UMNO Revolt Rises Against Malaysia PM

With the filing of a police report late last week by a member of Prime Minister Najib Tun Razak’s own political party, the long knives have appeared in Malaysia, seeking the premier’s scalp over the scandal-ridden state investment fund 1Malaysia Development Bhd.

1MDB is said to be seeking permission for an extension from Bank Negara, the country’s central bank, on nonperforming loans from the country’s Tier 1 banks out a concern that if no extension is granted, the banks could be forced to make major provisions.

Although he has made only oblique comments publicly, the man behind the move to oust Najib is former Prime Minister Mahathir Mohamad, who publicly withdrew his support for the prime minister via his blog, Che Det, in August.

Kairuddin Abu Hassan, a Penang-based United Malays National Organization deputy district chief, filed the request for a “detailed and comprehensive” investigation including the interrogation of 1MDB’s board of directors and representatives of any companies that might be implicated.

While the Penang UMNO branch distanced itself from Khairuddin’s actions and threatened to bounce him out of the party, there can be little doubt that forces aligned with Mahathir have seriously increased the pressure. Over the weekend, the 700,000-member Perkasa NGO, a Malay supremacy organization closely allied with Mahathir, denounced the prime minister, saying he had lost the confidence of the country.

“Realistically Najib’s situation is untenable,” a member of the Mahathir faction said. “Certainly he will fight back but whether he resigns or not point is he is he cannot function as PM.”

When Mahathir began his campaign against Najib more than a year and a half ago, it was given little chance. The former prime minister had been out of office for more than a decade and was regarded as a loud but irrelevant force. But political analysts in Kuala Lumpur say his campaign has been gaining traction over the 1MDB issue.

Even at 89, and reportedly seeing a physician for various ailments, Mahathir remains a formidable if flawed figure who during his 22 year reign as prime minister forcefully led an industrialization drive to move the county out of its plantation mentality, at the same time resulting in as much as US$100 billion in bad investments.. He forced the departure of Abdullah Ahmad Badawi, the successor he hand-picked in 2003 as premier in 2009, and set his sights on Najib in the runup to the 2013 general election, charging behind the scenes that Najib hadn’t adequately represented the interests of the Malays.

The vehicle for his surrogates’ attack on Najib is 1MDB, the five-year-old state investment fund which as of March had amassed debts of RM49.1 billion (US$14.04 billion) against assets of RM51.4 billion, registering losses of M663.5 billion at the end of the quarter, mainly on huge finance costs.

Mahathir and his allies have been dissatisfied with Najib’s performance for more than two years over a wide range of other issues as well, however. The 1MDB issue, described as “the mother of the mother of the mother of all scandals” by Democratic Action Party MP Tony Pua in an Asia Sentinel article on Dec. 8, has become the vehicle with which the octogenarian hopes to skewer the prime minister. It has gained additional momentum because of allegations that Jho Low Taek, a hard-partying young friend of the Najib family, may have used Malaysian government guarantees to back the making of The Wolf of Wall Street, a hit movie starring Leonardo di Caprio, and to fund his attempt to take over three of London’s most prestigious hotels.

Najib is the chairman of the 1MBD advisory board and the motivating force, apparently on the advice of Jho Low, as he is known, a putative whiz kid who is alleged to have steered the fund first into a disastrous alliance on oil exploration on the advice of a Saudi prince he went to school with in London.

When the exploration failed, opposition figures alleged, the money was invested in forex trades in yen. The trades were not successful and, opposition lawmakers alleged, the money disappeared. That was the first of a long string of financial disasters that put 1MDB deep in the red without adequate capital to meet obligations.

Mahathir, who rarely attacks frontally, sought to use his allies to put pressure on Najib at the UMNO annual general assembly in Kuala Lumpur in late November, in particular seeking to bring a vote to the floor of the body rejecting Najib’s stated plans to international leaders to dump the country’s imprecise, often-abused colonial era Sedition Act.

Najib short-stopped the plan by announcing in advance that he would not only not discard the sedition act, he would strengthen it “to defend Islam” and other religions. Any attempt to bring the disaster surrounding 1MDB was also turned back. .

Nonetheless, despite having quelled open rebellion, the widespread feeling is that Najib emerged from the UMNO convention weakened. A number of political observers including those inside UMNO have suggested that he will be replaced by Muhyiddin Yassin, the deputy prime minister and UMNO vice president, sometime later this year.

Following Kairuddin’s filing of the complaint last Friday, alleging “questionable” business, investment and fund raising transactions and decisions, A. Kadir Jasin, the former editor of the New Straits Times and one of Mahathir’s closest allies, wrote on his blog that an additional report may be filed with the Malaysian Anti-Corruption Commission, a notoriously political body – ostensibly modeled on Hong Kong’s vaunted Independent Commission Against Corruption -- that tends to shovel corruption complaints under the carpet unless there is a political motivation to push them along.

The MACC, as it is known, has a long record of refusing reports of corruption or finding no cause of action after reports have actually been filed. If the MACC takes up the report filed by Mahathir’s allies, it raises very interesting questions.

1MDB, in a statement, said “We are aware that a police report concerning 1MDB was filed by a politician in Penang. We have not seen any documentation related to this, so are unaware of the nature of the complaint. However, we are confident that it will have no legal basis. We welcome any investigation into our affairs and the opportunity to rebut malicious allegations.”

A delegation led by the 1MDB Chairman, Lodin Wok Kamaruddin, along with two other board members, met with Mahathir to vainly attempt to assuage his concerns. Apparently they didn’t deliver the answers Mahathir wanted.

In a thinly veiled entry on his blog, Kadir quoted a source – probably Mahathir himself – saying the former prime minister feels obliged to take up the matter and to speak openly because many parties had come to see him to inform him about the goings-on in the company and that he was disappointed that issues surrounding 1MDB weren’t seriously discussed by delegates at the Umno General Assembly.