By THOMAS FULLER and LOUISE STORY
New York Times
JUNE 17, 2015
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PUTRAJAYA, Malaysia — Malaysia’s governing party is at war with itself, embroiled in a power struggle that is destabilizing the country and threatening the party’s nearly six-decade stretch of uninterrupted governance.

The battle has revealed itself publicly in a nasty spat between two political titans. Mahathir Mohamad, a former prime minister who turns 90 next month, is the chief architect of a political insurgency aiming to oust the man he helped put into office six years ago, Prime Minister Najib Razak.

Having lost none of the combativeness honed during more than two decades in power, Mr. Mahathir is pressing allegations of malfeasance in a sovereign wealth fund, criticizing the “lavish” lifestyle of the prime minister’s wife, and has resurrected troubling questions about the murder of a Mongolian woman, the mistress of a former top aide to Mr. Najib.

“I’ve had quite a long time in government, and I’ve learned a few things,” Mr. Mahathir said in an interview at his office on Wednesday in Putrajaya, the administrative capital he built from scratch when he was prime minister.

Mr. Najib “wants to leave his own legacy,” he said. “But what he does is verging on criminal.”

Mr. Najib has denied allegations of abuse of power and urged patience while the country’s auditor general completes a report on the transactions of the sovereign wealth fund. “If there is any misuse of power, we will not shield anyone,” he told a Malaysian television channel in April. The report is due at the end of the month.

The political combat has transfixed this nation of 30 million people, an officially Muslim country with one of the most developed economies in the region.

The latest round took place early this month when Mr. Najib was scheduled to address a public forum on the questions swirling around his leadership.

When Mr. Najib failed to show up, Mr. Mahathir took the stage. But he had just begun to speak when the police shut him down, cutting off his microphone and escorting him off the stage.

This is the third time in Mr. Mahathir’s career that he has turned on his former protégés, and he succeeded in sidelining the first two. Another former deputy, Anwar Ibrahim, is in prison on charges of sodomy, which is illegal in Malaysia. Mr. Anwar’s five-year prison sentence, affirmed by the country’s highest court this year, was the culmination of trials that began when Mr. Mahathir fired Mr. Anwar as his deputy prime minister in 1998, declaring “I cannot accept a man who is a sodomist to become the leader of this country.”

The second time was nine years ago, when Mr. Mahathir came out of retirement and lashed out at his successor, Abdullah Badawi, for what he said was poor economic management. Mr. Abdullah resigned, and Mr. Najib took over as prime minister.

Mr. Najib’s approval ratings have plummeted over the past year amid bleaker economic prospects and higher living costs, and Mr. Mahathir says he fears that the party will lose elections if Mr. Najib remains at the helm. But he also expressed little faith in the long-term prospects of the party, the United Malays National Organization, which has led coalition governments since independence from Britain in 1957.

In the interview on Wednesday, Mr. Mahathir said that the party he led for decades, known as UMNO, lacks vision and talented people, and that it has become a repository of patronage-seeking politicians seeking to monopolize the spoils of power.

“The little Napoleons in UMNO try to keep out people who are more intelligent than themselves,” he said.

Government ministers and members of Parliament have been pressed to declare their allegiance in the dispute, and many have been cagey, afraid to alienate either their current leader or the next one if Mr. Mahathir gets his way.

For now, the divided opposition poses little threat. Its leader, Mr. Anwar, is in prison, and the unwieldy three-party coalition he led appears to have dissolved this week.

The political imbroglio comes on top of economic problems. About a third of government revenues comes from oil and gas production, whose prices have fallen steeply, and the government has been forced to pass an unpopular sales tax to make up for the loss.

Murray Hiebert, an expert on Southeast Asia at the Center for Strategic and International Studies in Washington, says the country’s political troubles “could hardly come at a worse time.”

“The prime minister is focused on political survival when the country’s economy is slowing due to low oil prices and falling exports resulting from China’s economic slowdown,” he said. The combination, he said, is “giving pause to the foreign investors Malaysia is seeking to court.”

