- Malaysia’s overdue housecleaning clamor
- Najib Razak, ‘biggest warlord in Malaysia’, sends message to opponents with sackings amid 1MDB scandal
- Why didn’t Najib explain RM2.6b donation from Day 1? Sarawak Report editor asks
- Malaysia Agency Says Money in Razak’s Personal Account Isn’t From 1MDB
Posted: 03 Aug 2015 10:46 PM PDT
Malaysia's stock market was down over 10 percent at end-July after Prime Minister Najib Razak, fighting to extend his six-year tenure in the wake of the 1MDB debt and campaign funding scandal, sacked his deputy and other cabinet members openly challenging him.
His public approval rating at 45 percent has suffered since the United Malay party won re-election last year, despite the opposition getting a larger vote total.
His predecessor Mahathir Mohamed did not think he deserved another term for lack of economic and political vision, as the household debt burden, which soared to 85 percent of GDP through government programs to boost consumption, is no longer sustainable to offset falling oil exports.
Foreign investors, with respective one-third and one-quarter ownership in the local bond and equity markets, were once enthusiastic about early promises to change the state-dominated business and financial sector model. But the results were meager and with the currency now at a 15-year low as the region's worst performer, aversion is spiking as in the Asian financial crisis aftermath.
The sovereign wealth fund investigation into $11 billion in accumulated debt has also begun to scapegoat international finance houses as during the early 2000s. Goldman Sachs has been singled out for high bond underwriting fees and the aggressive style of its Asia head.
The son of a wealthy Malaysian business executive, who started a fund in New York and expanded 1MDB's portfolio into luxury real estate, has been accused of shady foreign practices and steering $700 million into Najib's account.
As a central bank task force examines such conspiracies, asset sales to other government-linked companies, with stock exchange heavyweight Tenaga Nasional just bidding for a power unit, will be the main channel for servicing obligations and staying afloat.
GDP growth may be only 4 percent this year as the PMI manufacturing index fell below 50 in June, and April introduction of a goods and services tax to narrow the chronic 3-percent range budget deficit caps domestic demand.
Property and construction after a long upswing have stalled as bank credit growth drops to single digits, with personal non-performing loans rising.
The central bank has held rates despite ringgit depreciation to 3.8/dollar to discourage a further borrowing binge, which has been the main factor cited by ratings agencies for a likely sovereign downgrade.
Fitch Ratings last month maintained an 'A' grade on the prospect of household deleveraging amid the allegations swirling around the prime minister. To allow banks to handle workouts, short-term Islamic government securities issuance, which soaked up liquidity, has been stopped, effectively halving the global 'sukuk' universe to $50 billion in 2015, according to Standard & Poor's.
External accounts show a dwindling current account surplus to 1.5 percent of GDP as both high tech and natural resource exports sputter. International reserves have dropped 20 percent this year to just over $100 billion as they are used for currency intervention, and domestic and foreign-based capital outflows accelerate.
In May, a $2 billion sovereign bond was placed to boost holdings, but fund flow tracker EPFR shows steady debt and equity exit since the first quarter. Outward FDI from both private and state companies is a strong trend, as they diversify risk and react to slim infrastructure pickings in Najib's ambitious Economic Transformation Program now compromised by debt and political baggage.
These elements are also pervasive in Thailand where the stock market was off the same 10 percent at end-July on the MSCI index. It is tied with Malaysia for ASEAN's greatest household debt, which was pushed by the Yingluck administration's rice farmer and auto buying schemes before she was ousted by the military.
The generals postponed the election timetable into late 2016 as a new constitution is drafted and former government officials face trial for misconduct, including in agricultural credit. Informal money lenders and external corporate and financial institution borrowing add to the debt load which altogether is estimated at 125 percent of GDP. Balance sheet bloat in both countries regardless of criminal intent remains scandalous, and investors need to see that fiscal and political houses are equally in order.
Posted: 03 Aug 2015 10:36 PM PDT
Can the prime minister weather a full-blown wealth-fund scandal and a fractious party?
Malaysia's deputy prime ministers have rarely had it easy. To play the role of the utterly loyal number two while hinting at one's potential as a future number one requires extreme political adroitness.
Most have failed and faded into ignominy as also-rans. Others are now fierce critics of the government.
So when Muhyiddin Yassin was booted out of the cabinet on Tuesday for his attacks on his embattled boss, Prime Minister Najib Razak – who is fighting allegations that he took money from the 1MDB state wealth fund – it seemed like history repeating itself.
