Malaysia’s Najib Razak Played Key Role at Troubled 1MDB Investment Fund

By Tom Wright And Bradley Hope

Wall Street Journal

Oct. 15, 2015

Prime minister ordered removal of auditors, authorized controversial investment, Malaysian investigation shows

In early 2013 at the glitzy World Economic Forum in Davos, Switzerland, Malaysia’s prime minister approached the country’s longtime financial adviser Goldman Sachs with an urgent assignment.

A government investment fund the prime minister oversaw wanted Goldman to help it raise $3 billion quickly and quietly, according to people close to the bank.

The fund, 1Malaysia Development Bhd., or 1MDB, was Prime Minister Najib Razak’s signature initiative, envisioned as helping transform Malaysia into a modern Muslim democracy fueled by new industries. It burnished his credentials as a new type of liberal, Western-friendly leader, embraced by the U.S. as a counterbalance to China.

Its projects also stood to polish Mr. Najib’s standing with Malaysians who would soon be voting in an election. Goldman was told the fund wanted the money quickly so it could hold a public unveiling of a major investment in a planned high-profile financial center in Kuala Lumpur.

That development stalled, though the money was raised. Today, 1MDB has come to represent a different side of Malaysia—and of Mr. Najib. Even as he was courting Goldman officials in the Alps, opposition politicians were raising questions about 1MDB and how the billions it was raising were being used.

This year, the fund has become the center of a political scandal that has engulfed Malaysia’s government. The fund is mired in debts of over $11 billion. It is a subject of a raft of local and international investigations, including, in Malaysia, by the central bank, auditor general, anticorruption agency and a parliament committee. It has faced accusations that billions of dollars are missing and that money was misused for political purposes or siphoned off in corruption by individuals.

Center of storm

At the center of the storm stands Mr. Najib, a dapper 62-year-old Anglophile, the founder and chairman of 1MDB’s board of advisers.

Mr. Najib declined multiple interview requests. He has denied any wrongdoing. Supporters say the accusations are a political plot to unseat him. They also have said that though head of the fund’s advisory board, Mr. Najib wasn’t intimately involved in its operations or management.

Investigative documents reviewed by The Wall Street Journal show Mr. Najib playing an important role at 1MDB at key moments over several years. Among other things, he authorized several of its investments, according to documents that form part of Malaysia’s official investigation of the fund.

He played a leading role in raising billions of dollars in financing for the fund, people familiar with the matter said, and Mr. Najib’s cabinet approved the $3 billion bond deal he enlisted Goldman to arrange in early 2013. That deal included a fee to the bank of nearly $300 million, said people close to the bank, far above the $1 million to several million typical if a bank doesn’t have to take on the risk involved in getting it done fast.

Mr. Najib personally ordered the removal of the 1MDB fund’s auditors when they wouldn’t sign off on its books, the government investigation found. He authorized the fund to make investments of millions of dollars although some board members had raised concerns about them, documents in the auditor general report show.

Malaysian investigators, the Journal reported in July, have traced deposits of almost $700 million into the prime minister’s alleged personal accounts via agencies, banks and companies linked to 1MDB. The original source of the funds was unclear, and the government investigation didn’t detail what happened to the money that allegedly went into Mr. Najib’s accounts.

Malaysia’s anticorruption agency has said the money was a donation from the Middle East but hasn’t named the donor. Investigations continue. Mr. Najib has denied taking any money for personal gain.

The Journal reported earlier this year on how 1MDB appeared to overpay for certain assets, with the seller later donating to a Najib-led charity that disbursed money on projects, such as schools, Mr. Najib could cite as he campaigned. The fund has said its decisions are driven by what is best for business and not political considerations.

The scandal is taking a toll on Malaysia and dividing Mr. Najib’s party, the United Malays National Organization, which has ruled Malaysia since its independence from Britain in 1957. Malaysia’s ringgit currency is one of the worst performers this year.

The affair also is proving an embarrassment to Goldman Sachs. As part of a broad probe into allegations of money laundering and corruption, investigators at the Federal Bureau of Investigation and the Justice Department have begun examining Goldman’s role in transactions involving 1MDB, the Journal reported this week. The inquiries are at the information-gathering stage, and there is no suggestion of wrongdoing by the bank, people familiar with the matter said.

Malaysian investigators have also been looking at the financial affairs of Mr. Najib’s wife, Rosmah Mansor, according to government investigation documents. Ordinary Malaysians have criticized her public displays of wealth, including appearances with Birkin bags that can cost tens of thousands of dollars.

Around half a million dollars was deposited into the private account of Ms. Rosmah between February and April by a personal assistant in the prime minister’s office, according to documents recently reviewed by the Journal that are part of a Malaysian government investigation.

Efforts to reach Ms. Rosmah, who hasn’t been accused of wrongdoing, were unsuccessful. She has denied going on spending sprees. After media reports on the bank account earlier this year, her lawyers denied their client had done anything wrong. The account was private and unrelated to 1MDB, the lawyers said in a statement carried by local media.

An anti-Najib demonstration in August drew tens of thousands of supporters. A political faction headed by Mahathir Mohamad, a prominent former prime minister, is trying to unseat him.

Mr. Najib is digging in, attacking Western influences he once courted. After pressure from Western leaders to address graft in July, he lashed out in a Malay-language speech. “If an outsider, a white person, a foreigner is going to decide who should lead the country, I and the party cannot accept it,” Mr. Najib said. “What right have they? We must be united in this.”

In recent weeks, the prime minister suspended the publishing license of an independent media group—a move later overruled by a court—and removed from office a deputy prime minister and the attorney general who questioned the government’s handling of the affair.

Police detained a former party member who said he had been planning to hand over evidence to the FBI, as well as the man’s lawyer. An anti-sedition law that criminalizes discourse critical of the government, which Mr. Najib had said he would rescind, is instead being used to silence critics, human rights groups say. The government says retaining the law is necessary to ensure stability.

“I believe he genuinely wanted to change Malaysia,” said John Malott, a former U.S. ambassador to Malaysia, but “he doesn’t have the guts to carry out his own policies.”

Mr. Najib, who wears bespoke suits and has a trim salt-and-pepper mustache, was born into a political dynasty in 1953. His father and an uncle were prime ministers.

He spent much of his youth studying in England, where he became an Anglophile, he said during a visit to his former boarding school this year.

At the event, he talked of his penchant for British television, including the sitcom “Yes, Minister.” He thanked the school for teaching him “decency, discipline and perseverance.” A politician needs at least two of these to win elections, he quipped to laughter.

When he became prime minister in 2009, Mr. Najib shocked the establishment by taking steps to unwind a system of preferential treatment for ethnic Malays, established by his father after race riots in the late 1960s. Critics of the system say it became a font for corruption, used to dole out patronage and tighten the party’s grip.

Mr. Najib reduced the minimum Malays must hold in many companies to 12.5% from 30% and allowed greater foreign investment. He wanted to win back urban voters, especially Malaysians of Chinese and Indian ancestry disillusioned by graft, said a former political secretary of his.

“We must resolve to eradicate money politics right down to the roots,” Mr. Najib told a party gathering before he became prime minister. “If not, we will all be collectively responsible for the demise of this beloved party of ours.”

He also pledged to rebuild relations with the West, which had suffered under Mr. Mahathir, who claimed Jews ruled the world.

The U.S. embraced Mr. Najib as it looked for Asian allies to counterbalance China. In April 2014, Barack Obama became the first U.S. president to visit Malaysia since the 1960s. Last Christmas, he and Mr. Najib golfed together.

Promising a new economic model, Mr. Najib set up 1MDB, saying it would help race relations by involving all groups in contracts. One of its main projects was the financial center in Kuala Lumpur.

Mr. Najib announced 1MDB in July 2009 during a trip to Abu Dhabi, where he asked crown prince Sheikh Mohammed bin Zayed Al Nahyan to invest. The men met in Abu Dhabi’s sumptuous Emirates Palace, with marble hallways and a cafe with cappuccinos sprinkled with gold flakes. The prince agreed to invest $1 billion, Malaysian media reported.

The fund was put under Malaysia’s finance ministry, which Mr. Najib heads.

Policies backfire

Other policies of his backfired almost immediately. Malay politicians in the ruling party, fearful of losing their perquisites, were furious. A hard-line Malay nationalist group protested plans for an equal-opportunity commission, and it was shelved.

The backlash taught Mr. Najib he needed to do more to bolster support among party chiefs, say people who know him. He unveiled plans for the state oil company to hand Malay businesses around $6 billion annually in contracts.

The dealings of 1MDB, meanwhile, grew murkier.

There is no indication in financial statements the $1 billion Abu Dhabi investment ever materialized. A spokesman for the United Arab Emirates, of which Abu Dhabi is a part, declined to comment.

By 2011, the 1MDB fund was facing questions from opposition politicians about its growing debt and its decisions, which included pouring money into a joint venture with a Saudi oil company that produced no oil. The fund’s board approved a transfer of $1 billion into the venture with PetroSaudi International Ltd., which is owned by a Saudi prince, according to a draft copy of a report by Malaysia’s Auditor General on the fund’s activities.

