Malaysia’s central bank Governor Muhammad Ibrahim offered to resign from his post two years into his term, according to people familiar with the matter, who declined to be identified because the discussions are confidential.
The move comes less than a month after Prime Minister Mahathir Mohamad won a surprise election victory and his newly installed Finance Minister, Lim Guan Eng, raised questions about the central bank’s purchase of land from the previous administration.
It’s unclear what the government’s response was to his resignation offer. A spokesperson for the central bank declined on Tuesday to comment on whether the governor had offered to resign. An official at the Finance Ministry also declined to comment. Muhammad didn’t respond to several calls and text messages to his mobile phone and office.
Lim said in May that the previous administration of Najib Razak had used money raised from a land sale to the central bank — valued at about $520 million — to pay off some of the debts of 1MDB, the state investment fund that’s been mired in a corruption scandal.
Bank Negara Malaysia has said the purchase was transacted at fair value and complied with all governance requirements and relevant laws.
The ringgit erased earlier gains to trade little changed at 3.9730 per dollar after the report, while the benchmark stock index pared earlier losses of as much as 0.4 percent to close steady at 1,755.14.
Ongoing Investigation
“It is still part of the ongoing investigation into the previous government’s alleged corruption,” Andy Ji, Asian currency strategist at Commonwealth Bank of Australia in Singapore, said by phone. “At this stage, it is hard to see the development would lead to a change to monetary policy stance.”
Muhammad was promoted to lead the central bank for a five-year term in May 2016 when Zeti Akhtar Aziz — who was appointed by Mahathir — stepped down after 16 years of leadership. He had risen through the ranks of the central bank since joining it in 1984 and was endorsed by Zeti when she left as a successor able to provide policy stability.
Born in 1960 and with a master’s degree from Harvard University, Muhammad has had to navigate volatile financial markets since he took the helm at Bank Negara Malaysia. He cut interest rates in a surprise move shortly after taking office and implemented curbs on some foreign-exchange trading that has drawn criticism from currency traders.
The economy has rebounded since then, with the currency among the top performers in emerging markets globally this year.
— With assistance by Pooi Koon Chong, and Y-Sing Liau
It’s been a while since I have seen you personally. It seems you have been well, especially since last week when your upstart coalition won control in Malaysia’s first surprising election.
Destiny brought them together for Reformasi towards Democracy and Good Governance. Anwar Ibrahim knows what Freedom means.
During my two years at Bloomberg’s office in Kuala Lumpur, from 1996 to 1998, I regularly attended press conferences you held as Prime Minister. You once chided me for seeking too many details in your answers. That annoyed me, because when one was based in KL — as opposed to stopping by to write a quick dispatch, as most Western journalists did — nuances and details mattered greatly. I’ll give you this: You were very available and ready with an answer to almost any question. You didn’t hide behind mystique, like Suharto in Indonesia. Look what happened to him!
The time I spent in Malaysia was formative. I have an enormous reservoir of fondness for the country and its rich culture and, yes, awe at its political brutality. As one who watched what went wrong 20 years ago (remember when you jailed your finance minister?), let me offer some advice as your team settles in.
First, the cabinet must prove it can govern. This takes priority over the hasty prosecution and jailing of anyone for their role in the 1MDB scandal, egregious though it was. A culture of state cronyism grew up over six decades and won’t be reversed in six days or six weeks. In any case, you weren’t elected just because of that scandal; your predecessor’s party lost the popular vote not just this year but also in 2013, before most people had even heard of 1MDB. The cabinet must disprove defeated leader Datuk Seri Najib Razak’s jibe that your bloc is a “motley” collection. They must prove they can set and execute an administrative agenda that prioritizes decisions affecting the daily lives of people.
Nobel Laureates Nelson Mandela and Frederik de Klerk
Neither of us wants this period of democratic flowering to run aground over perceptions that adults have left the room. Cited in the Wall Street Journal, Paul Wolfowitz likened the born-again alliance between you and Anwar as akin to that between the last apartheid-era South African President, F.W. de Klerk, and the revolutionary Nelson Mandela.
Forget Mandela and De Klerk. Just avoid being the DPJ. — Bloomberg Opinion
Here’s another comparison, one you will want to avoid: the short, chaotic rule of Japan’s Democratic Party from 2009 to 2012. That was supposed to be a new era. Instead, it came crashing down in a single term, collapsing under its own weight of inexperience and expectations that were way too high. The Liberal Democratic Party, which dominated the country since the American occupation, came storming back under Shinzo Abe, and nobody has taken the DPJ seriously again.