An already polarised country is being thrown into deeper turmoil with the capital Kuala Lumpur swirling with ominous rumours of arrests and more sackings, including that of well-respected central bank governor Zeti Akhtar Aziz, all because she is investigating the 1MDB scandal.
Charge sheets allegedly showing that Najib was about to be prosecuted for corruption surfaced on Thursday. Public prosecutors have denied their existence.
The government has also had to come out to say it is not planning to arrest Muhyiddin. Meanwhile, civic groups are planning to launch street protests.
Above all, many Malaysians are still in shock at the ruthlessness of the sacking. To some, it was un-Malay, alluding to the gentle, softer manners of the majority race.
Muhyiddin also told the media that he learned about his firing an hour before it was announced. When asked if he was about to be sacked, his boss merely nodded, Muhyiddin said while mimicking Najib's gesture, to derisive laughter.
It was only two days earlier that Muhyiddin had voiced his strongest criticism yet of the 1MDB scandal that has ensnared Najib, who is chairman of the fund. The deputy prime minister said he, too, did not know the answers to so many questions about the debt-laden fund and The Wall Street Journal report that US$700 million from the fund had been funnelled into Najib's personal accounts.
His statements were mild compared with the salvos unleashed by former prime minister Mahathir Mohamad. But the sacking came swiftly. Sources told the South China Morning Post that Muhyiddin's camp did not see it coming.
Muhyiddin is now the second deputy prime minister in the history of Malaysian politics to be sacked from the cabinet. Anwar Ibrahim, dismissed in 1998 after disagreeing with Mahathir's handling of the Asian financial crisis, is in jail over a sodomy conviction.
Muhyiddin remains deputy president of the Malay-centric Umno, the largest party in the ruling coalition. He has said he does not intend to rock the boat. But nobody expects calm waters ahead.
The two men came together in a marriage of convenience. One is from a pedigreed political family; the other rose through the ranks steadily at the state level in Johor, the birthplace of Umno.
Najib is the son of Malaysia's second prime minister and secured the top job by waiting patiently in the wings as deputy prime minister for several years, and even after the ruling coalition's massive losses in the 2008 election. He took over from PM Abdullah Badawi only a year later.
Muhyiddin, who was the chief minister of Johor for nearly a decade until 1995, had appeared as if he was in no hurry to assert himself.
But the 1MDB scandal proved too hard to resist taking on. Along with Muhyiddin, Najib sacked other ministers who had also been vocal about 1MDB. Attorney general Gani Patail, who was involved in the investigation into the wealth fund controversy, was also fired.
Since the firings, a leaked, undated video has emerged online, showing Muhyiddin, in a private conversation, reporting that Najib had told him that he did take the US$700 million.
Najib has denied taking any money for "personal gain", rejecting the accusations as malicious lies to force him out of office.
With the sackings, he has shown he is bent on staying on until the next election, due by 2018. But can he last that long and will Umno stay united?
The Malay ground in Malaysia is in strife. Umno has lost favour with vast sections of the urban Malay middle class that has abandoned it in droves since the 2008 election, when the ruling coalition lost its two-thirds majority in parliament.
But broad swathes are also disillusioned with the opposition alternatives of Anwar's party, Parti Keadilan Rakyat (PKR) and the Partai Islam Se Malaysia (PAS). PAS is now being torn apart, with defectors rumoured to be setting up a new political party in the coming months.
In the past, when two deputy prime ministers left the cabinet, the ensuing infighting left Umno in shreds.
In 1986, after quitting as deputy to Mahathir, Musa Hitam joined forces with another Mahathir nemesis, Tengku Razaleigh Hamzah, to challenge the top leadership post of Umno. Both lost, but the bruising battle split the party for several years, into Semangat 46, or "Spirit of 46", harking to the founding year of Umno, and Umno Baru, a newly constituted party.
In 1998, when Anwar was sacked, he launched the Reformasi protests against his former boss. Umno again split as defecting members joined Anwar to form PKR.
But Umno may not suffer such a fate this time. Like many Asian countries, Malaysian democracy is rife with the politics of patronage. And Najib has ensured the loyalty of the Umno rank-and-file: at a party meeting in March, more than 160 out of 191 division chiefs pledged their endorsement of him.
Sources told the Post that Najib also has the support of most members of the supreme council, the highest leadership body in the party and, barring other more damaging evidence, can ride out the storm until the party elections next year.
For Umno unity to come undone, some mighty machinations and even more money would be needed to establish a whole new source of patronage.