But hundreds of millions of dollars of the money went to another account, the Auditor General’s draft report said. The account’s ownership and location remain unclear.

In anger over that money, two senior Malaysian business figures on the fund’s board resigned around the beginning of 2010. Attempts to reach them weren’t successful.

Mr. Najib later authorized 1MDB to lend money to the Saudi company, including $125 million in October 2011, according to the report.

The reason is unclear. According to a 1MDB document signed by Mr. Najib that is now part of investigation materials, increased exposure to the company made sense “in consideration of the government relationship between the Kingdom of Saudi Arabia and Malaysia.”

A statement from PetroSaudi didn’t go into details of the situation but said its relationship with 1MDB resulted in a profit for the fund. The fund has called it profitable and has denied any wrongdoing.

The fund attracted attention from Wall Street banks because of its intention to issue bonds to further finance operations. Goldman and others pitched for the business. Goldman’s top banker in Southeast Asia had deep relationships in Malaysia and was close to Mr. Najib, say people familiar with the matter.

The bank won the role of underwriting $3.5 billion in bonds in 2012. Goldman initially put the whole issue on its own books, later selling pieces in private placements.

Rather than invest the money in new industries, the stated purpose of the 1MDB fund, it used some of the money in 2012 for purchases of power plants. Some it bought from Ananda Krishnan, a politically connected Malaysian tycoon, and one from Genting Group, a plantation company with ties to the ruling party.

Analysts said the price 1MDB paid for Genting’s plant was unusually high, since its operating license was running out. The 1MDB fund later wrote down about $285 million of the price it paid for all the plants. It has defended the purchase price as commensurate with the value of the plants.

Mr. Najib was facing the first test of his rule at the ballot box in those months of early 2013. Support was surging for the opposition, worrying the prime minister, say people who know him.

A Genting unit made a donation of about $10 million to a Najib-linked charity, the Journal reported earlier this year. The charity and 1MDB spent heavily in Penang, a state with a large ethnic Chinese population, ahead of the voting. Genting and the charity declined to comment. Mr. Krishnan didn’t respond to requests for comment.

It was several months before the election that Mr. Najib spoke at Davos to a Goldman executive about another bond issue. As before, Goldman initially bought the entire issue, a speedy process that put the proceeds in the fund’s hands rapidly, but also entailed risk for the bank and thus resulted in a higher fee.

The 1MDB fund said it needed the $3 billion quickly as its share of a plan to jointly invest $6 billion with Abu Dhabi’s sovereign-wealth fund in projects including the planned Kuala Lumpur financial center, according to people close to the bank.

Abu Dhabi’s Sheikh Mohammed went to Malaysia that month, March 2013, for a signing ceremony with Mr. Najib.

But Abu Dhabi never invested its share. And 1MDB put half of the $3 billion it had raised into overseas portfolio investments, according to the fund’s financial reports.

Though a 70-acre Kuala Lumpur site was cleared for the financial center, little construction began.

The ruling party won just a third of the vote. Its coalition remained in power because of an electoral system that gives more parliamentary seats to Malay rural areas.

Investigations of 1MDB continue. The FBI and Justice Department are looking at assets connected to Mr. Najib, say people familiar with the matter. Officials in Singapore and Switzerland are probing money flows related to 1MDB. The fund has said it would cooperate with all investigations.

Mr. Najib is going about business as usual. In September, he gave a speech at a meeting of world leaders in New York chaired by Mr. Obama. Next month, Mr. Najib will host the president in Malaysia during a meeting of Southeast Asian nations.

While in the U.S., Mr. Najib also met investment-fund managers. The 1MDB allegations, he told them, were just “noise.”

—Celine Fernandez

contributed to this article.

                This entry was posted on Saturday, 17 October 2015, 10:00 am and is filed under
Financial Scandals
,
Najib Razak
. You can follow any responses to this entry through
RSS 2.0
.


Political myths in Malaysia that must be debunked  if Malaysia is to move forward to fulfill our destiny to be a world model of an united, harmonious, moderate and  successful  plural society

There are several political myths in Malaysia that must be debunked if Malaysia is to move forward to fulfill our destiny to be a world model of an united, harmonious, moderate and successful plural society instead of becoming  basket-case of a failed, or even worse, rogue state.

Some of these political myths are:

1. Umno is Malay and Malay is UMNO.

 Nothing can be further from the truth as right from the first general election in 1959, UMNO was not the only political party representing the Malays in the country.

Arising from this myth, other myths have been born – the myth that Malay rights and interests are under threat because UMNO is fighting a battle of political survival and that Malay rights and interests will be the  first casualty if UMNO is ousted from Putrajaya in the next general election.

Whether Najib is ousted as Prime Minister or UMNO replaced as the leading political party in the government coalition, Malay political power is not threatened as a new Prime Minister will be a Malay and new coalition will be Malay-dominated reflecting Malaysia’s demography.

As UMNO veteran Tengku Razaleigh Hamzah said  last month, he did not know where the perceived threats to Malays were coming from when the government is headed by a Malay, state governments headed by Malays with the exception of Penang, the civil service is mostly made up of Malays, the army are mostly Malays and there are also the Malay rulers.

Malaysia’s foremost civil rights activist, Zainah Anwar, had also questioned where does the “threat to the Malays” come from after 58 years of UMNO rule, and  why, after more than four decades of the New Economic Policy, are (i) 75.5 per cent of those at the bottom Malays; (ii) some 90 per cent of the unemployable university graduates Malays; and (iii) of the RM54 billion worth of shares pumped to Malay individuals and institutions between 1984 and 2005, only RM2 billion remain in Malay hands today.

2. PAS is Islam and Islam is PAS.

UMNO, which has been the backbone of ruling Federal government for the past six decades, does not accept this. Furthermore, nothing can be  more divisive and detrimental to the objective of fostering a progressive and  inclusive Malaysian mindset and consciousness  than to doubt anyone’s religious or nationalistic credentials just because he  or she is not a card-carrying member of any particular political party.

3. DAP is Chines and Chinese is DAP

Right from the very beginning of the DAP nearly 50 years ago, DAP had rejected this political equation as DAP had never aspired to be a Chinese or non-Malay party as have always been a Malaysian party for all Malaysians.

DAP is in fact  the first political party in the country to be Pan-Malaysian, establishing branches in Sarawak and Sabah before any other political party in the country, open to all Malaysians regardless of race, religion or region.

No political party seeking support from all Malaysians can be anti-Malay or anti-Islam, or for that matter, anti-Chinese, anti-Indian, anti-Dayak, anti-Kadazandusun or anti-Buddhism, anti-Christianity, anti-Hindiuism or anti-Sikkhism.

This is why  from the first general election in 1969 contested by the DAP, the party had always put up a multi-racial and multi-religious slate of candidates.

In fact, in the 1969 general elections, two Malay State Assemblymen were elected, one in Perak and the other in Negri Sembilan. In the past 11 general elections, DAP had elected Malay Members of Parliament and State Assembly representatives in Peninsular Malaysia.

As in the 1969 general election, DAP has now more Indian MPs than MIC. It is because of the DAP that there is an Indian Deputy Chief Minister in Penang and the first Indian Speaker in the Perak State Assembly after the 2008 General Election.

In the 2013 General Election, a Kadazan State Assemblyman was elected in Sabah and we look forward to the election of the first DAP Dayak elected representative in Sarawak in the forthcoming Sarawak state general electios.

All these precedents and breakthroughs are testimony that DAP had never aspired to be a Chinese or non-Malay party, as we have always regard ourselves as a Malaysian party.

Although UMNO/BN propagandists want to perpetuate the myth of “DAP is Chinese and Chinese is DAP”, it is most mischievous and completely  baseless.

Earlier, there had been attempt to foist the myth that “MCA is Chinese and Chinese is MCA”, but this has been decisively rejected not only by the Malaysian electorate, but also by the Malaysian Chinese voters, which is why MCA had been reduced to being a 7/11 party, winning only seven parliamentary and eleven state assembly seats in the 13th General Election in 2013.

The pre-condition for any DAP leader or member is for him or her to be  a Malaysian first and his or her  ethnicity and religion second.

I believe that in the sixth decade of our nationhood, there are more and more Malaysians with such an outlook and commitment – who are Malaysians first, and Chinese, Malays, Indians, Kadazandusun and Ibans , or Muslims, Christians, Buddhists, Hindus, Taoists or Sikhs second.

This is the stuff that Impian Malaysia, whether Impian Sabah, Impian Sarawak, Impian Kelantan,  Impian Kedah/Perlis or Impian Johor, are made of!

We must  grasp  three political realities in Malaysia:

Firstly, that no single race or one political party can  rule Malaysia, as it is through inter-racial, inter-religious and inter-party co-operation – as equals and not between superior and subordinates – that Malaysia can become a successful model of plural society which is progressive, prosperous  and inclusive not only to the world but also to the Middle East.

Secondly, that although Pakatan Rakyat is no more, the hopes and aspirations of Malaysians as encapsulated in the Pakatan Rakyat Common Policy Framework principle and policies of national unity, justice, progress and prosperity remain valid and  relevant and this torch of hope for Malaysia’s tomorrow is now carried by Pakatan Harapan comprising DAP, PKR and Parti Amanah Negara.

