What you need to know
'If there is an indictment in the DoJ case in the United States where Najib is named directly, then he is toast.'
In July 2012, the venerable weekly magazine The Economist offered that the Syrian Civil War, which had started 15 months earlier, was turning against the Assad regime and the world needed to start preparing for “the day when Syria is at last rid of him.”
In Malaysia, opposition groups hope the revelation of a fresh corruption allegation involving Prime Minister Najib Razak – potentially dwarfing the multi-billion dollar 1MDB scandal – is the beginning of the end for the maligned Malaysian leader.
“People are playing up his chances, but in Malaysia the situation is beginning to slide because he has governed it so badly,” Malaysia-focused investigative journalist Clare Rewcastle Brown says.
The corruption scandal currently unfolding involves FELDA Global Ventures, an enterprise that was listed in 2012, but which the Rewcastle Brown has described as “1MDB Times Ten.”
Rewcastle Brown is a longtime critic of Malaysia’s government and the founder of Sarawak Report, an online publication which led the charge in exposing the multi-billion dollar 1MBD case – it is alleged more than US$1 billion was siphoned from the state investment fund 1MDB into accounts controlled by Najib; the prime minister denies the accusation.
Corruption in Malaysia, the journalist told The News Lens from London, has “exploded” since Najib was voted into power in 2009; the problem “is far wider than just 1MDB.”
If the accusation true, it may be globally significant. But will it be enough to unseat Najib?
‘The information is relentless’
Transactions linked to 1MDB have led to money laundering investigations in a handful of countries, including the U.S., Switzerland, Australia and Singapore. Leading news organizations, including The Wall Street Journal and Bloomberg have dedicated webpages to chronicle each step of the controversy as it unravels.
The Swiss Financial Market Supervisory Authority said in February that it had conducted investigations into “a number of Swiss banks” in relation to the 1MDB and launched proceedings against at least six banks, including Coutts & Co, BSI Bank and Falcon Private Bank AG. In the case of Coutts & Co, the regulator was also considering legal action against the bank employees responsible. Earlier in 2017, Australian Federal Police confirmed they were working alongside international agencies to investigate businesses in Australia linked to 1MBD. Court documents in New Zealand have revealed family members of Jho Low, one of Najib’s cronies, are connected to trusts holding some US$265 million in assets.
In the U.S., the scandal has embroiled Hollywood blockbuster “The Wolf of Wall Street,” as well as banking giant Goldman Sachs and a major New York property developer.
The most notable of the global investigations is the U.S. Department of Justice’s (DoJ) bid to recover more than US$1 billion related to 1MDB – the largest single action ever brought under the Kleptocracy Asset Recovery Initiative. In announcing the action in July 2016, Attorney General Loretta E. Lynch said, “We are seeking to forfeit and recover funds that were intended to grow the Malaysian economy and support the Malaysian people. Instead, they were stolen, laundered through American financial institutions and used to enrich a few officials and their associates. Corrupt officials around the world should make no mistake that we will be relentless in our efforts to deny them the proceeds of their crimes. ”
Rewcastle Brown has been covering corruption in Malaysia for more than seven years; initially she focused on environmental degradation and dodgy business deals in Sarawak, Malaysian Borneo. While she is no longer allowed to travel to Malaysia, and officials in Kuala Lumpur have blocked Sarawak Report from being viewed locally, she is confident reporters in Malaysia and around the world are now focused on uncovering the truth about Najib’s ties to 1MDB.
“The genie is out of the bottle with this story,” she says. “Everybody knows.”
Notwithstanding that Najib has “intimidated a number of people” and some sources have not been adequately protected by the local press – which has served to silence other would-be sources and whistle-blowers – Rewcastle Brown does not foresee a slowdown in the pace of fresh revelations linking Najib and his cronies to corruption.
“The information is relentless,” she says.
Forcing a resignation
Professor James Chin is the inaugural Director of the Asia Institute Tasmania, University of Tasmania and a frequent commentator on politics in Southeast Asia.
Asked whether the 1MDB scandal could force Najib to resign, he suggests a lot will depend on the court cases in overseas jurisdictions.
“If there is an indictment in the DoJ case [in the United States] where Najib is named directly, then he is ‘toast,’” Chin says.
Still, Chin does not see this as likely, because of the case’s complexity and the lengthy timeframes involved in the proceedings.
“As long as he is not named directly, he can survive. All he needs to do is the play the game – ‘I am not indicted,’ ‘I am innocent until proven guilty.’”
Saleena Saleem is an Associate Research Fellow with the Malaysia Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.
Saleem suggests two possible scenarios where Najib could be forced to resign: new revelations regarding the 1MDB scandal that directly implicates him with wrong-doing; or, new evidence emerges that contradicts his explanations given so far.
“If either of these scenarios occurs just prior to the general elections, which must be called by August 2018, we could potentially see UMNO (Najib’s party) withdraw their support for Najib,” she says.
The international perception of Najib’s rule has deteriorated; from initial hope for reform to fears for human rights amid crackdowns on protests, free speech and arrests of government critics. But it is the country’s economic reputation that may have taken the biggest hit; growth has slowed and the currency has plummeted along with a dive in business confidence.
As Bloomberg editor-in-chief emeritus Matthew Winkler last month wrote of the U.S. accusations against Najib, “Global investors aren't waiting for a legal verdict. They're already making Indonesia the favored regional economy at Malaysia's expense.”
While no doubt excruciatingly frustrating to his critics, Najib has managed to hold onto power through the 1MDB fiasco and amid Malaysia’s worsening economic outlook.
And there are reasons to believe that for Najib, his United Malays National Organisation (UMNO) and the ruling Barisan Nasional (BN) coalition, the “endgame” may not be so near after all.
