Will it be checkmate for Arul Kanda?

April 30, 2015

by Kee Thuan Chye

http://www.malaysiakini.com

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Arul Kanda Kandasamy is not involved in any siphoning of funds from 1MDB to the wrong pockets. He was brought in to head the company long after the foul deeds had been done. He was brought in to rationalise the company and bring it back in the black. ‘Rationalise’ might even have been a nice word used for his job description – to mean cover up the dirt, if he found any.

Well, from the Public Accounts Committee (PAC) report and some of the things he has said publicly, it appears that he did find dirt and he did cover it up.But now he has openly admitted that 1MDB might have been massively defrauded. More, he has also declared in an interview with The Edge Financial Weekly that “maybe there was collaboration from our side”.

Maybe? He was supposed to investigate and find out for sure. How could he say “maybe”? We are talking about billions of US dollars going astray, and he says “maybe”? Has he failed in his job?Or has he succeeded exceedingly well by way of not exposing fraud when he discovered it? And is he still equivocating by saying “maybe” when he could actually mean “certainly”?

Hiding the fraud would of course make him an accessory after the fact. And when it comes to prosecuting the culprits, he should also be implicated.

MP Tony Pua, a member of the PAC and 1MDB’s closest observer, has called Arul a “liar”. The fact that Arul has not defended his honour by, say, suing Pua, suggests that the accusation is true.

What was it that Arul allegedly lied about? In February 2015, he said in an interview with the Singapore Business Times that 1MDB had redeemed US$1.103 billion from its offshore account in the Cayman Islands and parked it in a Singapore-based branch of Swiss bank BSI Bank.

“The cash is in our accounts… I can assure you… I have seen the statements,” he attested. Note his confident tone.But it turned out there was no cash. In May, the government admitted that the redeemed US$1.103 billion was actually in the form of ‘units’.

In June, 1MDB laughably sought to get Arul off the hook by stating that he “never said he ‘saw the cash’” and that he was “on the record as saying he had ‘seen the statements’.”That was stupid. Anybody could see that Arul and 1MDB were trying to twist words. After all, he also was on record saying “the cash is in our accounts”, so how could he wriggle out of that?

Anyway, in October, Sarawak Report published on its website minutes of a 1MDB board meeting that took place in January 2015, at which Arul gave “detailed assurances to board members that there was indeed cash in the so-called Brazen Sky company account at BSI Bank”.

This cash-but-no-cash episode is very telling of what Arul’s mission amounts to. Even more telling is the refusal of 1MDB under Arul’s watch to provide details of the company’s foreign banking transactions to the PAC and the auditor-general.

Such information is crucial in determining, for example, whether a US$700 million transfer made by 1MDB to an account belonging to Good Star Ltd was legitimate.

Unexplained payments

More significant than that are the billions of dollars of unexplained payments – totalling at least US$3.51 billion – made to British Virgin Islands registered company Aabar Investments PJS Limited.

According to the PAC report, 1MDB has not clarified whether this company was linked to the Abu Dhabi-registered Aabar Investments PJS that is a subsidiary of International Petroleum Investment Corp (IPIC), which actually declared to the London Stock Exchange this month that the Virgin Islands Aabar “was not an entity” within IPIC or Aabar Investments PJS.

If the Virgin Islands Aabar is not a company that 1MDB had legitimate business dealings with, then it is incumbent on Arul to provide the essential information to set the record straight. Why hasn’t he done it? Why did he not furnish the PAC with the required foreign banking information? What is he trying to hide?

I could cite more instances of Arul’s seemingly dodgy behaviour in divulging information to the public and the authorities, but I think the main points have already been clearly made.

As I said earlier, if he is hiding the truth, he is an accessory. And now that he has acknowledged the possibility that there was fraud and that 1MDB itself might have participated in the fraud, something that he had been denying before, what is he going to do about it?

He was brought in to head 1MDB in January 2015 on a three-year contract. He still has time left. And although, as he told The Star on April 1, that his job was to turn 1MDB around and sort out its debt, and that “from my perspective, I’m done”, he should know that he’s now in a very vulnerable position.

