Malaysian Anti-Corruption Agenda Wrecked

Kleptocrat Najib given amnesty no one can explain

There is spreading outrage over the reduction of the jail term and fine for former Prime Minister Najib Razak, one of the architects (along with Low Taek Jho, who remains on the run in China, of the 1Malaysia Development Bhd sovereign fund as its chairman, approving misappropriation as both finance minister and prime minister. Najib refuses to admit guilt, has expressed no regret, served only 17 months of his 12-year prison term, and has four cases pending in the courts for abuse of power, money laundering, and criminal breach of trust. The fund collapsed in 2016, leaving the Malaysian government with bonded indebtedness of US$2.4 billion.

Current Prime Minister Anwar Ibrahim, who conveniently left the Pardons Board a few months before the decision and has claimed no part in it, flagged anti-corruption as the priority for his administration. He made strident public speeches promising to take down the privileged elite who leverage political power to steal billions. The jailing of Najib Razak raised national hope for a judicial system of integrity, which Mahathir had previously compromised. Tengku Maimun Tuan Mat, Malaysia’s 10th chief justice, stood firm against political intimidation by Najib’s supporters, to despatch the thief to prison without delay.

Despite the pardons board verdict of Jan 29, the government kept stalling, asking everyone to wait for the “official announcement.” It was finally released on February 2. Jail was halved from 12 years to six, and the fine was discounted 76 percent, from RM210 million (US$ 44.4 million) to RM50 million. Neither the prime minister, the communications minister, the home minister, nor the federal territories minister (member of the pardons board) dared field a press conference. It was shambolic fumbling for four days, on a matter of the highest national and foreign investor interest.

As the blowback arose in fury and volume, Anwar urged everyone to “respect the pardons process.” The question is if the pardons board itself breached the protocols on basic eligibility. To qualify for a pardon, by convention, the prisoner must admit guilt, express remorse, serve one-third jail term, and have no cases pending. Felon Najib, not even eligible on those criteria, was vaulted over the pardons queue. UMNO Supreme Council member Lokman Adam thanked Anwar for expediting the pardon review for the party’s former president, making his expressions of dissociation from the process look rather hollow.

CNA trumps Malaysian media

Singapore’s satellite broadcaster Channel News Asia (CNA), along with Asia Sentinel, carried the pardons board decision on January 30, citing “reliable sources” three days before the Malaysian government. CNA has a regional footprint, and Asia Sentinel an international one, which means neighboring countries and governments were informed days before citizens. Given the history of prickly relations between the two nations, CNA must have had unimpeachable sources, to so boldly broadcast highly confidential information ahead of the Malaysian government.

Malaysian journalists and media are upset to be outplayed on their home turf, on the hottest domestic news – facilitated by authoritative sources. Communications minister Fahmi Fadzil denied he was the leak. He is one of the more approachable of the Pakatan Harapan ministers, with a ready smile and informal manner. Journalists have a troubled relationship with Fahmi, who threatens police raids and investigations for reports he deems embarrassing to his boss and government. “Fake News” laws add the hazard of legal booby traps for investigative journalists doing their job. That job generally is to expose what flaky governments wish to hide.

Will Najib be required to make full restitution of all that he stole? His seemingly inexhaustible funds to pay expensive legal teams for seven years of court hearings, can only come from his 1MDB heist, not his salary, which was RM78,000 monthly. The supreme irony of the thief using stolen state funds to challenge the state, seems lost on the government. That audacity exhibits the culture of impunity of political elites entrusted with the key to state coffers.

Elite politicians can literally get away with murder. The feudal social construct of Malay society and inherent fealty, tributes obsequious awe to the titled. No one blows the whistle on the political burglars. The police investigate whistleblowers. A couple of incidental murders await legal closure too. The jailing of Najib rattled the political class to its roots. Najib’s error was in getting caught – not in stealing. His loyalists are upset by the other high-level thieves roaming free, while their patron is jailed.