Thirdly, what the country needs today is for Malaysians, whether political parties, organizations or individuals – and most important of all, the Federal and State Governments –  to have a more inclusive outlook and commitment which tolerate and accept the role and contribution of all races, religions, regions and groups with one common objective to Save Malaysia from the rampant corruption and misuses of power, breakdown of the rule fo law and collapse of good governance which if not stopped, would hurtle Malaysia towards a rogue and failed state.

(Talk to Malaysian students in Istanbul on Friday, Oct. 16, 2015 at 9 pm)

                This entry was posted on Saturday, 17 October 2015, 12:23 pm and is filed under
DAP
,
Pakatan Harapan
,
PAS
,
UMNO
. You can follow any responses to this entry through
RSS 2.0
.


The Merdeka Centre poll that Najib for the first time lost the approval of majority of Malay voters must have tilted his decision not to seek a  confidence motion in Parliament on Monday

The Merdeka Centre poll that the Prime Minister, Datuk Seri Najib Razak has for the first time lost the approval of the majority of Malay voters must have tilted  his decision not to seek a confidence motion when Parliament reconvenes on Monday.

Members of Parliament were only informed yesterday about the order of business for the 25-day budget Parliament beginning on  Monday, which is most unusual as Members of Parliament would normally have been given the order of business  a week before the start of a new  parliamentary meeting.

This is the first time in my years in Parliament since 1969 that Parliament failed to give about a week’s notice of the parliamentary business to be transacted in a new meeting of Parliament – and this could be because Najib was agonising over whether to seek a confidence motion at the beginning of the parliamentary meeting on Monday instead of allowing the issue of whether there would be a no-confidence motion in him  as Prime Minister whether moved by Pakatan Harapan or even by a MP from UMNO/BN  hanging over Parliament for the next two months.

However, the latest Merdeka centre poll has changed the whole picture.

According to the latest Merdeka Centre survey, only 31 per cent of Malay voters is satisfied with the government – the first time approval for the government among Malays has fallen below 50 percent since Merdeka Centre began recording the data in February 2012.  The fall among Malay voters had been  drastic as it had stood at 52 percent this January.

The government’s overall approval rating also plummeted to 23 percent, the worst since the polls started in 2012.

The latest Merdeka Centre poll should serve as a reminder that Najib should stop dilly-dallying about giving a full and satisfactory accounting to Parliament  on the 1MDB scandal as the first item of government business in Parliament, especially as international news report about Najib’s involvement in the 1MDB scandal is becoming a regular feature. Such international reports do not rain, it pour.

International reports like Reuters  and Wall Street Journal have just  reported  about FBI  reviewing Goldman Sachs’ business relationship with Malaysia’s sovereign wealth fund as part of a broader, wide-ranging investigation into 1Malaysia Development Berhad (1MDB).

Malaysians, including Members of Parliament, are tired to reading about 1MDB developments in the international media, as thet are  nothing to be proud about but events for Malaysians  to feel thoroughly ashamed.

Will Najib present a White Paper on the RM50 billion 1MDB scandal in Parliament on Monday?

                This entry was posted on Saturday, 17 October 2015, 2:01 pm and is filed under
Najib Razak
,
Parliament
. You can follow any responses to this entry through
RSS 2.0
.


Malaysia’s 1MDB Gets Bids for Power Assets

B
y P. R. VENKAT

Wall Street Journal

Oct. 17, 2015

Malaysia’s government investment fund has received three bids from domestic and international companies to buy its power assets, as the embattled state-run firm tries to dig itself out from its US$11 billion debt load.

In a statement late Friday, 1Malaysia Development Bhd., or 1MDB, said that it had received “binding and fully funded offers from three strategic investors.” 1MDB didn’t mention the names of the bidders for the assets, which are owned by a unit called Edra Global Energy Bhd.

Only one of the bidders publicly said it made an offer for the power assets. That bidder, another state-run power company called Tenaga Nasional Bhd., which is 30% owned by Malaysia’s sovereign-wealth fund Khazanah Nasional Bhd., said Friday that it had submitted a conditional offer.

Tenaga didn’t say what it bid for the assets, but added that its bid was subject to conditions that included support from its outside shareholders for any potential transaction and more information from 1MDB on the power plants’ operations. It wasn’t clear why Tenaga’s description of its offer as conditional appeared to contradict 1MDB’s characterization of all three offers as binding.

1MDB’s travails have put Malaysian Prime Minister Najib Razak in the spotlight, while hammering investor confidence in the commodities-exporting Southeast Asian nation at a time when it is suffering from fund outflows and falling oil prices.

Though the proposed sale of 1MDB’s power plants initially attracted several local and international players, the interest petered out.

Last week, China’s top state nuclear firm dropped out of bidding for 1MDB’s power assets. On Friday, Hong Kong-listed CGN Meiya Power Holdings, an independent power producer that focuses on clean and renewable power-generation projects, said it decided not to proceed with the proposed acquisition of certain 1MDB power assets.

1MDB appeared to overpay for the power assets when it bought them in 2012 from two Malaysian companies. It wrote down the value of the purchase from one of the companies, and the seller recorded a big gain on its financial statements. 1MDB said the premium it paid reflected the experience of the staff that ran the power plant. The fund paid roughly 12 billion ringgit ($2.85 billion) for the plants in 2012, and valued them at around $4 billion in a planned initial public offering earlier this year.

After the deal, funds tied to one of the companies were donated to a Najib-linked charity, which later donated money to schools in a battleground state during a tightly fought national election, according to a Wall Street Journal report in June.

People with knowledge of the impending sale said it is increasingly unlikely 1MDB would get back what it paid for the power assets. One of the people said Tenaga is likely to proceed with the deal only if it made strategic sense. Given that Tenaga is a publicly traded company with outside shareholders, the company wouldn’t want to be seen as bailing out another state fund, the person said.

“Any potential transaction would need to make strong commercial and financial sense, be value-accretive to TNB’s shareholders, and be assessed based on the highest standards of corporate governance,” Tenaga said in a statement on Friday.

People following the transaction said if 1MDB was forced to take a loss on the transaction, the buyer would likely be Malaysian since the government didn’t want to be seen as giving away a bargain to foreigners.

Azman bin Mohd, Tenaga’s chief executive, said that as a major power producer in Malaysia, the company is the “best and most logical buyer” for the assets. “As the country’s largest power producer, no other bidder knows these assets better than TNB.”

However, he emphasized that a transaction can be completed only if Tenaga’s conditions were met by 1MDB.

1MDB said in its statement that it will start evaluating the offers in the next few weeks and will be guided by its goal to get maximum value for its shareholders through the asset sale. “We expect to enter into a definitive agreement with the chosen party shortly after the evaluation and negotiation process has been completed, before the end of 2015,” 1MDB said.

Mr. Najib formed 1MDB in 2009 to spur growth in the Southeast Asian country, but the fund has since rolled up over $11 billion in debt and is the focus of a series of global investigations. The 1MDB affair has embroiled Mr. Najib in Malaysia’s biggest political controversy in years. Malaysian investigators earlier this year had traced $700 million into Mr. Najib’s alleged bank accounts through agencies, banks and companies linked to 1MDB, The Wall Street Journal reported in July. The fund has in the past denied wrongdoing and said that it was cooperating with authorities.

The government investigation hasn’t detailed what happened to the funds that went into the prime minister’s alleged personal accounts, most of which it determined were received ahead of national elections in 2013. Mr. Najib has denied any wrongdoing or taking money for personal gain.

—Celine Fernandez contributed to this article.

                This entry was posted on Sunday, 18 October 2015, 11:22 pm and is filed under
Financial Scandals
,
Najib Razak
. You can follow any responses to this entry through
RSS 2.0
.


Has Hasan Arifin been appointed PAC Chairman with a pre-fixed agenda to exclude Tony Pua from PAC’s 1MDB investigations?

I want to congratulate the  new BN MP for Rompin Datuk Hasan Ariffin on his election as Chairman of the Public  Accounts Committee (PAC) for he has an unenviable task – as he does not have months, but only weeks, to establish himself as an independent and intrepid PAC Chairman whose remit is the integrity of government finances and who will uphold it against transgressors, whether the Finance Minister or Prime Minister.

When accepting the appointment as PAC Chairman particularly at these trying national times, Hassan must be armed with the maxim “Let justice be done though the heavens fall” in discharging his duties as PAC Chairman, because it will be a test whether he is prepared to lead the PAC to serve the higher national interests if this conflict with his loyalty to the party, the UMNO/BN government coalition and the Prime Minister himself.

Ariffin should be aware that an inquiry into the 1MDB transactions is in fact an inquiry into Najib’s role in 1MDB, Najib’s most controversial brainchild.

He should not accept his appointment as PAC Chairman if he is not prepared to rise above party interests if they conflict with national interests, such as to take a stand against the transgressions if any of the Finance Minister-cum-Prime Minister, especially as he seems to be pivotally involved in all 1MDB’s key and strategic decisions.

