Chris Wright | Contributor
7/05/2015 @ 5:28PM
Forbes

Najib Razak, Malaysia’s Prime Minister since 2009, is facing the greatest challenge of his leadership – and even the risk of criminal charges.

As we reported last week, Najib has been embroiled in the scandal surrounding the state investment fund 1MDB. The fund was already an embarrassment to him – not only has it run up $US11.6 billion in debts and attracted inquiries by four different institutions, from the auditor-general to the police, but Najib himself chairs the fund’s advisory board. But on top of that, last week he was alleged by the Wall Street Journal to have received almost $700 million of transfers from the fund into his personal bank accounts, much of it during an election campaign.

If it is proven that the funds did indeed go into an account bearing his name, it is difficult to see how Najib can survive. But even if it isn’t proven, the allegations have come at a very difficult time for Malaysia’s leader. The UMNO party, which he represents, is in a period of internal turmoil as it recognises that it no longer has an automatic right to expect to win every election, and wonders whether Najib is the right person to lead it in this newly competitive political environment. Malaysia’s economy is struggling, particularly in an era of falling commodity prices; the country is one of the few in Asia to be a net exporter of commodities.

And Malaysia’s elder statesman, Mahathir Mohamad, who led the country for 22 years and was something of a mentor to Najib, has turned against him. He has called for Najib to step down over the fund’s behaviour, and even beforehand was angry with Najib’s leadership. Later this week I will print an interview I conducted with Tun Dr Mahathir earlier this year which talks at length about his thoughts on Najib – which have not been positive for some time.

Worse, on Saturday the attorney general of Malaysia, Abdul Gani Patail, confirmed that he had received documents linking Najib to the investment fund, and is reported to feel there is the potential for them to lead to criminal charges if they turn out to be accurate. Najib himself has referred to the allegations as political sabotage, and has blamed Mahathir for orchestrating them.

Malaysia is a place where reputation matters enormously and where bad press sticks. Even if the attorney general does not feel the evidence is strong enough to prosecute, there is a very strong sense that Najib has been weakened regardless.

Chris Wright is the author of No More Worlds to Conquer, published by HarperCollins.
I write about banking and finance in Asia, the Middle East and Africa.
Opinions expressed by Forbes Contributors are their own.