Few expect Najib to survive the current crisis, but for now, it would appear he has done enough to pacify the different "warlords" who control the different sections of the grass roots.
When this reporter interviewed him in 2009 soon after he took office, I asked Najib how he would deal with them. He waved aside the question and quipped: "Don't forget, I am the biggest warlord."
With the sackings, he has ensured his opponents will not forget.
Posted: 03 Aug 2015 10:34 PM PDT
Founder and editor of whistleblower website Sarawak Report (SR) Clare Rewcastle-Brown has questioned Prime Minister Datuk Seri Najib Razak's failure to explain from the very beginning that the RM2.6 billion found in his accounts had come from "donors" and not from 1Malaysia Development Berhad (1MDB) as previously suspected.
Defending SR's reports on the funds, the Sarawak-born British journalist pointed out they had been based on information obtained from the investigation on 1MDB, which she said had suggested the possibility of a link between Najib and money from the troubled state investor.
"Gosh! How come the PM didn't clear all that up immediately on Day 1 then? What we said was that the information had come from the investigation, because it was believed by investigators to be linked.
"How else would we have obtained it?" she wrote in an email reply to Malay Mail Online yesterday.
Rewcastle-Brown also suggested that these donors come forward and reveal their identities.
The London-based journalist did not contest the conclusion that the RM2.6 billion had not come from 1MDB although she noted that it was made by the Malaysian Anti-Corruption Commission (MACC) after the series of arrests of some of the agency's own leading investigators.
"People can reach their own conclusion about this latest MACC statement," she added.
She went on to question the purpose of the donation, saying that if it had been used as suspected for Barisan Nasional's Election 2013 campaign, the ruling pact would have broken election laws by exceeding the legal limit for political funding.
Yesterday, former prime minister Tun Dr Mahathir Mohamad had made a similar point in his blog.
Rewcastle-Brown also took a swipe at Najib, asking him if it was okay for "white foreigners" to influence to outcome of the federal polls, after alleging that the funds had originated from an Abu Dhabi bank.
Last weekend, Najib had said in a speech during an Umno divisional meeting that "white people" should stay out of Malaysia's administrative affairs.
As an example, the prime minister had singled out Rewcastle-Brown's whistleblower site.
Other than SR, several other international media organisations have written extensively on 1MDB and Najib's alleged involvement in the state owned fund.
An article by the Wall Street Journal (WSJ) recently claimed that US$700 million (RM2.6 billion) was funnelled through 1MDB into Najib's private account.
Najib has not directly denied the claim, but has repeatedly said that he has never taken 1MDB money for personal gain.
A special government task force comprising officials from the Attorney-General's Chambers, the MACC, Bank Negara Malaysia and the police was set up to investigate the allegations in WSJ.
Some of the key investigators from the task force however have been hauled up by the police for a separate investigation on information leaks.
– See more at: http://www.themalaymailonline.com/malaysia/article/why-didnt-najib-explain-rm2.6b-donation-from-day-1-sarawak-report-editor-as#sthash.TCzm4uMY.dpuf
Posted: 03 Aug 2015 10:27 PM PDT
Anticorruption group says money was from 'donor contribution' but doesn't identify donor
KUALA LUMPUR, Malaysia—Malaysia's anticorruption agency said Monday that 2.6 billion ringgit (about $700 million) was deposited into Prime Minister Najib Razak's personal account and that the money was from a "donor contribution," not from 1Malaysia Development Bhd, a state investment fund also known as 1MDB.
The Malaysian Anti-Corruption Commission didn't say, however, who the donor was, nor the purpose of the contribution. MACC officials didn't immediately respond to further queries.
"Results of the investigation found that 2.6 billion ringgit alleged to have been deposited into an account belonging to the Prime Minister was a donor contribution and not from 1MDB," the commission said in a statement.
On July 2, The Wall Street Journal reported that Malaysian investigators had traced nearly $700 million of deposits into what investigators believe were Mr. Najib's personal bank accounts after the movement of cash among agencies, banks and companies linked to 1MDB. The Journal has reported that the original source of the money was unclear and that the government investigation hadn't detailed what happened to the money that allegedly went into Mr. Najib's personal accounts.
The prime minister's office didn't immediately respond to a request for comment. Mr. Najib, who heads 1MDB's advisory board, previously has denied any wrongdoing or taking any money for personal gain.
Authorities so far have detained eight people and are currently seeking two former 1MDB executive directors to assist the investigation into the activities of 1MDB, which had racked up more than $11 billion in borrowings while facing a cash crunch.
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