by Greg Earl
Australian Financial Review
Feb 3 2016
There was a time when a Malaysian leader only had to slug it out in the opaque but tough forum of the United Malays National Organisation (UMNO) to remain in power.
And tough it certainly has been, with a leader or rising deputy ruthlessly shoved aside usually amid outbreaks of Malay chauvinism about once a decade during the almost 60 years UMNO has been in power.
Prime Minister Najib Razak produced a masterful performance at the party conference late last year drawing on Malay feudal notions of loyalty and more modernist Islamic principles to fend off a corruption scandal, a weak economy and criticism by his deputy.
Last week the Attorney-General Apandi Ali seemed to take his cue from the conference and declare that there was nothing more to investigate about one of the world’s most amazing political funding sagas in which the Saudi royal family put US$680 million in Najib’s private bank accounts in the run-up to the 2013 election. And after a budget adjustment to cope with the emerging market uncertainty, the attorney-general appeared to clear the way for the prime minister to celebrate his 40 years in politics.
But for a sophisticated, liberal sounding, world traveller with a dynastic claim on the top job, just consider how the political battleground has actually changed since his father and then uncle both served as PMs through the 1970s.
MONEY LAUNDERING INVESTIGATION
In the US the Federal Bureau of Investigation is reportedly investigating money laundering by a heavily-indebted sovereign wealth fund 1Malaysia Development Berhad (1MDB) which is chaired by Najib. His stepson Riza Aziz’s real estate dealings in the US are also under scrutiny.
Then last Friday Swiss investigators investigating 1MDB revealed that up to US$4 billion may have been misappropriated from Malaysian state companies with some of that money lodged in Swiss banks.
Then on Monday the international web of attention got closer to home when Singapore’s Monetary Authority and financial fraud unit said they had seized a large number of bank accounts as a result of investigations into 1MDB and were co-operating with agencies in Switzerland and the US.
This is now a classic clash between old ways of political management when emerging countries were still insulated from global financial market pressures and the new world where regulatory authorities are sharing financial information at a global level.
And it is even more classic because – whatever you think of Malaysia’s elections – Najib heads what is the world’s longest continually elected same-party government. And this is in a country which was also at the forefront of Asia’s economic renaissance from the beginning with a congenial pro-foreign investment business climate.
Even as this amazing web of international legal attention has functioned as a sort of parallel universe to the conduct of the government in Kuala Lumpur, Najib has been receiving quite positive reviews of his economic management from market economists and the International Monetary Fund.
This raises obvious questions about how long foreign investors will tolerate the continual revelations about poor management of state funds before they fear the rot may spread further.
The answer probably lies in the fact that the alternate forces in Malaysia from economic reformers to the ethnic minorities haven’t been able to assemble a coherent alternative government, notwithstanding some electoral unfairness. Until that happens, investors can probably assume the UMNO system remains intact and that surviving within it runs deep in Najib’s blood.
And that’s why the sudden emergence of his own brother on social media this week worrying about the country’s future and image may be a crucial turning point.
One can really only let Nazir Razak, head of the Malaysia’s second biggest bank, conclude this sorry tale. “I just can’t see how our institutions can recover, how our political atmosphere can become less toxic, how our international reputation can be repaired,” he reportedly said on Instagram.