UMNO was booted out in the 2018 general election, and an upright and competent attorney-general drove legal recovery of the stolen funds. The US Department of Justice investigated 1MDB for abusing US financial institutions, and convicted those it could get hold of – which provided valuable material evidence for the Malaysians to proceed.

Consequences for Malaysia

The mind-boggling scale of the fraud has saddled the government with over RM12 billion in public debt to settle 1MDB liabilities. The debt servicing for 1MDB adds to the deficit financing load from excessive, imprudent annual budgets. That has triggered credit rating downgrades and increased borrowing costs. Citizens have to shoulder this payback over several generations. Taxes on petty stallholders are being levied, the GST scheme is being reconsidered, and tax dodgers are being hunted.

Malaysia’s governance of public funds and financial institutions stinks. It ranks 50th of 180 countries on the 2023 Transparency International Corruption Index. Corruption at the highest levels has been normalized over six decades of unbroken UMNO rule. The Pakatan Harapan government scrambled to strengthen the Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) framework. Too little, too late.

The Malaysian ringgit continues to dive against the Singapore dollar. They were on par 1:1 from 1965 (when Singapore was evicted from Malaysia) to 1973. Today the Singapore dollar is worth RM3.54, reflecting persistent misrule, and mismanagement of the Malaysian economy. As one African commented, “When politicians are richer than entrepreneurs, the country manufactures poverty.” Along with imposing onerous bumiputra equity and staffing conditions, there is little interest from investors. Capital flight is rampant. The Pandora and Panama Papers revealed the scale of ill-begotten cash stashed in tax havens abroad by politicians and their cronies.

Civil service pensions totaled RM32.4 billion, gouging 10.5 percent of the 2024 budget. It is an unproductive financial albatross expected to balloon to RM46 billion by 2030. It is unsustainable, diverting resources from infrastructure investment, education, and social programs. This gravy train chokes itself.

Next five years

The incoming 17th Agong, Sultan Ibrahim Sultan Iskandar, has made clear his distaste for racial politics, religious extremism, displacement of Malay culture by Arabic, corruption, and political jockeying. He is keen on fundamental education reform to upgrade teacher quality, and review of religious education content. Multicultural harmony is the norm in Johor state, and a core principle of governance.

Ibrahim wants the stalled fast rail project between Singapore and KL revived and has confidence in Chinese joint-venture partners to boost the Johor economy via closer logistics integration with Singapore. The massive Forest City scheme in Johor crashed after Mahathir canceled the permanent residence incentive for mainland Chinese buyers and the developer, Country Garden, crashed into bankruptcy in China’s distressed property market.

The Agong is constrained by the Westminster model of constitutional monarchy, which has time-honored protocols in place between a sitting prime minister and monarch. Anwar Ibrahim will find the monarch more interested in execution than talk, and if he has the right team to implement. In an interview with the Straits Times of Singapore, Sultan Ibrahim said he wants to “put things right” during his term till 2029. He floated the idea that the anti-corruption agency MACC and state-owned oil monopoly Petronas should report to the King, not the prime minister.

Historically, MACC was used to target political enemies of the ruling party, while cronies strutted. Petronas is the giant piggy bank Mahathir and Najib raided repeatedly, along with the Employees Provident Fund, to bail out incompetent cronies who were gifted national assets. The national shipping line was bankrupted under Mahathir’s son.

Sultan Ibrahim questioned the huge budget allocated to JAKIM, the Islamic development department, which he banished from interference in the religious affairs of Johor state. JAKIM monitors all government departments for Islamic conformity, including dress codes. This has inconvenienced citizens filing reports at police stations and seeking treatment at hospitals. It is not the mandate of civil servants to tell the public what to wear. “Do the job you are paid to do, and mind your business,” was his majesty’s advice. JAKIM and its champion Anwar have to tread carefully. Malaysians are fed up with JAKIM and wish it could be purged entirely from the civil service. They wonder why MACC’s investigation into systemic corrupt JAKIM halal meat packaging practices, exposed in 2018 by Asia Sentinel, has failed to charge the scammers.

Cyril Pereira, former publisher of Asia Magazine, is a long-time Asia Sentinel contributor based in Hong Kong since 1985