Should he merely confine his stint at 1MDB to just the brief he was originally given when he now suspects that fraud has been committed? Isn’t in in the interest of 1MDB to get down to the bottom of the fraud?

In fact, since 1MDB is government-owned, isn’t it in the interest of Malaysian taxpayers to know the truth? And since all Malaysians pay tax these days, at least in the form of the goods and services tax (GST), doesn’t this mean that all Malaysians have a stake in 1MDB and what it’s been doing (or misdoing)?

So, is Arul Kanda going to carry out his duty to all Malaysians or is he going to wash his hands of the matter? Is he going to care for the financial well-being of the country or uphold the interests of his master?

The answer to that has become more pressing this week in light of IPIC’s termination of the deal to slash US$3.5 billion of 1MDB’s debts that has led to 1MDB defaulting on its payment of US$50 million interest for bonds it issued.

This latest development has prompted Pua to warn that as a result of it, “Malaysians need to brace themselves for the bailout of the century of at least RM20 billion by the Malaysian government”.

If that should turn out to be true, the culprits that started this whole 1MDB mess must be held accountable. Arul’s head should also roll if he was not duly diligent in averting a disaster by coming clean with the company’s dirt.

On April 1, Arul said, “We don’t need any money from our shareholders to get us to 2039. There is no bailout of 1MDB.” What will he say in the weeks to come? He also said the allegations against wrongdoing by 1MDB were unfounded and politically motivated. “The misunderstandings about 1MDB stem from the fact that what was a business problem became politicised and became a tool by the opposition or those not aligned with the government to topple a democratically elected prime minister and government.”

That was glib (misunderstandings, indeed!) and parrot-like (quoted verbatim from government propaganda about toppling blah blah blah). Unfortunately, in a matter of weeks since then, the situation has turned negatively against 1MDB. And, naturally, for Arul Kanda, too. He could be due for his comeuppance.For his own sake, he should decide now to do the right thing.

Whither ASEAN–The View of a Pessimist?

April 30, 2016

by Philip Bowring

http://www.asiasentinel.com/politics/obituary-association-southeast-asian-nations/

As 2016 chair of the Association of South East Asian Nations (ASEAN), the Laotian People’s Democratic Republic is leading the group toward political irrelevance. And that is doubtless how China, the hand controlling the Laotian glove puppet, would like to see it.

The three minnows of ASEAN, Brunei, Cambodia and Laos, have just undermined ASEAN’s efforts to present some sort of a united front questioning China’s claims and activities in the South China Sea. Feeble though these have been, with endless talk of a developing a Code of Conduct making scant headway, they have at least been commonly agreed.

Meanwhile China has continued aggressive actions, reclaiming land, driving Filipinos from the Scarborough Shoal which lies well within the Philippine Exclusive Economic Zone and sending fleets of fishing boats protected by armed Coast Guard vessels operating 1,000 miles from the China coast to steal the fish from the exclusive zones of Indonesia, Malaysia and Vietnam.

But creating facts in the sea while stalling the Code of Conduct, is not sufficient for China. On April 24 in the Laotian capital Vientiane, China’s Foreign Minister Wang Yi announced, with an understandable sense of triumph, that an “important consensus” had been reached with the three that disputes over the South China Sea should be resolved entirely on a bilateral basis and not involve ASEAN.

According to the Chinese, the consensus criticized any efforts to “unilaterally impose an agenda on other countries” and vowed that national sovereignty would prevail over the regional grouping. None of the other parties has contradicted Wang.

Timed for Hague Decision 

This China-created “consensus” was timed in advance of the decision expected in June from the Permanent Court of Arbitration in The Hague on a Philippine case against China. Beijing refuses to accept the jurisdiction of the court but needs to find some diplomatic support given that the court is widely expected to rule largely in the Philippines’ favor.

The statement also comes at a time when Indonesia, which long claimed not to be involved in the South China Sea disputes, is making more determined efforts to protect its fisheries and is growing concerned about the proximity of China’s nine-dash line claim to its gas fields off the Natuna islands.

In February, ASEAN expressed serious concern about developments in the South China Sea, with only Laotian and Cambodian opposition preventing a stronger statement. But now the three minnows have effectively said that neither ASEAN nor international courts play any role in regional issues.