Having been blocked  for some three months from conducting 1MDB investigations by the simple expedient of the Prime Minister promoting the PAC Chairman and three members as Minister or Deputy Minister in the sudden Cabinet reshuffle on July 28, Malaysians who want the PAC to immediately get on with its 1MDB investigations without any further delay, must have cringed at Ariffin’s comments after his appointment envisaging the possibility that the PAC under him might not even be able to meet at all this year.

In his first press conference as PAC Chairman yesterday, Ariffin   strenuously denied  allegations that the Government was out to delay the PAC’s 1MDB investigations and dismissed them as “mere perception”.

Ariffin’s defence of the government is  a great boon to the Najib government but this is not the PAC’s job nor is it a service to his developing the image and stature  of an independent and intrepid PAC Chairman acting without fear or favour and not just a mouthpiece of the Najib administration.

Ariffin had  said: “The Government has promised that it will be investigated, and the government MPs have said that we will speed up investigations and produce a report for the Dewan Rakyat.

“I cannot say when exactly I can call for a PAC meeting, because I have to wait for the other appointments, but if I can call for one within this sitting, then certainly I will.”

I am utterly shocked and confounded that we have a PAC Chairman who has absolutely no sense of urgency, no understanding that time is of the essence in the 1MDB investigations, and who could entertain the thought that the PAC might not be able to meet in the current meeting of Parliament, when he said: “If I can call for one within this sitting, then certainly I will.”

The question of his being able to call  a PAC meeting within this sitting should not arise at all, for a pro-active, committed and even aggressive PAC Chairman should assure MPs as well as the nation that there will be no further delay in PAC investigations into 1MDB, and that he would make it his personal commitment to have the first PAC meeting under him in the month of October itself.

It is understandable that Ariffin is waiting for the Parliamentary Selection Committee, which was reconstituted yesterday in view of the changes in the Deputy Prime Minister, the MIC President and the Parliamentary Opposition Leader, to meet first to appoint new members to fill the other three PAC vacancies, before calling his first PAC meeting.

In view of the urgency and importance of the resumption of PAC investigations into 1MDB, Ariffin cannot just sit and wait. He should either urge the  Selection Committee to appoint the three new members in the shortest possible time –  and I can see no reason why the Selection Committee cannot meet this week or latest by next week –  or he should set a date for a PAC meeting by the end of this month, regardless of whether the three PAC vacancies are filled or not.

This is the type of pro-active and dynamic leadership which Ariffin should demonstrate as the new PAC chief.

Surprisingly, Ariffin has shown that  he could be pro-active, but in a very wrong  manner which raises doubt about his independence and intrepidity.

This was when Ariffin told the press that the PAC will discuss the fate of DAP PAC Member of Parliament Tony Pua with regard to his membership, raising the question whether Ariffin has been appointed PAC Chairman by the Najib administration with the pre-fixed agenda of excluding Tony from PAC’s 1MDB investigations.

It is an open secret that Najib’s loyalist faction in UMNO want Pua excluded from PAC’s 1MDB investigations, accusing him of breach of ethics in using PAC information in his statements.

Former PAC Chairman Datuk Nur Jazlan Mohamad is on public record as saying that Pua had never used PAC information in his statements, and that Pua had actually highlighted important matters regarding 1MDB from parliamentary answers and other sources.

Nur Jazlan said:

“I personally think he has helped to highlight the issue on 1MDB, which the majority of Malaysians today believe PAC will dismiss the issue in favour of the government. We are working well as a team

“Pua performs dual role as a MP for PJ Utara and a PAC member. And as far as I am concerned he has not used any information obtained from PAC hearings from 1MDB in his statements.

“Whatever information he uses in his statements are obtained from parliamentary answers and other sources.”

Ariffin should  ask BN MPs or UMNO circles who want  Pua removed from PAC’s 1MDB investigations to lodge official reports to PAC against Pua for disclosing PAC information in his statements.

DAP welcome and support that these allegations be investigated to ascertain as to whether there is any truth in the allegations against Pua or  whether they are pure falsehoods and fabrications.

If no UMNO MP or official dare to file official charges against Pua for disclosing PAC information in his statements and speeches,, why should Ariffin talk about deciding Tony’s fate at the first PAC meeting he is to chair?

This is where the question arises as to whether Ariffin is  acting according to the dictates of a pre-set agenda to exclude Pua from PAC’s 1MDB investigations?

Ariffin should realize that not only Malaysians, but the informed world, is watching his every single step as PAC Chairman – to determine whether he is an independent and intrepid public servant of the nation or otherwise.

(Media Conference Statement in Parliament on Tuesday, October 20, 2015 at 10.30 am)

                This entry was posted on Tuesday, 20 October 2015, 11:19 am and is filed under
Financial Scandals
,
Najib Razak
,
Parliament
. You can follow any responses to this entry through
RSS 2.0
.


Solving Malaysia’s economic crisis

BY
DATUK RAMESH CHANDER & BRIDGET WELSH, GUEST CONTRIBUTORS
 – 19 OCTOBER 2015

New Mandala

Ahead of the Government’s 2016 budget, Malaysia is staring down fiscal challenges unlike any that it has faced over its history as an independent nation.

In this special in-depth report, Datuk Ramesh Chander and Bridget Welsh examine whether Malaysia can resolve its economic woes, and offer several key reforms to get the nation back on track.

2015 – a year of economic decline

This year has seen tumultuous changes across the entire spectrum of the Malaysian body politic and economy. Unlike in earlier years of Prime Minister Najib Tun Razak’s six-and-a-half year tenure, Malaysia’s economy is now seen to be in trouble, with contracting growth, rising inflation, continued high levels of capital flight, declining consumer and investor confidence, and a depreciating currency.

As the Government prepares to release its upcoming budget later this month, it is important to analyse key economic developments and point to possible solutions. To date, assessments have largely ignored how the underlying structural and policy shortcomings of the Najib administration have contributed to the current economic decline.

Broadly, Malaysia’s economy has faced strong headwinds that are having a sizable impact on economic well-being. Three distinct interrelated forces are at play:  global developments, declining leadership confidence and, policy failures tied to an unwillingness to engage in substantive and much needed structural reforms.

Malaysia faces an unfavorable global environment. The slowdown of the Chinese economy, Malaysia’s largest trade partner, has contributed to a sharp decline in Malaysia’s GDP growth. While the US economy has begun a recovery, it has not filled the vacuum as a driver of growth left by China’s slowdown.

Four regional economies are seen to be under strain – Singapore, Indonesia, Thailand and Malaysia. The broad decline of Southeast Asian currencies to the US dollar and drops in exports have cast a pall over the region.

Global drops in oil and gas prices (now at levels less than half of those prevailing a year ago) have had a special impact on Malaysia; Government revenues from petroleum had accounted for almost 40 per cent of total revenue. The fall in other commodity prices, including those of rubber and palm oil, have affected export earnings, all contributing to less funds in government coffers.

Negative global conditions have been exacerbated by a protracted political crisis surrounding the prime minister. The July release of the Wall Street Journal article alleging deposits of nearly US$700 million into the premier’s personal account tied to the 1MDB sovereign fund has raised concerns about Najib’s management of the economy.

Rather than have a thorough investigation of the 1MDB allegations, the Government has undermined efforts to win back confidence. These actions in turn have contributed to rising concerns about governance, extending from challenges to the integrity of Bank Negara to the management of government-linked companies.

With multiple jurisdictions now investigating the transactions involving 1MDB, the crisis has placed Malaysia under a negative international spotlight. The Najib government has responded by attempting to shore up his support at home through patronage for party elites, increased arrests and race-based mobilisation.

The latter has included a Malay chauvinist rally that has raised concerns about the well-being of ethnic minorities within Malaysia and reinforced perceptions of a weak government lacking confidence and stability. Najib’s domestic popularity has reached record lows as he continues to fend off challenges to his position and growing criticism.

Domestic economic conditions are an integral element of the discontent. The adverse external environment, coupled with domestic political developments, have led to a shortfall in private investment.

Private household consumption has slowed down for three primary reasons. The first of these is the rise in inflation expectations which has made consumers reticent; this has been compounded by the imposition of a six per cent GST in April. The depreciation of the ringgit (RM) has further weakened consumer confidence, adding to inflationary pressures and a retail slowdown.

Public spending in real terms has been largely flat. This can be attributable to the lowered public sector investment which has been held back in part by the desire to limit the size of the deficit in order not to breach the self-imposed ceiling of 55 per cent to GDP. An additional factor has been the slow roll out of projects after the announcement of the new Five Year Plan.

Taken together, the evolution of global markets, political developments and weak domestic policies have contributed to a lower growth rate of GDP in 2015. The IMF in its latest World Economic Outlook (WEO) estimates growth during the current year to be at 4.7 per cent; the external current balance to be 2.2 per cent of GDP and inflation to amount to 2.4 per cent. The WEO projections for 2016 do not anticipate a recovery. Indeed it foresees lower growth in the coming year together with a reduced external balance.

Some structural issues

Although Malaysia had an early start in electronics and was seen as having a strong manufacturing core, it has not been able to build on its technological advantage and move up the value chain in any significant or sustainable manner.

Malaysia has in recent years moved back to a reliance on processing primary commodities centered on the processing of petroleum refining and palm oil processing. These activities have displaced electronics as the leading component of exports. These broad trends have led to a labor force in manufacturing made up largely of workers with no more than a high school certificate, and increasingly a heavy reliance on foreign labour.

