Malaysia's political money trail

In Malaysia’s squabble for primacy between Prime Minister Abdullah Ahmad Badawi and former premier Mahathir Mohamad, money politics is playing an increasingly crucial role. The extent to which one well-heeled political faction can weather the other's onslaught until the next leadership election in the United Malays National Organisation, will weigh heavily on ready access to various forms of monetary support.

Abdullah announced Thursday that the triennial race to lead the largest of Malaysia’s three ethic-based political parties will come sometime after the next general election. It is a battle that Abdullah looks more like winning, not least because of the amount of patronage he is able to dispense to party stalwarts, critics say.

UMNO has led the Barisan Nasional, or national coalition, since independence in 1958 and control of UMNO is tantamount to control of Malaysian politics.

After months of sniping against Abdullah by Mahathir, the first real electoral skirmish came during national party elections held on September 7 for seats to the next UMNO general assembly. The battleground was in the northern Malaysia state of Kedah, Mahathir’s home territory. The result was a humiliating defeat for the man who was the strongest political leader in the country for 22 years.

In the wake of his loss, Mahathir charged that money played a vital part in denying him one of seven seats up for grabs in his home division. He claimed RM200 had been placed in brown envelopes for party electors, along with a list of “preferred candidates” that did not include his candidate. The claim was dismissed by the local party chief. Mahathir’s two sons, however, did win seats in Kedah.

While details of money politics are often murky, Malaysia’s party slush funds are legendary and allegations of money politics have persistently dogged the party.

Mahathir and former Minister Daim Zainuddin reportedly used UMNO slush funds to attempt to corner the world tin market and lost hundreds of millions of dollars in the early 1980s. Mahathir himself charged that his former protégé and onetime finance minister Anwar Ibrahim had accumulated a RM3 billion fund for political purposes.

Anwar, who was jailed on charges of corruption and sexual perversion, was freed by Abdullah in 2004. He has since told reporters that the UMNO leadership’s own fund now amounts to as much as RM8 billion.

Certainly, through his son-in-law, Khairy Jamaluddin, a director of ECM Libra Avenue, Abdullah is believed to have access to enough cash to wage a prolonged campaign of attrition. The company, cobbled together through a series of corporate maneuvers, has been the subject of extensive questions in Malaysia. Its chairman, Kalimullah Hassan, is a onetime journalist who has become an UMNO stalwart and close Abdullah ally.

Critics have asked how Kairy, the deputy head of the UMNO youth wing, was able to fund his RM9.2 million purchase of a minority share in the company and why the purchase was considerably below market price. The shares rose 50 percent after the transaction was announced. Khairy has since said he borrowed the money to fund the purchase.

Continuing charges of nepotism forced Khairy to sell his shares back to ECM Libra in August, for a total of RM6.63 million, a move meant to protect Abdullah.

On other corporate fronts, Kamaluddin Abdullah, the PM’s son, also wields considerable financial clout. He controls SCOMI Engineering, whose shares surged from a low of MR$1 to more than MR $18 before falling back below RM2 over the last six months. Despite the tumble, there is no telling if cash reserves churned up by the stock’s wild ride could be leveraged or used for campaigns that may enhance Abdullah Badawi's political survival.

Through the development of the Johor Southern Corridor, where Abdullah will serve as co-chairman of the investment committee along with the state’s Chief Minister, more control can be exerted on the economy. Indeed, thousands of contracts and concessions in the Ninth Malaysian Plan (2006-2010), which have not been parcelled out, can be instrumental for similar purposes. Development plans in Penang and Kedah wield similar advantages for the prime minister.

Given this, many Malaysians have ruled out a comeback for Mahathir, especially when he himself is now no longer bankrolled by federal and state coffers. Most of his business supporters are believed to no longer see eye to eye with him.

Najib Abdul Razak, the deputy Prime Minister, also has the means to project his position, should the campaign increase in competitiveness and intensity.

Through elaborate maneuvering by his younger brother Nazir, Abdul Razak heads the CIMB Group, an entity that was merged with Southern Bank Ltd earlier this year. Although Southern Bank is the country's second-smallest bank by assets, at the time of the merger Nazir said the niche bank would help investment bank CIMB to develop its consumer operations. With the consolidation, CIMB is now one of the biggest investment banks in Malaysia, with regional ambition and scale.

Should Anwar Ibrahim feel he has to wade into the fray as an independent --or perhaps even as Abdullah’s ally -- he could probably count on the financial might of his friends and colleagues in the Middle East, especially in Dubai, where Anwar is known to have considerable business interests. He operates a consulting firm in Dubai that advises Middle Eastern businesses on how to invest in Asia, specifically Malaysia.

In the weeks and months to come, money will matter more and more in UMNO’s competitive politics, not just through simple cash pay-outs, but in oiling the political machinery of each candidate.

In turn, members are expected to calibrate their loyalty accordingly to ensure maximum gains and advantage. Come what may, the usual pledges of allegiance to Abdullah and Najib Razak would be guaranteed. What is less certain is whether such a culture will in due course undermine the strength of the party, leading the opposition to make further inroads.