In which case, why bother to treat ASEAN as having any political or diplomatic role? Just leave ASEAN as a loose economic grouping with some extra benefits such as visa-free travel and stop pretending that it is anything more. It has long been clear that the overriding national interests of the states abutting the South China Sea were not fully shared by Myanmar or Thailand, let alone landlocked Laos.

As it is, tiny Laos with its long Chinese border, is already the focus of massive Chinese investment and is a bridgehead for the advance of Chinese road and rail systems into Thailand. The Hun Sen regime in Cambodia was installed by the Vietnamese (?) but has come increasingly under Chinese influence thanks to money and historic Khmer suspicion of Vietnam.

Brunei Sultan Blazes Islamic Path

As for Brunei, making sense of the decisions of its autocratic Sultan Hassanal Bolkiah is never easy. Two years ago he announced that full Islamic law would be introduced in three stages, culminating in such features as cutting off limbs and stoning adulterers and homosexuals. At the same time, he is trying to reduce dependence on oil and make his petty kingdom into an Islamic version of Singapore, which would call for a far more open society than he consents to envision. All this is very confusing particularly given the Brunei royal family’s past reputation for gross extravagance and as a paradise for beautiful rent-seeking women who dare serious sexual harassment from randy royal children.

Brunei’s EEZ is known to contain oil and gas it needs to replenish its dwindling reserves. Much of its 200-mile EEZ lies within China’s nine-dash line so Brunei’s interest should be in expressing solidarity with Malaysia, the Philippines and Vietnam. But Chinese money may have been more persuasive. Or the Sultan may figure that being a tool of China makes it less likely that Brunei, population 250,000, will eventually be swallowed by Malaysia or Indonesia.

The current divide makes it a good occasion to re-think both the name and the concept of the region. The very name Southeast Asia is of recent creation – by the British in the 1940s to describe territories occupied by Japan from Burma (previously part of British India) to the Philippines vis so-called Indochina, the Malay Peninsula and the Indian (or Malay) Archipelago (Indonesia). ASEAN in turn was invented in the 1960s as an anti-Communist bloc from which grew something bigger but more oriented towards trade.

ASEAN Minus Five?

Trade cooperation is still needed but as a political tool for its three largest states, Indonesia, the Philippines and Vietnam, which between them account for 75 percent of its population, ASEAN is now counter-productive. Likewise Malaysia needs close South China Sea allies not merely to defend its own islands and exclusive zones but to protect the integrity of a nation divided by roughly 600 km of sea, some of which lies within China’s nine-dash line.

In other words, these four states plus Brunei, if it could be released from the clutches of a newly medieval ruler, need a new grouping, could find sensible compromises on their own overlapping claims and confront China with a firm and united voice.

Convincing Indonesia of the merits of such as idea would be difficult. Jakarta not only hosts the ASEAN secretariat, such as it is, but harbors a sense that it is both the leader of the group and voice of moderation on all issues. That may have been the case in the past when it still basked in its non-aligned legacy and China was on the margin of regional affairs. But now China’s power and expansionist interests have divided ASEAN and made a myth of Indonesian assumptions of quiet leadership.

Wang Yi’s April 24 statement was a blunt description of a reality that has long been evident but fervently denied by foreign ministries in many capitals wedded to ASEAN illusions. It can be denied no longer. China has spoken: ASEAN is irrelevant.

Your Weekend Entertainment–Here’s Mr. Sam Cooke

April 30, 2016

May 1 is also Freedom Day for Malaysia

Tomorrow  is May 1, 2016. It is Labour Day. It should be renamed Human Resources Day. Old economics treated labour as a factor of production. Today, perception has changed rather dramatically. Labour is a strategic resource which combined with technology enhances productivity that enables a country to compete in world trade.

Today, Dr Kamsiah and I choose to pay tribute to men and women around the world for their contributions to global prosperity. Your services and sacrifice are no longer to be taken for granted. As they say, “you have come a long way baby”. For Malaysia, May 1 should also be dubbed Freedom Day.

So this weekend, we have chosen to feature the sound, voice and music of Sam Cooke, one of the pioneers of soul music.