The prime minister’s trip to Beijing last year saw some US$34 billion in trade and investment agreements pledged, not to mention the country’s first defense deal with China; a move that should help boost the local economy. Rewcastle Brown notes that the deals struck in Beijing could help Najib curry favor with voters, but she maintains that dealings with Chinese do not sit well with all Malaysians.
“Malaysia is extremely troubled by this swivel on access to China,” she says. “The question is whether Najib can keep up this balancing act.”
However, Najib’s ability to consolidate power and purge state institutions of his critics would suggest that he can do just that.
“The various institutions that were supposed to hold the government accountable [over 1MDB] have all faltered in one way or another,” Penang Institute analyst Ooi Kok Hin wrote in The Diplomat in January. “A concentration of power has enabled the state leviathan to dismiss any institution that could actually hold it accountable.”
Others have suggested that the recent assassination of Kim Jong-nam has been used by the Malaysian prime minister to divert attention from the 1MBD scandal and economic pressure ahead of the next general election.
Manjit Bhatia is an Australian research scholar who specializes in the economics and politics of Asia and international political economy. Bhatia wrote recently in New Mandala that Malaysia’s leaders are, “hoping the matter of the half-brother of North Korea’s insane leader Kim Jong-un will grip Malaysians like a John Le Carre thriller.”
Bhatia added that state-controlled media in Malaysia was giving the case round-the-clock coverage.
“After all, Malaysians need distractions.”
On the economy, the Malaysian Institute of Economic Research says that 2017 has brought “a glimmer of hope for better economic conditions,” with large oil producing countries recently agreeing to a long-awaited production cut.
“This development is good for Malaysia on two counts. First, higher oil prices will increase export as well as government revenues. Second, global trade flows are expected to improve with better oil prices,” MIER says.
Still, improved oil prices will only go so far to relieve pressure on the government over the country’s economic performance. For several years, more than 90 percent of real GDP in Malaysia was attributed to domestic demand. MIER says growth in domestic demand in 2016 was at its lowest since the 2008 global financial crisis and is expected to stay flat this year.
Down to a vote
Looking ahead to Malaysia’s next general election – there has been speculation a snap election could be held this year – the most important factor in keeping the incumbent in power, however, may have little to do with Najib at all.
Rewcastle Brown contends that opposition parties have accepted that in order to get rid of Najib they need to work together across factions and there are signs that this is already happening.
But as the Economist Intelligence Unit (EIU) says, “Given the fragmented opposition, made up of three separate groups, the ruling Barisan Nasional coalition appears well placed to win the next election whenever it is held.”
Penang Institute’s Ooi Kok Hin wrote, “The fault lines of Malaysian society are too many and too deep, with groups frequently divided along ethnic and religious lines. Due to this, Najib can easily turn a once-unified opposition against one another.”
Professor Chin agrees. He suggests that the center-left Democratic Action Party (DAP), the country’s second largest political party and the opposition’s “only strong performer,” appears unable to expand beyond its ethnic Chinese supporter base. The return of former Prime Minister Mahathir Mohamad to Malaysian politics – he has designs on starting a new party – is unlikely to be a panacea for disunity among the opposition groups.
“A large part of the Malaysian middle class cannot forgive the opposition for tying up with Mahathir. Many of them blame Mahathir for all the mess Malaysia is in now.”
The irony, Chin says, is that whilst Najib and the ruling Barisan Nasional coalition is at its weakest, “the opposition is even weaker.”
Moreover, the stakes are high for Najib and BN. As Chin says, Najib has to “win big” at the next election in order to name the terms for his own retirement.
Nanyang Technological University’s Saleem says that negotiations between the different opposition parties are already underway, which will likely lead to electoral pacts on seat arrangements. Despite this display of unity, she says the key issue the opposition needs to deal with is one of public perception.
“With the failure of the opposition coalition to present a united and cohesive front in the past, voters could have ample reason to doubt that the opposition could actualize its stated goals,” Saleem says. “Such developments stand in stark contrast to the UMNO-led government, which has successfully rallied behind its leader, Najib Razak, even as he continues to face criticism over 1MDB.”
Saleem adds that recent defections of DAP politicians in Malacca – one member of parliament and three assemblymen were followed by several others – and speculation over comments made by opposition politicians is a signal that an emerging power struggle is underway among the center-left political groups.
“Such news only serves to reinforce negative perceptions of a non-viable opposition coalition prone to in-fighting,” she says.
No endgame after all?
It may be in Malaysia, as in Syria, that despite all the wrongdoings of the leaders, the lack of a unified opposition ensures the continuation of an unpopular incumbent.
As Saleem says, Najib’s political position has been secure since late 2015 when he had neutralized the key political and institutional threats; last year Najib led his government to wins in two by-elections and the state election in Sarawak.
“Najib’s strong-armed moves, his ability to galvanize support within his UMNO party, and the electoral wins ensured that his political position remained secure even after the United States Department of Justice filed civil forfeiture complaints seeking to recover more than US$1 billion of the US$3.5 billion that it alleged was misappropriated from 1MDB funds,” she says.
For Rewcastle Brown, there is also no sympathy for the western companies and individuals that have been involved with Malaysian projects and with deals and links to corruption.
“Human beings have an absolutely brilliant ability to rationalize their own self-interest,” she says. “The reason these countries have become so fantastically corrupt is because Western and other countries have rivaled each other to corrupt the people in charge. They have done it with impunity. Until those bankers and industrialists know they can get into very deep water for doing it they will keep doing it.”
Just this week Sarawak Report noted reports from Switzerland that, “Nicolas Giannakopoulos has been suspended from his position at Geneva University following concerns published by Sarawak Report about his apparent funding by the Malaysian Government to spy on its opponents.”
Editor: Olivia Yang