In the past decade Malaysia has been a net exporter of capital. Many analysts have contended that the outward flows represent capital flight than outward FDI. Much of the outward FDI flow has been generated by government-linked companies (GLCs), but the outflow in recent months has included the private sector. The domestic business environment has not been friendly, despite many incentives, to private investors.

Many observers have made the case that distortions resulting from the design and implementation of the 1970-1990 New Economic Policy (NEP) and its subsequent incarnations has had negative consequences. One important implication has been a dependence on government contracts in the private sector, feeding an uncompetitive business environment that is seen to promote corruption. At the same time, the GLCs have crowded out private investment in many sectors and prevented small and medium-sized enterprises (SMEs) from growing and introducing innovative processes.

There is little debate over the fact that the Malaysian economy is burdened by a number of structural imbalances which have contributed to the current economic ills. These include the high level of debt, both of the public sector and households. Recent estimates place the Federal Government’s debt at RM 627.5 billion, a level hovering about the self-imposed ceiling. It is also noteworthy that foreign holders account for almost RM 180 billion, accounting for almost 29 per cent of total debt.

In addition to the total debt of RM 627 billion, a conservative estimate of the contingent liabilities by way of loan guarantees amount to just over RM 175 billion. Over and above these levels of debt, there is some uncertainty about off budget borrowings and the viability of some of the government-linked companies.

Source: Derived from Bank Negara: http://www.bnm.gov.my/index.php?ch=statistic_nsdp&uc=2

Based on officially published numbers, a number of conclusions can be drawn. First and foremost, it must be noted that the Federal Government’s debt jumped sharply from RM 501.6 billion at the end of 2012 to RM 627.5 billion in 2015. Continued borrowings at this pace are not sustainable.

A second noteworthy point is that almost 29 per cent of the debt, although denominated in ringgit, is held by foreign holders. This circumstance exposes Malaysia to the risk of further capital flight.

There is some evidence that this scenario is currently in play as foreign fund managers have been liquidating their holdings and remitting funds abroad. These transactions, along with the drop in leadership confidence and global pressures, have contributed to the 30 per cent de facto devaluation of the ringgit from levels prevailing a year ago.

Further liquation and repatriation of debt holdings and equities are highly likely if and when the US Federal Reserve raises interest rates. The 1MDB crisis has drawn attention to the indebtedness of the GLC’s and raised concerns about the transparency and viability in the corporate sector. Thus, Malaysia faces severe challenges over the near term.

There are a number of possible key fallouts from a scenario such as the above playing out. First and foremost, the ringgit will in all certainty come under further pressure. As a consequence, import costs will rise. Imports of intermediate goods, which are disproportionately high in manufacturing in Malaysia, will contribute to raising production costs in manufacturing.

Consumer goods will be subjected to higher costs. Malaysia disproportionately imports many of its basic stables, including rice. Although officially at low numbers, inflation is hitting ordinary citizens particularly hard, as they are reeling from the double impact of the imposition of the GST and a depreciating currency. Through measures such as toll hikes, the Government also has opted to increase transportation costs to consumers during these challenging months.

Thus, a negative inflationary impact is evolving at a time when GDP growth will be lower. Exports are likely to be sluggish given the overall slow growth of global GDP, overshadowed by the slowdown in the world’s second largest economy – China – which also represents Malaysia’s largest trading partner.

Counteracting these trends will inevitably be difficult given Malaysia’s exposure as an open economy. The Government is not well placed to mount counter measures, in the form of pump-priming (stimulating the economy through investment), as it lacks a strong revenue flow from depressed petroleum prices and further constraints because of the absence of headroom to borrow further.

Malaysia’s weak revenue position has been a growing concern, and has not been significantly offset by the imposition of the GST, in part due to failings in the implementation of the tax. The Government’s high dependence on commodities, especially oil and gas, continues to limit revenue growth.

Any hopes that private household consumption, which has contributed substantially to GDP growth in recent years as a result of election-related priming before 2013, will help sustain growth, must be tempered for several reasons. The high level of household debt (estimated at over 80 per cent of GDP) will act as a dampener on private consumption growth.

Coupled with this, stagnant wage levels especially in a soft economy are likely to weaken consumer expenditures. Perceptions of a declining economy have also impacted spending, especially among the large share of Malaysians who make less than $1000 monthly and remain highly vulnerable in the current negative economic climate.

The problems of wages and household debt can be traced back to structural problems in the labour market. Real wages have not substantially increased in decades, especially in manufacturing and parts of the service sector. This has contributed to a persistent brain drain that extends across all of Malaysia’s ethnic communities. Wages are held down by the high importation of foreign labor, a mechanism the government has used to maintain low-end manufacturing.

The large number of migrants has raised concerns about labor conditions and human trafficking. Inadequate resources have been invested in improving the skills of the workforce, with limited development of English-proficiency and problem-solving. Performance in education has declined even as the number of Malaysians entering the workforce have increased. The public sector has been used to hire workers that would be unemployable in a competitive private sector, with the effect being a reduction in the quality of the civil service.

Flawed approaches

Can Malaysia address its economic woes? The prospects for such an outcome regrettably are not bright if global economic developments are taken into account. The Government appears to have few arrows in its quiver.

Ministerial statements that the upcoming budget for the year 2016 will be expansionary with the objective of sustaining growth lacks credibility as the Government has neither the revenue flows nor the ability to borrow and spend. Inevitably the Government will break the ceiling on the deficit, a measure that will undermine credibility especially given the uncertainties projected for 2016. If the Government does persist in increasing spending, the cost of borrowing is likely to be high and Government paper may acquire junk bond status, an event that would have serious consequences.

The problem is the Najib administration’s pump-priming is not working. Not only has it fundamentally failed to address the economy’s structural problems, the Government’s approach has deepened them. The focus on spending has been on non-competitive areas of the economy, with a heavy reliance on government contracts in areas such as construction, land development and infrastructure. As Najib has faced political pressure, he has increased spending under the rubric of Bumiputera programs and projects, weakening competitiveness in the private sector.

To date, spending has concentrated on shoring up the stock market and domestic capital, dominated by government-linked or politically-linked companies. This has done little to strengthen the economy as a whole.

At the same time, funds have arbitrarily been cut from government programs, undermining administration and governance, as civil servants have been undercut. Rather than engage in meaningful civil service reform and lay out a plan that reduces government expenditure effectively and strategically, the trend has been to displace and weaken government departments.

Spending has also involved payments to lower-income citizens under the rubric of BR1M, a people’s aid scheme, and regular bonuses to civil servants. These temporary cash payments have not meaningfully contributed to reducing household debt and been inadequate to cover rising costs from inflation. The Government has not developed a sustainable safety net program that has addressed the impact of current economic difficulties.

Despite denials by the Prime Minister and the Governor of Bank Negara that the Government will not impose capital controls or peg the ringgit, as was done at the time of the 1997-98 East Asian financial crisis, there are some analysts who believe the Government may turn to adopt these measures. Analysts point to the fact that Bank Negara intervened in the market in recent months to prop up the ringgit but failed despite the use of some RM 40 billion of the foreign exchange reserves.

This attempt has demonstrated the futility of trying to defend the ringgit in the current circumstances. Moreover, a ringgit peg is pointless unless accompanied by capital controls. The imposition of the latter would come at a great cost. Markets would act by ostracising Malaysia, thus inflicting high costs in terms of future dealings. Lessons from the 1998 use of these instruments should not be forgotten.

The Government appears to have few options in confronting the crisis it now faces. In the short term, as noted above, the policy approaches adopted are not working. The administration must inevitably accept the need for an in-depth review of available options.

A vital step involves decisive measures to address questions surrounding the 1MDB crisis and restore integrity in the management of the economy. The Government needs to move away from palliative measures such as the recent injection of RM 20 billion into the stock market to prop up equities, for the most part GLCs. The Government needs to come to terms with the fact a dose of austerity measures is needed to restore a degree of credibility.

More fundamentally, the Government must embrace needed economic reforms. It must start with a genuine Public Expenditure Review conducted by an independent team. As a further step, it should postpone implementation of large infrastructure projects like the high speed railway. It needs to streamline the bloated public service; a starting point should be a full-scale review of the functioning of the service.

More transparent procurement practices would not only result in savings but would reduce opportunities for corruption. An immediate launch of a program to hive off loss making GLCs and further privatisation of the larger GLCs is called for.

Simultaneously, there needs to be a proper assessment of how to ameliorate the impact of economic difficulties on vulnerable communities. Part of this involves a serious program to strengthen the labor market, increase productivity and wages. Genuine reform measures will greatly enhance the credibility of the Government and introduce better governance.

This rather bleak review of the current and near term economic scene is sobering. Malaysia faces challenges unlike any that it has faced over its history as an independent nation. Unlike in the 1997-8 East Asian financial crisis, the Government does not have favourable commodity prices to shore up its financial position. It lacks a safety net.

The prospects of avoiding further economic hardships are not bright. It is therefore necessary to look to taking measures that correct the structural deficiencies that have snared Malaysia in the middle income trap.