Mr. Najib has denied allegations of abuse of power and financial malfeasance. Credit Kiyoshi Ota/European Pressphoto Agency
The sour economy has also thrown into relief what Mr. Mahathir and others describe as the Najib family’s jet-setting lifestyle of shopping trips in world capitals and the buying of expensive real estate in the United States.

Mr. Mahathir criticized Mr. Najib’s wife, Rosmah Mansor, for her “lavish lifestyle” and for acting “almost if she was a prime minister.”

Mr. Mahathir has also dredged up questions related to the case of Altantuya Shaariibuu, a Mongolian model who was murdered by two of Mr. Najib’s bodyguards in 2006. While the bodyguards were convicted, Mr. Mahathir has demanded to know who gave the orders.

But at the heart of his dispute with Mr. Najib is Malaysia’s sovereign wealth fund, which has debts running into the billions of dollars and is overseen by Mr. Najib, who is chairman of its board of advisers.

Mr. Mahathir says the fund, 1Malaysia Development Berhad, or 1MDB, is missing “huge sums of money” that Mr. Najib has been unable to account for.

The fund has been criticized for the last several years for taking on expensive debt as well as for some of its investments, which opponents say have benefited supporters of Mr. Najib’s political party. “He has never been able to explain how the money was spent,” Mr. Mahathir said Wednesday. “They give a list of payments, but nobody believes it.”

Mr. Najib did not respond to requests for comment emailed to his spokesman.

The fund has also drawn controversy for its close relationship with a financier named Jho Low, a friend of Mr. Najib and of his stepson. Mr. Low has been involved in the sale of tens of millions of dollars of luxury real estate to the stepson in the United States.

Though Mr. Low holds no official position with 1MDB, he has acknowledged advising the fund, and several of his friends have held senior positions there. In recent months, documents have been published by The Edge, a Malaysian newspaper, and Sarawak Report, a British blog, showing that Mr. Low was instrumental in a deal between 1MDB and a Saudi oil company, PetroSaudi International. The newspaper also said the documents show that a company, Good Star Limited, was controlled by Mr. Low and received hundreds of millions of dollars from 1MDB as part of the oil deal.

Mr. Low did not respond to requests for comment.

In a statement to The New York Times this week, 1MDB said that Good Star was owned by PetroSaudi and noted that PetroSaudi had confirmed that 1MDB said it had provided information about these transactions to the Malaysian authorities that are investigating the sovereign fund.

The payments by 1MDB are attracting attention in part because the fund is floundering. In recent weeks, the government announced a restructuring plan that involves the fund’s acceptance of money from the International Petroleum Investment Company, an investment fund affiliated with the Abu Dhabi government that has also made numerous deals with Mr. Low.

1MDB has issued statements disputing the notion that it is being bailed out. “This is a business transaction, not a loan, not any kind of debt and not a bailout,” the fund said in its statement to The Times.

Mr. Mahathir’s criticisms of the management of 1MDB, which he makes in regular blog postings and in public comments, are closely followed in Malaysia. But they have also been greeted with cynicism by those who say that money politics and bailouts of government-linked companies were very much a part of Mr. Mahathir’s 22 years in power.

“Mahathir is being disingenuous,” said Ibrahim Suffian, the director of the Merdeka Center, an independent polling company. “What we are seeing today did not happen overnight. It’s been heading this way for decades.”

Still, the concerns over 1MDB seem to have gained traction.

“We have been talking about and highlighting 1MDB for the last five years, and although it slowly gained momentum as a national issue, things changed the moment Mahathir picked 1MDB as an issue to bring down Najib,” said Rafizi Ramli, an opposition Parliament member. “For the first time, a government scandal has reached the attention of both sides of the political divide. In fact, it’s a bipartisan issue.”

Thomas Fuller reported from Putrajaya, and Louise Story from New York.