Samuel Cook (January 22, 1931 – December 11, 1964), known professionally as Sam Cooke, was an American singer, songwriter, and entrepreneur.

Influential as both a singer and composer, he is commonly known as the King of Soul for his distinctive vocals and importance within popular music. His pioneering contributions to soul music contributed to the rise of Aretha Franklin, Bobby Womack, Al Green, Curtis Mayfield, Stevie Wonder, Marvin Gaye, and Billy Preston, and popularized the likes of Otis Redding and James Brown. AllMusic biographer Bruce Eder wrote that Cooke was “the inventor of soul music”, and possessed “an incredible natural singing voice and a smooth, effortless delivery that has never been surpassed”.

Cooke had 30 U.S. top 40 hits between 1957 and 1964, plus three more posthumously. Major hits like “You Send Me“, “A Change Is Gonna Come“, “Cupid“, “Chain Gang“, “Wonderful World“, and “Twistin’ the Night Away” are some of his most popular songs. Cooke was also among the first modern black performers and composers to attend to the business side of his musical career. He founded both a record label and a publishing company as an extension of his careers as a singer and composer. He also took an active part in the Civil Rights Movement.-www.wikipedia.org

We hope you like our choice for this weekend.–Dr. Kamsiah and Din Merican

Malaysia: Need for Institutional Reforms

April 30, 2016

by Shankaran Nambiar, MIER

http://www.eastasiaforum.org

Mahathir Mohamad, Malaysia’s former Prime Minister, seems to have missed the mark with the Citizen’s Declaration that he has so vigorously initiated and promoted.The bulk of the Declaration is directed at Prime Minister Najib Razak and his alleged wrongdoings in connection with the beleaguered 1Malaysia Development Berhad (1MDB). Therein lies its fatal flaw.

 

The Declaration’s specific attacks on the sovereign wealth fund miss the larger issues of institutional reform, delivery of public services, accountability and good governance in the public sector and government-linked organisations. It even questions the limits of government participation in business.

There are two ways of looking at the 1MDB issue. One could identify it as a problem where domestic institutions are weak and the local institutional framework is crumbling.

There is a gaping void in a governance system if a civil servant can misappropriate US$26 million from their department without financial procedures triggering warnings to the relevant Secretary-General and Minister before the matter became public knowledge.

A 2015 report by the Washington-based NGO Global Financial Integrity ranked Malaysia as the country with the fifth largest illicit financial outflows in the developing world. This is hardly a tribute to the country’s institutional performance and it suggests that the central bank has a weighty task at hand. These are just a few signs of institutional failure and poor governance which, if left unabated, have the potential to bite into the country’s growth and developmental outcomes.

UMNO: Political party of rent seekers and corrupters

Another way of looking at Malaysia’s problem is to see it as characteristic of capitalism at its worst. A capitalism where greed, poor institutional safeguards, loopholes and lobbyists derail a system that is otherwise meant to support the efficient functioning of markets.

As evidence of the worst that capitalism can slip to, the West has its Raj Rajaratnam, the hedge fund manager who once was among the 400 richest Americans and now languishes in jail, and the rogue trader Nick Leeson who brought down the Barings investment bank. The Enron case and the fall of Lehman Brothers are other signs of disruptions in the system. Malaysia can claim to have imported an economic model that has deep fault lines.

Mahathir, in sharpening his sword solely for Najib, disregards a more systemic assessment of the problems that confront Malaysia. He also brushes aside the need for institutional reform and a more holistic transformation of the economy.

If, as a recent parliamentary report claims, 1MDB has been fraught with mismanagement of funds and unwise investment decisions, then it brings into question the integrity and wisdom with which other government-linked companies are managed.

Najib–The Exemplar

This is a serious question in an age of trade and investment openness for two reasons. First, the global trade and investment system hardly favours government participation in business in general. Second, transparency and sound institutional practices are the basis for investment attractiveness. The 1MDB saga undermines the credibility and attractiveness of Malaysia on these issues, which will not do Malaysia any good in the long run.

International exposure on 1MDB has not been complimentary. Authorities in nine countries are reported to be investigating whether their laws were broken in the course of 1MDB’s transactions.

