enough warning to the MACC. Najib has apparently made arrangements to delay the findings of the Special Task Force and eventually clear his name.

There is a maxim in bureaucracy - "Do not set up an investigation, unless you know the results of the findings well in advance." It would be naive to think that Najib does not know the findings of the Special Task Force.

Whatever the ultimate findings of the Task Force, the fact that huge amounts of money were transferred to Najib's accounts has been established.

While it looks like Najib will probably ride out this crisis, he will emerge with his moral authority and credibility badly dented.

Mahmood Hasan is a former ambassador at the Bangladesh Foreign Ministry.


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