Najib Appears Out but What About UMNO?

With the freezing on July 6 of six bank accounts that some reports have linked to Malaysian Prime Minister Najib Tun Razak and the reported seizure of 17 accounts at two other banks by a special task force investigating the 1Malaysia Development Bhd scandal, it appears likely that the prime minister is toast although definitive statements are always dangerous.

The seizures follow reports by the Sarawak Report and the Wall Street Journal that US$700 million from companies linked with 1MDB was deposited into Najib's personal bank accounts at AmBank. The Wall Street Journal has since reported that the six frozen accounts were not the ones it reported on, however, and it is uncertain how the accounts were linked to Najib. That information has spilled into a torrent of statements by other officials suggesting he step aside while the investigations are completed. Although Najib’s name wasn’t tied to those accounts, those statements and the freezing of the accounts are an indication that his Teflon has worn thin.

He may not go immediately. One knowledgeable political analyst said Najib could last until the end of the year, although it is unlikely. And while former Prime Minister Mahathir Mohamad isn’t linked directly to the reports by the two news organizations, Najib’s now almost inevitable departure represents a victory for the former premier after months of bitter warfare to drive Najib from office. There is likely to be a bloodletting that may claim such loyalists as Khairy Jamaluddin, one of Najib’s closest allies.

Maintaining the system

But Mahathir’s crusade to drive Najib out is not about reforming the system but preserving what amounts to a cash register filled with billions of dollars that benefit the top officials of the United Malays National Organization. The alleged diversion of hundreds of millions of dollars into Najib’s accounts, apparently used by UMNO in the 2013 general election, followed the alleged €114 million kickback on the purchase of French submarines to a company controlled by Najib’s best friend, which was also passed back to UMNO, according to French investigators.

“My sense is that the corrupt power elites that run Malaysia are now deeply concerned that the Wall Street Journal exposé could spin out of control and have decided to ditch Najib and try to regain mastery of the situation,” a senior diplomat told Asia Sentinel. “Najib will be offered a deal – go quietly and be protected against any charges or be taken down. Najib has little choice and will step down. The new man will promise to clean up the mess, track down the money, etc. but nothing will be done. Jho Low, Najib’s tycoon friend who helped him start 1MB, and perhaps Arul Kanda [the executive director] will take the fall and in time, the whole matter will be forgotten as have so many other scandals in the past.”

Mahathir’s candidate to succeed Najib is Muhyiddin Yassin, the 68-year old UMNO deputy president and deputy prime minister. But Muhyiddin is hardly a paragon of virtue. He has become extremely wealthy despite spending his life in government service. As Minister of Education, he steered a contract for computerization of the country’s schools to YTL Corporation Bhd., where his son is a partner. In addition, Muhyiddin is an unrepentant Malay nationalist, as is Mahathir. Mahathir's first irritation with Najib arose not over corruption but because he believe Najib had given away too much to ethnic minorities, particularly the Chinese, in the 2013 election. Behind the scenes, both he and his closest ally, Daim Zainuddin, were demanding that Najib increase perks to ethnic Malays and ignore the minorities.

Rotten at the core

The fact is that for 35 years, since Mahathir was named prime minister, UMNO has provided a golden cornucopia for the cadres, as Asia Sentinel reported as far back as 2010. At least 23 of Malaysia’s biggest companies have been vehicles for UMNO to siphon off vast amounts of money in government contracts. Most of the companies were mismanaged into the ground and taken over by various government entities. These companies are so hard-wired to UMNO, the government and its investment arms that de-linking them would probably destroy the party.

Muhyiddin is hardly likely to undo that system. It is a system that regularly produces contracts like that which went to YTL. Another was “Cattlegate,” which ensnared the Women Family and Community Development Minister, Shahrizat Abdul Jalil for allegedly diverting a major portion of RM250 million in taxpayer funds intended for the National Feedlot Corporation (NFC) to raise halal beef to herself and her family. She was accused of using RM800,000 for an overseas junket and RM10 million to purchase a luxury condominium in Kuala Lumpur as well as cars and other items.

After the exposure, Rafizi Ramli, the opposition Parti Keadilan Rakyat general secretary, was charged with violating the official secrets act for making the scandal public. Shahrizat was forced to step down temporarily but was rehabilitated by Najib for the 2013 general election.

Other Contracts such as the disastrous Port Klang port terminal were handed to Barisan Nasional component parties, in this case to the Malaysian Chinese Association. The Port Klang contract – let under Mahathir – cost the government billions of ringgit after officials artificially kited up the value of the property before it was sold to the port.

Skating through

Although a handful of functionaries were charged, none of the major party figures went to jail. Ling Liong Sik, the principal figure in the scandal, walked away unscathed. The Perwaja steel mill scandal cost the government US$800 million. Eric Chia, a Mahathir crony charged with diverting funds for his own use, walked away clean. The Malaysian Indian Congress received similar contracts that enabled Samy Vellu, the then party leader, to become a rich man.

Mahathir may well try to repair the system but whoever replaces Najib "inherits a totally broken party that won’t survive,” a Malay businessman said. “This scandal has really sunk in. Everyone in Malaysia has financial problems because subsidies have been removed and the government has implemented a goods and services tax. At the same time RM2.6 billion went into the prime minister’s accounts. People understand 50 million here, 100 million there. This is impossible to fathom.”

At the moment, however, there is no broad opposition coalition capable of capitalizing on the scandal, with the opposition Pakatan Rakyat having imploded due to the jailing of its leader, Anwar Ibrahim, and infighting among the remnants. But with two years before the next general election, widespread disgust with UMNO may well drive a realignment of Malaysia’s political landscape that will allow a new opposition to emerge, the businessman said. Don't hold your breath.