The 1MDB question will not threaten Malaysia’s immediate economic performance. In fact, the value of the ringgit has been going up in recent weeks. It has responded more to the rise in the price of oil and the improving US economy than to allegations of impropriety in 1MDB’s dealings. But the long-term attractiveness of the country as a hub for investment could take a rubbing. This is also because other institutions have been dragged into the picture. The central bank has had to defend itself in an effort to maintain its credibility and the image of freedom from political pressure, at a time when it has to fight what may be a larger problem of illicit financial flows.

Former Prime Minister Mahathir does, of course, have the right to express his opinions on the current state of affairs. One wishes, though, that he had taken a different perspective, one that might constructively promote institutional restructuring. Malaysia needs developed country institutions as it aspires to achieve developed country status.

Shankaran Nambiar is a Senior Research Fellow at the Malaysian Institute for Economic Research.(MIER)

A version of this article originally appeared at The Sun.

MAS: Mueller’ s successor should have vision, experience and expertise.

April 29, 2016

by Scott Ng

http://www.freemalaysiatoday.com

http://www.freemalaysiatoday.com/category/opinion/2016/04/29/dont-make-an-issue-of-mab-chiefs-nationality/

At the end of the day, MAS is a business, and in a business you either prove yourself capable or you don’t deserve the job. This is our national carrier, and it should be a source of national pride, but we should not let national pride in and of itself be the sole determinant of whom we choose to lead it. That person should be someone with vision, experience and expertise.–Scott Ng

 

If there was any doubt about Christoph Mueller’s abilities as a business manager, this was dispelled last February when MAS, in its new incarnation as Malaysia Airlines Berhad, made its first monthly profit in years. His turnaround of our national carrier is indeed nothing short of phenomenal. So it was quite surprising to hear him announce his resignation as CEO, coming as it did less than a year after he assumed the position.

Some people are speculating that it was political pressure that forced the industry-renowned airline revival specialist to depart, though Mueller has denied this. He claims that personal reasons forced his hand, and he would be taking a huge financial hit with his departure.

While no Malaysian would be surprised to hear that rent seekers may have showed up the instant MAS turned a profit, what lies behind Mueller’s departure is his own business. But as conversation turns toward appointing a new head for the national carrier, there is some unsavoury talk about his status as a foreigner, with some saying the company should be run by a Malaysian, meritocracy be damned. Even PKR’s Tian Chua reminded the public that his party had warned about bringing in a foreigner to run MAS, saying, “It is unfair to bring in a foreigner at a critical time and ask him to turn around the national airline. How can he turn around the company if he does not understand Malaysian work politics?”

We do detect a touch of irony in Tian Chua’s remark, particularly where he refers to “Malaysian work politics”. Nevertheless, his complaint about the “unfairness” of hiring a foreigner instead of a Malaysian expresses a sentiment shared by a number of politicians on both sides of the divide.

Certainly, a foreigner would not be expected to be intimately acquainted with our politics, and MAS, like all national arms, is heavily linked to the ruling party. However, it seems rather a trite reason to protest against Mueller’s appointment. It appears that we Malaysians are indeed capable of extending our racism to include hostility to the idea of having someone from outside our ken coming in and telling us how to do our jobs.

The fact is that Mueller (above) was the most competent person willing to come in to help an airline that had lost two aircraft to tragedy in the span of a few months. He was chosen because he merited the role and the challenge, and no amount of hemming and hawing and subtle racism can take that away from him. Even if the announcement of MAS’ February profits seemed like one timed to save his face, he can still take pride in his achievement, considering the sordid state that the company was in after decades of national stewardship.

Look, it’s not about where someone comes from. At the end of the day, MAS is a business, and in a business you either prove yourself capable or you don’t deserve the job. This is our national carrier, and it should be a source of national pride, but we should not let national pride in and of itself be the sole determinant of whom we choose to lead it. That person should be someone with vision, experience and expertise.

 

Cambodia: The Rise of the Young Entrepreneur

April 29, 2016

by Scott Rawlinson

http://asiapacific.anu.edu.au/newmandala/category/cambodia/

A new crop are bursting onto the country’s business scene and showing the way for sustainable economic growth, reports Scott Rawlinson.

