Amid political crisis, Malaysia’s Premier Najib to announce economic measures soon!
-Dr. Abdul Ruff
Slowing demand from China and a political crisis swirling around Najib have also shaken investors in Malaysia, Southeast Asia’s third-largest economy in recent months, pushing the ringgit down nearly 19 percent against the US dollar so far this year.
In order to overcome the crisis, Malaysian Prime Minister Najib Razak said he would announce measures to strengthen the economy maybe tomorrow as falling commodity prices weigh on growth and the ringgit currency plumbs near 18-year lows.
Najib is expected to announce the new measures after a weekly meeting of the economic council on 14 September. Last month, Najib set up a special economic committee to propose immediate and medium-term measures to strengthen the economy and to restore investor confidence.
Malaysia has been gripped by political tensions which escalated in early July after a report that investigators looking into debt-laden state investment fund 1MDB had found that close to $700 million had been deposited in an account held by Prime Minister Najib Razak. Najib, who also chairs 1MDB, has denied any wrongdoing, but the scandal has not died and has weighed on the economy. Both Najib and Malaysia’s central bank governor have pledged not to impose capital controls.
Najib has maintained that Malaysia’s current economic situation was stronger than during the 1997-98 Asian financial crisis. Massive outflows of capital during that crisis forced Malaysia to peg the ringgit at 3.8 to the dollar, which was retained that 2005.
Malaysia’s deteriorating currency position – reflected in the ringgit’s sharp depreciation, falling foreign exchange reserves and shrinking current account surplus – could force it restore a negative outlook on the country’s credit rating.
By 2015, with a population of over 30 million, Malaysia became the 43rd most populous country in the world. The southernmost point of continental Eurasia, Tanjung Piai, is in Malaysia, located in the tropics. It is one of 17 megadiverse countries on earth, with large numbers of endemic species.
Since its independence, Malaysia has had one of the best economic records in Asia, with its GDP growing at an average of 6.5% per annum for almost 50 years. The economy has traditionally been fuelled by its natural resources, but is expanding in the sectors of science, tourism, commerce and medical tourism. Today, Malaysia has a newly industrialized market economy, ranked third largest in Southeast Asia and 29th largest in the world. It is a founding member of the Association of Southeast Asian Nations, the East Asia Summit and the Organisation of Islamic Cooperation, and a member of Asia-Pacific Economic Cooperation, the Commonwealth of Nations, and the Non-Aligned Movement.
Malaysia is a federal constitutional elective monarchy, and the only federation in Southeast Asia. The system of government is closely modelled on that of the Westminster parliamentary system, a legacy of British colonial rule. The head of state is the Yang di-Pertuan Agong, commonly referred to as the King. The King is elected to a five-year term by and from among the nine hereditary rulers of the Malay states; the other four states, which have titular Governors, do not participate in the selection. By informal agreement the position is systematically rotated among the nine, and has been held by Abdul Halim of Kedah since December 2011. The King’s role has been largely ceremonial since changes to the constitution in 1994, picking ministers and members of the upper house.
Legislative power is divided between federal and state legislatures. The bicameral federal parliament consists of the lower house, theHouse of Representatives and the upper house, the Senate. The 222-member House of Representatives is elected for a maximum term of five years from single-member constituencies. All 70 senators sit for three-year terms; 26 are elected by the 13 state assemblies, and the remaining 44 are appointed by the King upon the Prime Minister’s recommendation The parliament follows a multi-party system and the government is elected through a first-past-the-post system. Since independence Malaysia has been governed by a multi-party coalition known as the Barisan Nasional.
Race is a significant force in Malaysian politics, and many political parties are ethnically based. Affirmative actions such as the New Economic Policy and the National Development Policy which superseded it, were implemented to advance the standing of the bumiputera, consisting of Malays and the indigenous tribes who are considered the original inhabitants of Malaysia, over non-bumiputera such as Malaysian Chinese and Malaysian Indians. These policies provide preferential treatment to bumiputera in employment, education, scholarships, business, and access to cheaper housing and assisted savings. However, it has generated greater interethnic resentment. There is ongoing debate over whether the laws and society of Malaysia should reflect secular or Islamic principles. Islamic criminal laws passed by the Pan-Malaysian Islamic Party with the support of UMNO state assemblymen in the state legislative assembly of Kelantan have been blocked by the federal government on the basis that criminal laws are the responsibility of the federal government
Since reports first surfaced alleging that hundreds of millions of dollars had been transferred into the personal accounts of the Malaysian prime minister, investigations into the scandal have met stiff government resistance. Investigators have been sidelined, the publications of a crusading news organization have been suspended, and a deputy prime minister who asked too many questions was fired.
Faced with what they see as stonewalling at home, opponents of PM Najib Razak, some from within his own party, are going global, prodding foreign governments and agencies to investigate allegations of graft and money laundering they say are related to the case.
Some international inquiries have already begun. The Swiss authorities have opened an investigation into assets linked to a sovereign wealth fund that Najib leads. The Hong Kong police say they are looking into deposits made at a branch of a Swiss bank there. And a state investment fund in the United Arab Emirates is reportedly seeking clarification over a debt payment of more than a billion dollars that was promised by the sovereign wealth fund but may not have been delivered. Moves by foreign law enforcement agencies could create pressure for more robust Malaysian investigations, which many believe will embolden, support or fortify the investigative efforts at home.
