Dominique Wong Fook Jian
It seems like the perfect storm for Malaysia. The ringgit – the Malaysian currency – has tumbled this year, spreading discontent among Malaysians everywhere. Domestically, 1Malaysia Development Berhad (1MDB), a sovereign wealth fund, has racketed up RM42 billion in debt – the brain child and chairman of this fund being no other than the current Malaysian Prime Minister, Najib Razak. Externally, a deceleration in China’s economic outlook and a tumult in oil prices negatively impacted Malaysia, China being Malaysia’s trading partner and South East Asia’s last major net oil exporter.
This week’s encouraging export data in Malaysia and weaker jobs data in US was a welcome reprieve for the Malaysian Ringgit which rebounded 6.7% off 17 year lows. The ringgit had previously declined nearly 30% in just over a year. However, the data camouflage the deepening political crisis stemmed by the 1MDB sovereign wealth fund scandal in Malaysia.
Concerns first arisen whether a debt fund with inflated purchases of power assets and little commercial activity could repay its debt obligations. But the issue blew over in May this year, when the Wall Street Journal implicated Mr. Razak over financial impropriety amounting to $700 million of alleged illicit funds into his personal bank accounts allegedly from 1MDB.
The Prime Minister is now accused of buying off critics and stoking racial tensions to retain power.
The Malaysian central bank, Attorney General, Parliament Public Accounts Committee, Police and Malaysian Anti-Corruption Agency (MACC) all proceeded to investigate the allegations. But then the Prime Minister sacked his vocal deputy, the Attorney-General and a number of other ministers, and gutted the Public Accounts Committee, whilst several MACC and police officers were mysteriously sacked or transferred. The Prime Minister is now accused of buying off critics and stoking racial tensions to retain power.
Malaysian institutions seem crippled. Few weeks ago, the Prime Minister allegedly rented a racial Malay Mob to rally for his government while hurling racial slurs at Chinese minorities, after a previous rally denouncing corruption was accused of being dominated by Chinese and Indian minorities.
Even while the dust settles on the racial front, there is a diplomatic hangover in Malaysia political circles today over Beijing’s controversial response to the rally. Two weeks ago, for the first time in Malaysia-China bilateral relations, China’s envoy to Malaysia made a statement amounting to interfering in Malaysian politics. Huang Hui Kang reportedly stated China would not sit idly and “will oppose terrorism and any form of discrimination against races and any form of extremism.”
This resulted in political inertia and conflicting statements from different ministers in responding to and seeking clarification from the envoy; the implications of which portends to a more assertive China foreign policy that now includes the welfare of naturalised overseas Chinese.
The government also reared its ugly, invoked punitive security measures and arrested Lawyer Matthew Chiang whose client was soliciting investigations into 1MDB abroad despite only performing his professional duties. The (SOSMA) measures are targeted at “actions detrimental to Parliamentary Democracy” that allows preventive detention for 28 days. When legislated, government ministers took pains to explain that would only be used against terrorist suspects and not political dissenters.
Even the constitutional monarchs, who are symbols of reverence in Malaysia – especially within the politically dominant Malay majority electorate – are disquieted. They usually stay above politics but this week came out with a strongly worded joint statement urging "The findings of the investigation be reported comprehensively and in a transparent manner so that the people will be convinced of the sincerity of the government which shall not at all conceal facts and the truth.” The Deputy Prime Minister had to go on the defensive reiterating commitment to resolving the issue.
Two weeks ago, at the local Economic Update Conference in Kuala Lumpur, central bank Governor Tan Sri Zeti Akhtar was composed but unequivocal in stating that “[In the challenging external environment] we don’t need any more domestic uncertainty. When we begin to resolve the uncertainty surrounding 1MDB then we will see a recovery in our currency.” The governor was referring to the investigation stalemates seen domestically.
Malaysia’s central bank seems like the last independent institution standing, and has recommended criminal investigations into 1MDB to the AG (though it was already twice unheeded). In addition, the International Financial Action Task Force has strengthened international anti-money laundering regulations to avert terrorism financing in recent years.
With 6 international investigations from Abu Dhabi to Switzerland under way into these irregular financial activities, even while the prime minister stretches the Malaysian system at its seams, Governor Tan Sri Zeti is right. In her own words, “There is nowhere to hide.” TMM
Dominique Wong Fook Jian writes about Asian affairs for The Manchester Magazine. He is a second year Law student at University of Manchester. He loves to travel while meeting different people and countries to understand multifaceted perspectives on politics and history underpinning every individual country and delivering a uniquely Asian and Malaysian perspective on our current affairs