Michael Peel in Kuala Lumpur
Financial Times
10th July 2015

Malaysia is gripped by the biggest financial scandal in its modern history—although you might not know it from the reaction of Najib Razak’s
government.

Claims of large-scale misappropriation at a state investment fund now embroil the prime minister — but he and his administration are trying to shrug it all off by dismissing it as a political plot. That curt response to the ever-widening 1MalaysiaDevelopment Berhad affair tells of the grip on power enjoyed by the ruling United Malays National Organisation since independence in 1957.

“If there is no one shouting ‘I have been robbed’ why would anyone think there has been a robbery?” says Tony Pua, an opposition legislator, explaining the lack of official outrage over how a fund setup with the Malaysian people’s money came to be drowning in more than$11bn of debt. “That’s the problem at the moment.”

The long-running 1MDB affair took its most dramatic turn yet last week, when the Wall Street Journal and Sarawak Report website alleged that Malaysian investigators had found payments totalling$681m in March 2013 to a bank account in the prime minister’s name. The Financial Times has not been able to verify the claim independently.

Mr Najib has said he did not take any funds for personal gain and has denounced this and other allegations against him as “outrageous”, “unsubstantiated” and “political sabotage”. 1MDB has previously denied that it has ever given money to the prime minister. Neither Mr Najib nor 1MDBhas offered a detailed rebuttal of the latest claims.

The fresh allegations are now being investigated by a special task force, which took documents from 1MDB’s offices in central Kuala Lumpur on Wednesday. Opposition lawmakers and Mahathir Mohamad, the influential former prime minister, have called for Mr Najib to step down at least temporarily.

But official reaction has been strikingly muted, aside from a measured call by Mr Najib’s Deputy for the claim to be investigated. The central bank has said nothing. The head of parliament’s public accounts committee did not highlight anything untoward from a unpublished interim report on 1MDBsubmitted by the auditor general on Thursday, except to say that the officials seemed to have had trouble obtaining some documents. The police chief announced a new 1MDBinvestigation—but into how the bank transfer records and other papers at the heart of the new claims came to be leaked.

The communications regulator has meanwhile stepped in to warn that people commenting on the affair online could end up in jail under computer crime laws. The hashtag 1MDBMovies went viral this week, spawning mock-ups of Mr Najib at the centre of film posters such as “Lord of the Ringgits”—a reference to Malaysia’s ailing currency, which hit a 16-year low against the dollar this week.

Nor have efforts by the divided opposition to press the government had much conviction. Nurul Izzah Anwar, an MP and the daughter of Anwar Ibrahim, the jailed opposition leader, said she had few hopes for the success of an effort launched this week to have the results of the contentious 2013 election declared void, on the grounds that 1MDB money may haveflowed into ruling party coffers.

Her remarks reflect a wider cynicism about whether the full truth about 1MDBwill come out anytime soon—and, if it does, whether it will be acted on. “We don’t expect much from the outcome,” she said of the legal challenge to the election. “But of course we are going to fight to win.”