Najib’s critics say the fund has lost large sums of money and taken on expensive debt. A relatively junior member of Najib’s party, Khairuddin Abu Hassan, has been touring the globe, dropping off documents at the offices of law enforcement agencies. “This is the biggest financial scandal we’ve ever had in our country,” Khairuddin said in an interview in Penang last week. “But those who are involved in the investigation of this case are being arrested and questioned by the police.” Khairuddin seems to have the backing of influential politicians and disgruntled officials. In what he calls a “road show” for justice, he has traveled to Switzerland, Britain, France, Hong Kong and Singapore over the past three months to deliver packets of information related to the sovereign wealth fund at the center of the scandal. The fund, called 1Malaysia Development Berhad, or 1MDB, is chaired by Najib.
The government has struggled to explain the spaghetti-like complexity of its financial transactions across the globe, including funds held in offshore tax havens. The most explosive revelation was the nearly $700 million transferred to Najib in 2013 from entities reported to be linked to 1MDB. Najib has denied wrongdoing, saying he had “never taken funds for personal gain,” but has not specifically explained where the money came from.
Khairuddin declined to specify who is assisting him in his investigative efforts, but many in Malaysia suspect that he is being fed tips and documents by a range of people unhappy with Najib, including Mahathir Mohamad, a former Malaysian prime minister waging a campaign to unseat Najib
The Swiss investigation, which was underway before the pair visited, is moving forward. Last week, the Swiss authorities said they had frozen tens of millions of dollars in Swiss accounts related to the case. In Hong Kong, Khairuddin filed a police report accompanied by a photograph of a document that he says contains Najib’s handwritten notations indicating that 1.125 billion Malaysian ringgit, about $260 million, was transferred into Credit Suisse accounts in the city. The documents list four companies as the beneficiaries of the accounts, but Khairuddin said Najib had signatory powers over them.
The Malaysian government called the accusations “baseless and politically motivated lies.” “The Prime Minister does not control any Credit Suisse bank accounts in Hong Kong, whether in his name or the name of the companies mentioned,” the government said in a statement emailed to The New York Times. Credit Suisse declined to comment on the matter. The Hong Kong police said an investigation was underway and confirmed they had received information about “some bank deposits.”
In Malaysia, the central bank and the anticorruption commission are still officially investigating, but the case has been stymied by transfers of vital officials and an aggressive police investigation into leaks to the news media. Last month, the police raided the offices of the anticorruption commission, ostensibly to investigate a leak. In a purge that stunned the nation in late July, Najib removed the attorney general and fired several cabinet ministers, including the deputy prime minister, who had publicly raised questions about the issue.
In August, the government disbanded a task force investigating 1MDB. The Malaysian authorities have also frozen the accounts of Khairuddin using a law that seeks to prevent money laundering and the financing of terrorism.
Najib’s government also has a high degree of control over the police, the bureaucracy and the news media. In July, the government suspended the license of The Edge Financial Daily and The Edge Financial Weekly, sister publications that were taking a leading role in investigating the scandal. The government’s anticorruption commission, in its investigation, confirmed that the money had gone into Najib’s accounts, but said that it had come from an unidentified donor in the Middle East, not 1MDB.
One of Najib’s critics, former Umno leader Datuk Seri Khairuddin Abu Hassan, has lodged a report with the British police against troubled 1Malaysia Development Berhad (1MDB) and PetroSaudi International over alleged money laundering.
Meanwhile, Swiss authorities have begun their investigation into 1MDB. Switzerland’s Office of the Attorney-General (OAG) has opened criminal proceedings relating to 1MDB. The case involved suspected corruption of public foreign officials, dishonest management of public interests and money laundering. The source of the funds was unknown, but they had flowed through 1MDB-linked entities in various tranches, the largest of which – US$681 million (RM2.6 billion) – was channelled into Najib’s accounts in March 2013, ahead of the general election in May that year. MACC had said that the RM2.6 billion which had been funnelled into Najib’s accounts was a donation and not money from 1MDB.
Meanwhile, Chinese naval fleets left a port in Hainan province for a military exercise jointly held by Beijing and MalaysiaThe drill, coded “Peace and Friendship 2015”, is scheduled to be held September 17—22 in the Malacca Strait and surrounding waters. The fleets left on Saturday from the Sanya port. The drill will include exercises for joint escort, joint search and rescue, hijacked vessel rescue, weapons use, humanitarian rescue and disaster relief. It will be the first joint drill between the two armed forces and the largest bilateral military exercise between China and a country from the Association of South East Asian Nations (Asean). Armaments to be displayed by China will include a missile destroyer, a missile frigate, a hospital ship, four transportation planes and three helicopters. “The military drill aims to deepen the China-Malaysia all-round strategic partnership, enhance bilateral military exchanges, improve ability to address security threats and jointly safeguard regional maritime security,” said Hu Weihua, commander of the Chinese navy fleets. It does not target a third party and is not related to the regional situation, Hu added.