Getting back on track

The program of economic reforms contemplated by Najib soon after he assumed office as the sixth Prime Minister have been shelved. Instead, the Government has perpetuated affirmative action programs carried out under the New Economic Policy first introduced in the early 1970s and made the economy less competitive. Income inequalities have widened, as the Government has been seen to be serving vested interests and favoring the wealthy. These distortions have contributed to relatively slower growth in terms of Malaysia’s full potential.

Meaningful changes are needed to enhance the labour market. The reluctance to address urgently needed reforms in the field of education has had serious consequences. Standards have declined; the unwillingness to take on the need for strong skills in the areas of science, technology and English language proficiency and to allow space for creativity and independent thinking had led to the system producing, paradoxically, large numbers of graduates that do not match labour market demands. At the same time the market faces shortages of language proficient, problem-solving and technically oriented workers.

Concerns about good governance and public accountability have been largely ignored. While civil society has made calls for reforms and greater transparency, little progress has been made in addressing key concerns. Corruption looms large as an issue, especially in light of the 1MDB crisis, and there have been increasing calls for a fairer implementation of the law and increased transparency. These issues directly impact the economy as they involve confidence, competitiveness and ultimately growth.

Although the Government indicated that it would take steps to disinvest by privatising its holdings in the GLCs, few measures have been taken thus far. The GLCs continue to impact on the functioning of the business and commercial sectors. As noted earlier, they play a pivotal role in restraining private investment, and more so than the other distortions associated with public spending.

Malaysia can no longer evade the need to adopt and implement a coherent set of reforms that address the structural constraints that have contributed to the present crisis.

The key reforms can be listed as follows:

Labour market reforms
: Remove constraints to changes in wage levels; limit inflows of migrant labour; enhance vocational training to improve the skill pool; relax the ethnic composition of public sector employment and remove discrimination in the labour market; enhance labour mobility and productivity.

Education
: Strengthen the teaching of science and technology; emphasis the need for proficiency in English; expand post-secondary training in science, engineering and information technology. Foster creativity with investments in the arts and sciences; increase problem-solving and analytical thinking with more independent education initiatives; raise achievement standards.

GLCs
: Develop and implement a program for Government disinvestment. Loosen the regulatory framework; create a level playing field for SMEs to have greater opportunities; increase transparency in GLCs

Government processes and programs
: Introduce more transparent processes in the purchase of goods and services by the public sector; greater accountability and openness in budgeting; a reduction of bureaucratic procedures; a comprehensive public expenditure review; an overall review of the tax system; strengthen the role of technocratic expertise in oversight over the economy, especially in the Ministry of Finance; develop a stronger social safety net to address growing economic difficulties among vulnerable groups.

Institutional reforms
: Restore the independence of the law enforcement agencies; safeguard the independence of the judiciary; safeguard the integrity of Bank Negara; strengthen the independent enforcement of the anti-corruption bodies; increase the checks and balances in the management of GLCs; reduce the size of the public sector and centralisation of the executive.

Conclusion

Emerging from the current economic crisis will demand resolute measures. These inevitably will not be pain free. In the immediate future, measures such as an expansionary budget, further injection of funds into the stock market, attempts to shore up the ringgit and so on, may placate sentiments in the immediate. But these palliatives are likely to cause more harm than good. They will not address the deep-seated malaise that grips the economy.

The overall prospects for Malaysia’s economy are thus rather dim.  Malaysia may face a painful adjustment. Reform measures will need to be adopted, including steps to address the problems associated with the 1MDB crisis; in the event these steps are not taken, market forces are unlikely to turn around Malaysia’s negative fortunes.

Beyond the immediate challenges, the nation needs to urgently address the set of structural impediments that are limiting the achievement of sustainable growth over the medium term. If the Malaysian economy is to emerge from the present crisis as a robust entity capable of coping with future external shocks, it will need to embark on a program of reforms that boldly address these structural limitations.

The long delayed program of reforms cannot be further postponed if the nation is to avoid irreparable long term damage. While vested interests are likely to resist, the overall interests of the country demand the adoption and implementation of structural reforms.

Datuk Ramesh Chander was the first head of Malaysia’s Department of Statistics. He served as a Senior Adviser to the World Bank’s Chief Economist/Senior Vice President before retiring from the Bank.

Bridget Welsh is Professor of Political Science at Ipek University, Senior Research Associate at the Center for East Asian Democratic Studies of National Taiwan University, Senior Associate Fellow of The Habibie Center, and University Fellow of Charles Darwin University.

                This entry was posted on Tuesday, 20 October 2015, 11:23 am and is filed under
Bridget Welsh
,
Economics
. You can follow any responses to this entry through
RSS 2.0
.


The final countdown, earthquakes and iPhone

Liew Chin Tong

Malaysiakini

19 Oct 2015

MP SPEAKS
 Much as it sounds like cliché, our time is indeed both the best of times and the worst of times. In such a confusing time, clarity is in short supply.

Three things may help us to describe the state of affairs in Malaysian politics better: that the final countdown is imminent; that there were major political earthquakes, tectonic shifts and realignments in 2015; and that the voting public is waiting for something transformative, a bit like the iPhone when it was first created.

The final countdown

The joint press conference by former rivals Dr Mahathir Mohamad and Tengku Razaleigh Hamzah surprised some of us. Many of us were even amazed with the unprecedented statement by Majlis Raja-Raja Melayu (the Rulers Council) on 1MDB and the falling ringgit, as the council usually restricts its pronouncements to matters relating to Islam and national unity.

Since the Asian Financial Crisis in 1997 and the sacking of Anwar Ibrahim from the government in 1998, Malaysia has been a nation impatiently waiting for change. But change has been meagre, if any.

And we are now entering another crisis – a ‘perfect storm’ crisis that engulfs the nation on multiple fronts – politics, economics, finances, ethnic relations and so on.

On the government front, if Najib Abdul Razak leads Umno into the next general election, not only would Umno lose, the possibility of Umno leaders jumping the sinking ship to contest against Najib’s Umno cannot be ruled out.

For Umno and the BN supporters, they would want to know: If Umno manages to replace Najib, will the removal process be smooth or traumatic? If Najib is removed, will Umno stay united? And without Najib, can Umno win again with a new leader?

For the rest of us, the real question we want to ask is: Are all Umno’s problems caused by Najib, or is it something systemic? Can systemic problems be solved by having a new leader?

Some may say that Umno could surprise everyone with sudden and transformative reforms. But then again, this is just a wishful thinking. With a potentially volatile parliamentary session starting today, it feels like fin de siècle (French, for end of the century) or a looming final countdown.

Earthquakes

The sacking of Muhyiddin Yassin and Shafie Apdal from the government on July 28 was a major earthquake not seen since September 1998. Umno members are still shell-shocked, yet unable to express themselves openly. At least, for now.

The moderates and progressives in PAS were not a united force. All of them were defeated during the Islamist party’s elections of June 6. Three months later, the moderates and progressives formed Parti Amanah Negara.

As long as PAS is led by Abdul Hadi Awang, the party is not going to win the middle ground Malay voters, not to mention non-Malay voters. PAS is kissing goodbye to the peninsula’s West Coast votes.

Without the progressive faction, PAS is also not going to get any traction outside Kelantan and Terengganu, and to a lesser extent, Kedah. Some commentators even opined that PAS is in danger of losing Kelantan due to issues arising from long years of incumbency and slack in governing.

We cannot rule out a second split in PAS, or Hadi being replaced by Tuan Ibrahim Tuan Man, who is now seen as playing the exact role of his predecessor Mohamad Sabu (now Amanah president) in the previous PAS leadership, in his attempt to project an anti-Umno image.

In recent years under Hadi’s leadership, the line between PAS and Umno has been blurring. This is ironic. It was Hadi, at least according to Umno leaders and members, who deemed Umno as an infidel party in the 1980s, as well as declared PAS as the champion of anti-assabiyah, a reference against Umno’s brand of Malay nationalism.

Hadi’s embrace of Perkasa, the Malay supremacy group, has shocked some PAS leaders and grassroots; they know this could cause an electoral disaster, for Perkasa practises outright assabiyah, the Arabic term for social solidarity with an emphasis on unity, group consciousness and sense of shared purpose.

On Najib’s front, when everything is going against his administration – or the lack of it – the moderate pretender is now backed by the likes of Jamal Yunos of the Red Shirts, conservative Muslim scholars, including several muftis as well as Hadi and Haron Din, for their ideological support. These people do not hide their contempt for moderation and progress.

As I mentioned at the beginning, earthquakes are usually followed by smaller quakes, tectonic shifts and realignment. It also leaves a huge vacuum.

Vacuum

Najib’s Umno and Hadi’s PAS view things in ethno-centric terms. These views are not even representative of the many voices among the Malay community, not to mention the wider society.

According to pollster Merdeka Center, 23 percent of Malays supported Bersih, while 24 percent of Malays supported the Red Shirts rally. If these are two poles on the side with hardened views, what is unmistakably clear is that there is a huge middle group which has no strong preferences. They are the middle ground that would decide the outcome of any election.

This racial version of Malaysia promoted by Najib and Hadi is a recipe for disaster, electorally. Any coalition should know that it needs support from across ethnic groups in the peninsula, and win votes from Sabah and Sarawak.