On  March 16,  Prime Minister Hun Sen expressed his disappointment at foreign journalists who, painted Cambodia as a sort of “hell”. At the same time, democracy and human rights forecasts for the Southeast Asian nation are frequently gloomy. For example, see this report from USAID published in January.

Regardless of the merits of either side of the argument, the story of Cambodia since the fall of the Khmer Rouge is one that is much more complicated and multifaceted, defying easy and universal classification. In fact, there is not so much a Cambodian story as a multitude of Cambodian stories.

In particular, young Cambodians without memories of the Khmer Rouge’s brutal reign are forging new narratives. Since the 2013 National Assembly elections, and the shock experienced by the long-incumbent Cambodian People’s Party (CPP), the need to appeal to youth and capture their imaginations has risen in the party’s political agenda and strategies.

Prior to the 2013 election, the opposition Cambodia National Rescue Party (CNRP) made effective use of various social media platforms, gaining much support from young urbanites in Phnom Penh and its surrounding areas. In response, the CPP, and in particular Prime Minister Hun Sen, became much more active on Facebook, giving users the chance to watch live streams from various public works and graduation ceremonies as well as the opportunity to follow the day-to-day activities of the Prime Minister and his interactions with — often young — Cambodians.

Nevertheless, it would seem that young Cambodian entrepreneurs are taking matters into their own hands. At a special public lecture hosted by the Cambodian Institute for Strategic Studies (CISS) I was fortunate enough to attend a presentation on the ASEAN Economic Community and its implications for Cambodian entrepreneurs delivered by HE Dr Sok Siphana — an advisor to the Royal Government of Cambodia.

Following the fall of the Khmer Rouge regime infrastructure and business, among many other things, had to be rebuilt from scratch. Throughout the Vietnamese occupation, the intervention of the UN and the shift towards privatisation, Cambodia witnessed the (re-)emergence of powerful business tycoons as well as the smaller family-run stalls that remain a common site throughout the country.

According to Dr Sok Siphana (above), what many of these early businessmen and women lacked was formal education and training, robust accounting procedures, and the ability to communicate in the languages of international trade, particularly English.

This state of affairs underwent huge changes in the post-1993 era. The provision of scholarships to talented Cambodian youths, giving them the opportunity to study abroad, raised the human resources and capacity available to Cambodia. Now a number of Cambodians study in universities elsewhere in Asia, the European Union, the US and Australia, attending a number of prestigious institutions.

Of course there remains the issue of a possible “brain drain”. It is not always guaranteed that Cambodian students who opt to study abroad will necessarily wish to set up their business or work back in Cambodia once their degrees are completed.

However, with this growth in the number of tertiary-level educated Cambodians and the enthusiastic embrace of social media and other new technologies that act as business aids, young Cambodian entrepreneurs with knowledge and business plans are already and likely to continue to transform the nation’s economy.

Additionally, organisations such as the Young Entrepreneurs Association of Cambodia (YEAC) provide a community for accomplished and aspiring businessmen and women to exchange ideas and advice with one another.

There are a few notable success stories. A perfect example is Brown Coffee a thriving coffee and bakery chain with a number of outlets across Phnom Penh and which was co-founded by five young Cambodians with formal education, practical skills and a robust business model. One of its co-founders, for instance, studied education and communications, another is an architect, still another a pastry chef as well as two structural engineers. While serving both expatriates and locals it employs many local Cambodians.

Whether legislation from the government keeps up the pace with the private sector and the influx of ideas-full prospective entrepreneurs is something we will discover in the future.

It would be naïve to think that Cambodia has solved all of its social and political issues and ills that act as a hindrance to a more equal form of national development. However, young Cambodian entrepreneurs are lighting the way for a more sustainable and localised form of economic growth.

I hope that success stories like Brown Coffee act as an inspiration for this and the next generation of young Cambodian entrepreneurs.

Scott Rawlinson received his MA in South East Asian Studies from the School of Oriental and African Studies (SOAS), University of London. He is currently a Fellow, and Coordinator for Fellows, at the Cambodian Institute for Strategic Studies (CISS), Phnom Penh, and will commence his PhD at SOAS in September 2016. All opinions are those of the author and do not necessarily reflect the views of the Institute.