Malaysia’s Mahathir Again Turns a Blind Eye to Corruption

PM excuses favorite son AirAsia head in bribery scandal

Malaysia’s Pakatan Harapan coalition, elected in May 2018 as a reform government, is back in the middle of an ugly scandal reminiscent of countless affairs on the part of its disgraced Barisan Nasional predecessor, which the voters kicked out of office in the middle of a huge previous scandal.

Mahathir Mohamad, the 94-year-old premier brought back out of retirement to head the government, has dismissed bribery allegations against Tony Fernandes, the flamboyant head of AirAsia, who became a national hero through the discount airline he built in 1993 after buying a defunct predecessor – with Mahathir’s help – for RM1 (US24¢). Airbus SE has admitted to paying US$50 million in bribes to Fernandes in order to win orders from AirAsia through sponsorship of the Caterham Formula 1 team, which Fernandes and AirAsia Chairman Kamarudin Meranun bought in 2011.

As prime minister from 1981 to 2003, Mahathir presided over a vast regime of corruption perpetrated by cronies although there have never been allegations against his personal probity. After he left office, the mess he left behind blossomed into billions in scandals including the state-backed 1Malaysia Development Fund, in which US$4.6 billion disappeared into mismanagement and theft that has ensnared former Prime Minister Najib Razak, who is now on trial for corruption. Many of the Malay cronies Mahathir countenanced during his 23-year reign have returned to seek government contracts, as Asia Sentinel reported in October of 2019 in a story titled “Return of the Cronies.”

Both Fernandes and Kamarudin Meranun have stepped down from AirAsia temporarily, saying they have done nothing wrong and that the Formula 1 sponsorship deal was a “branding exercise.” 

Despite Airbus’s acknowledgement that the money to support Caterham was a bribe, Mahathir told reporters at Putrajaya, the country’s administrative capital, that the money might be considered an “offset,” which he called a normal practice.

“Yes, I hear there are allegations that AirAsia is involved in corruption. I am hesitant to comment, but usually when governments buy equipment, we always ask for an offset,” he told reporters. “For example, when we buy an airplane, we ask for an offset and whether we consider the offset as bribery or not, that is up to you. For me, if we can get something because we buy something at a high price, why can’t we accept it? Unless the money went into your pocket, now that is bribery.”

Airbus is enmeshed in what might be the biggest bribery scandal in aircraft sales history, with a UK court announcing on January 31 that the aircraft manufacturer would be forced to pay fines exceeding €3.5 billion (US$3.85 billion) as the result of a French, US and UK investigation relating to offences in 20 countries including Malaysia, Sri Lanka, Taiwan, Indonesia, Ghana, China, Colombia, Nepal, South Korea, the United Arab Emirates, Saudi Arabia, Taiwan and Russia.

Airbus acknowledged five counts of failing to prevent bribery out of a unit reportedly called “Bullshit Castle” at its French headquarters that maintained a network of secret agents paying airlines to buy their planes. Fernandes was one of Airbus’s biggest customers, buying scores of planes as AirAsia expanded across the region.

“It’s Tony,” said a well-placed business source. “He cut the deal with Airbus to sponsor his racing team Caterham. Tony has a lot to answer. The truth is these Froggies, to save their ass, sold some Asians down the river. That’s as simple as it gets. Otherwise, they would have been sanctioned and lost billions more.”

“What do we do?” a top lawyer in Kuala Lumpur told Asia Sentinel. “It doesn’t matter if the old man calls it an offset, Airbus called it a bribe. It is so entrenched in the system it can't be identified any longer.”

In July of 2012, in a prize-winning series of stories, Asia Sentinel reported that Mahathir and then-French Foreign Minister Alain Juppe, according to hundreds of documents in possession of the French Prosecuting Magistrate at the Court de Grand Instance de Paris, were fully aware of what then was one of the biggest scandals in Malaysian history, the purchase of Scorpene submarines from the French munitions-maker DCN. 

Led by then-Defense Minister Najib Razak, officials steered €114.96 million (US$126.5 million at current exchange rates) payment through a private company called Perimekar Sdn Bhd, wholly owned by Abdul Razak Baginda, a defense analyst who was Najib’s best friend and head of a think tank called Malaysian Strategic Research, which was connected with UMNO, headed by Mahathir. he payment appears to have been in violation of the OECD Convention on Bribery, which France ratified on June 30, 2000.  

There seems little appetite to hold Mahathir’s feet to the fire in countenancing dishonesty on the Airbus/AirAsia scale. The reformers who formed the backbone of the resistance to the Barisan and its corruption have gone silent including Rafizi Ramli and Tony Puah. Nurul Izzah, the daughter of then-opposition leader Anwar Ibrahim and a major voice for reform, has also basically disappeared.  

Voters have become disillusioned with a government in which very little has changed except that it has ceased to even function as well as the corrupt coalition that preceded it, critics say. Many of those critics are within the Pakatan Harapan coalition itself. Concern is rising that when elections are held in 2023 under the country’s parliamentary system, the coalition will be soundly defeated and Malaysia will have lost its chance at reform for good.