The battle for Malaysia is increasingly taking shape between the conservatives and the progressives, between those who push for Malay/Muslim dominance without a moral compass and those who push for a better Malaysia for all governed by broader principles of justice, such as those articulated in the discussion of maqasid syariah (the ultimate objectives of syariah) and the ideals of justice and equal opportunities.

There is a huge vacuum and no one is sure how to fill it.

iPhone

It was revolutionary when Steve Jobs created the iPhone in 2007. iPhone combined the function of an iPod (music), Internet surfing and phone function, three previously distinctive functions/products, into one product and set the new normal for others to follow. iPhone was the answer to its users’ unfulfilled desires.

In this post-earthquake scenario, with a huge leadership vacuum to fill, it is worthwhile for us to think through as a nation what is needed to effect change in the forthcoming election.

We know that the agenda of Conservative Malaysia is Malay supremacy. How then shall a Progressive Malaysia respond?

Progressive Malaysia needs a coherent set of ideas that will create the iPhone of Malaysian politics – something entirely new that appeals to hearts and minds, especially that of Malay voters in swing seats.

Much has been said about the opposition not being able to penetrate Umno fortresses in the rural areas. Those fortresses, like Rompin or Pengerang, were designed and built for Umno. It’s difficult to make way in these rural areas, at least for now.

To win electoral power is not to focus on those seats. Instead, out of Umno’s 73 peninsula seats, at least 35 of them are marginal. Progressive Malaysia should aim to win 40 Umno seats in the peninsula. Once that is achieved, everything else will fall into place.

The way forward

The way forward is to create a vision that inspires all Malaysians with a special focus on bringing better economic security and well-being to lower middle class Malays in the semi-urban areas.

In good humour, I’ve said that Pakatan Rakyat’s manifesto of the 2013 election – cheaper cars, no tolls, cheaper fuel, and abolishing the PTPTN (university loans) – had no relevance to Malays in semi-urban areas. Many of them can’t even afford a car (so why bother about tolls, car prices and petrol), and quite a number of them didn’t finish secondary school education.

Yet each of them has a vote to cast, and many are on smartphones, Facebook, and other communication channels not controlled solely by the government.

The future of Progressive Malaysia lies in its ability to articulate their wishes and aspirations of ordinary Malaysians and their concerns for jobs, wages, healthcare, transport, security, education, etc.

We need an economic vision that will create the virtuous cycle of higher wages, higher skills and higher productivity so that both the non-Malay dominated small and middle industry sector, and the Malay working class in semi-urban areas find their interests coinciding and not opposing one another.

When Malaysians find that their economic well-being is secure or will be more secure under the new government, change will not be feared, change will be embraced enthusiastically.

Honestly, Umno-BN can actually do this now if they want to. But we know that many of their leaders have lost touch with reality.

LIEW CHIN TONG is DAP’s Kluang MP and DAP national political education director.

                This entry was posted on Tuesday, 20 October 2015, 3:38 am and is filed under
Najib Razak
,
Pakatan Harapan
,
PAS
,
UMNO
. You can follow any responses to this entry through
RSS 2.0
.


Malaysia’s Najib caught between politics and the economy

Hafiz Noor Shams

Financial Times

20th Oct 2015

Scandal-stricken premier faces tough choices between pleasing voters and keeping fiscal balance

Najib Razak, Malaysia’s beleaguered prime minister and finance minister, is being pulled in opposite directions by conflicting imperatives.

One is political. Voters, dismayed by a slowing economy and allegations of personal corruption and other irregularities at state fund 1MDB — vigorously denied by Mr Najib and the fund — are piling on the pressure for an increase in public spending.

The economic imperative, however, demands spending cuts, as depressed energy prices and slowing growth threaten to reverse the benefits of fiscal reforms enacted over the past several years.

True, a goods and services tax introduced in April is bringing in additional revenues. But these pale next to a drop of more than 40 per cent in revenues from petroleum royalties and taxes in the first half of 2015 from a year earlier. Such revenues will probably fall further in the second half — a serious blow, given that they contributed about a third of all government revenues in 2014.

Petronas, the national oil company, is digging into its reserves and reining in capital spending in an attempt to pay the government a dividend of RM26bn ($6.3bn) this year, RM3bn less than in 2014. Despite the cut, the payout ratio — dividend paid relative to net profit — is rocketing to an unsustainable level.

FT Confidential Research, a research service at the Financial Times, expects it to pass 100 per cent this year (see chart). To keep it at a manageable level, Petronas will almost certainly have to cut its dividend again in 2016, putting further pressure on the government’s fiscal position.

The state of the economy and the allegations swirling around the government have soured the national mood. Surveys by FT Confidential Research show that, despite a small uptick in the third quarter, sentiment among the population towards both economics and politics remains at badly depressed levels.

Hence the pressure on Mr Najib to keep voters happy, especially those in his Bumiputera (indigenous Malaysian) and rural base. The government has already said it will expand an annual cash transfer programme for poor households next year, from the RM5bn allocated this year.

It is also investing more in rural infrastructure. One example is construction of the toll-free Pan-Borneo Highway, finally under way after years of delays. The pressure to spend will probably last right up to the next general election, which must be held by August 2018.

But political survival is not Mr Najib’s only problem. Fitch, Moody’s and S&P, the three big credit rating agencies, all have Malaysia at the same level — A- or A3 — seen as the bottom rung of upper medium grade, and four notches above non-investment grade or junk. All have said Mr Najib’s fiscal reforms were important in convincing them to maintain those ratings this year.

The reforms include cutting the fiscal deficit to 3.4 per cent of GDP last year from about 6.7 per cent in 2009. Yet FT Confidential Research reckons the deficit will rise to between 3.6 and 3.8 per cent this year, in contrast to the official projection of 3.2 per cent published in January.

Mr Najib, in his role as finance minister, will present the government’s budget on October 23. Opposition parties will turn the parliamentary session into a vote of no-confidence against him. While the odds of his being ousted are low, the vote will serve to highlight the political hostility he faces, from the opposition and from within his own party — as if the inflammatory comments on his social media accounts were not proof enough.

Between political survival and Malaysia’s ratings, something seems likely to give sooner or later.

                This entry was posted on Wednesday, 21 October 2015, 10:06 pm and is filed under
Finance
,
Najib Razak
. You can follow any responses to this entry through
RSS 2.0
.


Statement on Speaker’s ruling that I retract and apologise unconditionally to the Speaker for my remarks on PAC investigation into 1MDB

I rise as the Speaker has sent word that “at the next opportune time” for me to come to Parliament, I must unconditionally apologise to him  and retract what I said in Parliament on Monday, 19th October.

The country has been under unprecedented haze for weeks, closing schools, disrupting the economy and causing havoc to the livelihood of the people.

Former Deputy Prime Minister Tan Sri Muhyiddin Yassin said yesterday that Malaysia is enshrouded in a “political haze”, referring to the multiple crisis of confidence concerning the economy, politics, governance and nation building.

Now we have a parliamentary haze enveloping Members of Parliament.

I waited for the Hansard of yesterday’s proceeding which was uploaded at about noon today.

According to Hansard, the Speaker alleged that I had said:

“You don’t have any power. You abuse your power. You deliberately stop the Public Accounts Committee. You sabotaged the investigating.” (p 28, line 15/16).

The Speaker repeated this when responding to MP for PJ Utara Tony Pua, where he said: “Yang Berhormat Gelang Patah telah mengatakan bahawa, “I deliberately abused my power. I sabotaged the investigation.” Itu bermakna menghina kedudukan Speaker.” (p. 35 line 26/27)

Firstly, I never used the word “deliberately”. Secondly, I did not speak in such a peremptory fashion as if I was reprimanding the Speaker.

What I said when I sought clarification from the MP for Sepang, Mohamed Hanipa bin Maidin who was speaking on the debate on the appointment of the  Chairman of Public Accounts Committee was whether he agreed that the Speaker has no powers under the Standing Orders to stop the Public Accounts Committee, in the absence of a PAC Chairman, from continuing with its 1MDB investigations and which  was therefore  an abuse of power.

I said: “Adakah Yang Berhormat Sepang bersetuju ini satu salah guna kuasa yang Tuan Yang di Pertua tidak patut berlaku dan ini merupakan satu sabotaj penyiasatan 1MDB, satu skandal besar antarabangsa.”

Yesterday, the Speaker had given reasons to support his interpretation.

He referred to SO 82(1) which states: “(1) Every Select Committee shall be so far as is practicable, the balance between the parties within the House is reflected in the Committee”.

In this case, this provision has been made “impracticable”  because of the decision of the Prime Minister to appoint the PAC chairman, Datuk Nur Jazlan Mohamad as Deputy Home Minister, when the PAC was in the midst of very critical investigations into the mother of all scandals, the 1MDB scandal, an appointment which was clearly made to stop the PAC from proceeding with its 1MDB investigations.

If the Prime Minister had no intention to stall PAC investigations into 1MDB scandal, he has two options: to agree and give full support to the continuation of the PAC investigations into 1MDB under the chairmanship of the PAC Deputy Chairman, MP for Kepong Dr. Tan Seng Giaw as the PAC continues to have a quorum despite the elevation of the PAC Chairman and  three other BN members to the Executive; or convene an emergency meeting of Parliament to fill the PAC vacancies in view of both the importance and urgency of the investigations.

