Malaysia scandal sparks dispute over political funding reform

By Michael Peel
Financial Times
4th Sept 2015

An official push for reform to political party funding in Malaysia has deepened a dispute over how authorities are dealing with the financial scandal engulfing Prime Minister Najib Razak.

A special committee, set up in the wake of revelations that more than $675m landed from overseas in Mr Najib’s bank account shortly before the last general election, is proposing to introduce landmark campaign finance rules.

But sceptics see the promised change as part of an official effort to whitewash both the payment to the prime minister’s account and a wider probe into more than $11bn in debt racked up by the 1 Malaysia Development Berhad state investment fund. The Najib government has already removed officials involved in various investigations into the affairs, as well as cracking down on critics in the opposition and media.

“This is a clear attempt to legitimise the [$675m] transaction by framing it as a political donation,” said Tony Pua, an opposition MP who has been slapped with a travel ban and was called in by police for questioning on Friday. “This is meant to be Najib’s ‘get out of jail’ card.”

The dispute highlights an extraordinary impasse in a scandal that is stoking political turmoil and adding to growing financial woes in the Southeast Asian country. The national anti-corruption commission has said the payments made to Mr Najib’s account in March 2013 came from an anonymous Middle Eastern donor, yet the prime minister has offered no further details — and, according to the official heading the political funding reform effort, has no duty to do so.

Paul Low Seng Kuan, also a minister in the prime minister’s department, said existing political funding rules meant Mr Najib was not obliged to account for the payments.

“That is up to him to explain,” Mr Low said in an interview. “But there is no law that requires him to explain. That’s why I am formulating the political financing laws. That’s precisely the reason why I’m appointed to deal with it.”

Mr Low said his committee was examining law changes including forcing disclosure of donors’ identities and ensuring money be paid directly to parties, rather than personal accounts of officials. It was also looking at prohibiting foreign donations.

“Many countries ban financing from overseas, from non-citizens . . . for obvious reasons, because of sovereignty and all that,” said Mr Low, a former president of the Malaysia chapter of Transparency International, the anti-graft group. “The other thing is the issue of transparency and accountability.”

The emergence two months ago of news of the hundreds of millions of dollars of payments to Mr Najib’s account has piled pressure on a prime minister already under fire for his stewardship of 1MDB, whose advisory board he chairs.

Protesters took to the streets of Kuala Lumpur late last month to call for his resignation. Mahathir Mohamad, the long-ruling ex-premier, has also joined the campaign to topple his predecessor.

Mr Low suggested the wider probe into 1MDB was “not an issue so much of corruption” as of governance, despite the many questions raised about the funds’s dealings in the Middle East and elsewhere. The minister insisted there “shouldn’t be a problem” for the troubled institution to repay its debts, through sales of assets in sectors such as energy and property.

“I am sure that within six months, towards the end of this year, they will have resolved most of the problems,” he said.

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