This will also ensure that the elevation of the PAC Chairman and three BN members to be Minister or Deputy Ministers are not part of a larger game-plan to stall 1MDB investigations involving the sacking of the MP for Pagoh as Deputy Prime Minister, the MP for Semporna as Minister for Rural and Regional Development, Tan Sri Gani Patail as Attorney General, the dissolution of the multi-agency Special Task Force on the two mega-scandals of 1MDB and the RM2.6 billion “donation”  in Prime Minister, Datuk Seri Najib Razak’s personal banking accounts in March 2013; and the various moves undermining the integrity, independence and professionalism of key national institutions including the Malaysian Anti-Corruption Commission, Bank Negara, the Police and the Attorney-General’s Chambers.

It is Prime Minister who has rendered it not practical for the PAC to function as intended by Standing Order 82(1), that “Every Select Committee shall be so far as is practicable, the balance between the parties within the House is reflected in the Constitution”, although it was within the means of the Prime Minister to convene a special meeting of Parliament to fill these vacancies, and it is not for the Speaker to cure a problem created by the Prime Minister – bearing in mind that the Speaker must also be conscious of the need to have a PAC which has the respect of the nation as a body which is conscientious in its responsibility to uphold the integrity of government finances, as in its investigations into the 1MDB scandal.

I do not agree that Standing Orders 77,  82(1) and  82(2) confer on the Speaker the powers to stop the PAC under the PAC Deputy Chairman, Dr. Tan Seng Giaw, and the remaining PAC members from continuing its 1MDB investigations, and the effect of the Speaker’s ruling to stop the PAC from continuing with its 1MDB investigations is to sabotage its investigations.

I have the fullest respect for the Speaker and I make no malicious allegation that he “deliberately” abused his powers or that he “deliberately” sabotaged the PAC’s 1MDB investigations, but stating the effect of his decision to stop PAC from continuing its 1MDB investigations until the various vacancies are filled when Parliament meets some three months later.

I rest my case.

[
Speech by DAP Parliamentary Leader and MP for Gelang Patah Lim Kit Siang in Parliament on Wednesday, 21st October 2015
]

                This entry was posted on Wednesday, 21 October 2015, 5:05 pm and is filed under
Parliament
. You can follow any responses to this entry through
RSS 2.0
.


Azalina’s motion to suspend me from Parliament for six months

First item of business of Parliament today at 11.30 am after Question Time is Minister Azalina’s motion to suspend me from Parliament for 6 months.

Azalina claims that I have brought contempt to Parliament by allegedly insulting the Speaker. Azalina will have the numbers to pass motion.

                This entry was posted on Thursday, 22 October 2015, 8:43 am and is filed under
DAP
,
Parliament
. You can follow any responses to this entry through
RSS 2.0
.


Kit Siang’s battle is not over yet

— Liew Chin Tong

Malay Mail Online

Thursday October 22, 2015

OCTOBER 22 — Over the course of the last half-century, numerous attempts by the ruling elite to silence Lim Kit Siang had failed. The latest – suspending him from Parliament for half a year – will not silence Kit Siang’s voice for the nation.

On the contrary, 50 years after he started as a political novice with a yet-to-be-registered party then – the Democratic Action Party – Kit Siang is not done yet. The powers-that-be still want to silence him because they know many Malaysians listen to Kit Siang. The people trust Kit Siang more than they do Barisan Nasional.

So, what did Kit Siang do at the Parliament this week? He was merely doing his duty as a Member of Parliament, i.e., to voice his opinions and to state facts. He was commenting on Speaker Tan Sri Pandikar Amin’s role in preventing the Public Accounts Committee to hold its meetings after chairperson Datuk Nur Jazlan Mohamed was elevated to the government’s frontbench.

The PAC was at the height of investigating the 1MDB scandal with the troubled company’s past and present CEOs were about to appear before the Committee. The hearings never took place.

The series of moves by Prime Minister Datuk Seri Najib Razak – sacking of Attorney-General Tan Sri Gani Patail and Deputy Prime Minister Tan Sri Muhyiddin Yassin, and a strategic cabinet reshuffle – were aimed at averting a crisis that could possibly lead to Najib being charged in court.

Four Barisan Nasional MPs who sat on the PAC were promoted to the front bench in an attempt to stall the investigations into the 1MDB scandal. They are Datuk Nur Jazlan Mohamed, Datuk Seri Reezal Merican Naina Merican, Datuk Mas Ermieyati Samsudin and Datuk Wilfred Madius Tangau.

The Committee has still a Deputy Chairman and nine MPs who could still form the quorum for the Committee to carry on its investigation. At that critical juncture, Tan Sri Pandikar prevented the PAC from meeting and carrying out its duties.

Nur Jazlan could have resisted the offer and continue to lead the PAC. Speaker Pandikar could have ruled in favour of those who want to see the Parliament playing its true check-and-balance role by not preventing the PAC to function.

Jazlan and Pandikar lack a sense of history. They could have changed the course of history for our nation. They could have sided with the rakyat, and not with scandal-ridden Najib. They missed their date with history.

Whereas Kit Siang has proven his worth. He is but one of many casualties of the 1MDB scandal; from Gani to Muhyiddin, to Tony Pua, MACC officers, former Special Branch Deputy Director, and many more.

The veteran DAP leader has said, “What I said when I sought clarification from the MP for Sepang, Mohamed Hanipa bin Maidin who was speaking on the debate on the appointment of the Chairman of Public Accounts Committee was whether he agreed that the Speaker has no powers under the Standing Orders to stop the Public Accounts Committee, in the absence of a PAC Chairman, from continuing with its 1MDB investigations and which was therefore an abuse of power.”

Speaker Pandikar’s usual refrain is that MPs can move a motion against his decision “which is ultimate”. In a Westminster Parliamentary setting in which the Government has majority, the Opposition would not have the number to censure the Speaker.

Even if Kit Siang were to be subjected to this ordeal, he should be given due process through a Committee of Privileges hearing. DAP Legal Bureau Chief Gobind Singh explained to Parliament that it is clear that in the case of alleged contempt of Parliament such as the case of Kit Siang, the Speaker cannot bypass the process of an inquiry by a committee.

Standing Order 80A  ”Notwithstanding the provisions of Standing Order 80 relating to the Committee of Privileges, in any case where it appears to the House that there has been the commission, whether by a member or by any other person, of any acts, matters or things as are made punishable as contempt under the Houses of Parliament (Privileges and Powers) Ordinance 1952, the House may appoint a committee to summarily enquire into such a case and appropriate action in accordance with the said Ordinance.”

I told Parliament that the Speaker should reverse terrible precedents set by this Parliament previously that a member could be “summarily executed” through the brute force of Government majority in the form of a motion and a vote in the House.

Lest we forget, Opposition MPs such as Fong Po Kuan in the year 2000, Karpal Singh (2004), Gobind Singh (2010), Anwar Ibrahim (2010) and N. Surendran (2013) were suspended in this manner.

In the more democratic Westminster parliaments, suspensions are generally meted out for several days to maintain the order of the House if it is relating to the conduct of MPs in the House. In the British parliament, suspensions are also used against MPs who were involved in financial improprieties, not for exercising free speech without fear or favour.

In Malaysia, suspension is just a punitive tool to silence members of the Opposition. But Kit Siang will not be cowed. He told Parliament that his sacrifice would not be meaningless because it would make the people more aware of the embarrassing 1MDB scandal.

Fifty years in politics, he is still the man the powers-that-be feared and still the ultimate symbol of defiance and anti-establishment. Barred from entering Parliament for half a year, Kit Siang is on a new journey to meet Malaysians of all walks of life.

Plans are underway to commemorate the 50th Anniversary of DAP on 18th March 2016, as well as the 50th Anniversary of Kit Siang’s entry into politics on 1st December 2015, and his 75th birthday on 20th February 2016.

We shall not be moved. We shall remember the words of Thomas Paine, an 18th century philosopher activist, “the harder the conflict, the more glorious the triumph”.

* Liew Chin Tong is DAP National Political Education Director and MP for Kluang.

–

                This entry was posted on Thursday, 22 October 2015, 11:02 pm and is filed under
DAP
,
Parliament
. You can follow any responses to this entry through
RSS 2.0
.


Latest victim of 1MDB “monster” (2)

                This entry was posted on Thursday, 22 October 2015, 7:10 pm and is filed under
Financial Scandals
,
Najib Razak
,
Parliament
. You can follow any responses to this entry through
RSS 2.0
.


Latest victim of 1MDB “monster” (3)

                This entry was posted on Thursday, 22 October 2015, 7:10 pm and is filed under
Financial Scandals
,
Najib Razak
,
Parliament
. You can follow any responses to this entry through
RSS 2.0
.


Latest victim of 1MDB “monster”

                This entry was posted on Thursday, 22 October 2015, 5:20 pm and is filed under
Financial Scandals
,
Najib Razak
,
Parliament
. You can follow any responses to this entry through
RSS 2.0
.