Don’t be afraid to break the mold. Just because you made mistakes the first time, including centralising power and taming the bureaucracy, you weren’t always entirely wrong. Along with much of the West, at the time I thought you were wrong to buck the free-market, austerity-minded consensus of the International Monetary Fund and the US Treasury. In the end, your capital controls and decision to fix the currency weren’t a disaster, and it’s the IMF itself that engaged in soul-searching about its mistakes.
When you saved important Malaysian companies, you were scolded for bailouts. You were certain the West would do the same thing if it had to. Yep, then 2007-2009 came along and, sure enough, dozens of systemically firms in the US and Europe were certainly bailed out. You were rightly condemned for remarks that had an anti-Semitic feel to them, but sadly those low points have since been matched and exceeded by political discourse on the American right.
After Tun H.S. Lee and Tun Tan Siew Sin, Lim Guan Eng is the Non-UMNO Finance Minister of Malaysia. His supporters and friends wish him well
It was a bold move to give the finance ministry to Lim Guan Eng, leader of the Democratic Action Party, one of the key groups within your new coalition. It’s the first time in four decades the job has gone to someone of Chinese descent. Given politics in Malaysia has often been conducted along racial lines, with Malays dominant, this is huge. Lim says he is, above all, a Malaysian. True enough. And exactly what he had to say.
Yet you haven’t quite given him the reins. Until Lim clears up some legal issues that he says were harassment from the former regime, you, Mahathir, will keep finance for yourself. Resist the temptation to make this indefinite. One of the legacies of 1998, starting when you ousted Datuk Seri Anwar Ibrahim, is that prime ministers have been determined never to let the Ministry of Finance become a separate power base. They kept the role for themselves. I get the rationale, but it would be rich in symbolism and would help dispel concerns about your authoritarian instincts if you relinquish this one.
One of the biggest questions, particularly because you are 92 years old, is what comes next. I’ll write you separately on that one. Hint: It all hinges on how you handle the dynamics with your former rival Anwar.
Now in government, the former opposition simply has to get it right. Forget De Klerk and Mandela. Just avoid being the DPJ. — Bloomberg Opinion
* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
As Malaysia’s most powerful man, Najib Razak worked hard to keep the public from accessing information about a multi-billion dollar scandal at state fund 1MDB. Now they just might find out all the juicy details.
Only three days after 92-year-old Mahathir Mohamad secured a shocking election win, he barred Najib from leaving Malaysia and said he’d reopen a graft probe targeting the fund. He also said he was replacing the attorney-general who cleared Najib and instructed the auditor-general to declassify a 1MDB report that was protected by the Official Secrets Act.
It’s a stunning turn of events for Najib, who has long denied any wrongdoing and aggressively hit back at detractors after 2015 revelations that around $700 million — alleged to be 1MDB funds — appeared in his personal accounts before the prior election in 2013. Najib had fired his top prosecutor, expelled four cabinet ministers who defied him, filed defamation lawsuits and blocked websites of critical news outlets.
A revitalized probe would reverberate around the world, with investigations ongoing in a number of countries. The U.S. has alleged the fund’s officials laundered more than $4.5 billion through a complex web of opaque transactions and fraudulent shell companies located from Switzerland to Singapore to the U.S. — a scheme U.S. Attorney General Jeff Sessions in December called “kleptocracy at its worst.”
Shedding light on 1MDB is only one part of Mahathir’s move to root out corruption after a scandal that even Najib admitted hurt Malaysia’s international reputation. Mahathir is investigating government agencies and barring all civil servants from receiving material gifts and donations.
The Department of Justice has sought to seize about $1.7 billion in assets it says were illegally acquired with 1MDB cash, including art, real estate, a luxury yacht and proceeds from Hollywood movie “The Wolf of Wall Street.” Meanwhile Singapore and Switzerland reprimanded banks such as UBS Group AG and JPMorgan Chase & Co. for anti-money laundering lapse.
Malaysian Police block the road leading to Najib’s residence in Kuala Lumpur on May 13. Photographer: Roslan Rahman/AFP via Getty Images
Shedding light on 1MDB is only one part of Mahathir’s move to root out corruption after a scandal that even Najib admitted hurt Malaysia’s international reputation. Mahathir is investigating government agencies and barring all civil servants from receiving material gifts and donations.
The Department of Justice has sought to seize about $1.7 billion in assets it says were illegally acquired with 1MDB cash, including art, real estate, a luxury yacht and proceeds from Hollywood movie “The Wolf of Wall Street.” Meanwhile Singapore and Switzerland reprimanded banks such as UBS Group AG and JPMorgan Chase & Co. for anti-money laundering lapse.
“If there are any fresh transactions uncovered, this could trigger off related money laundering criminal and civil investigations worldwide,” said Nizam Ismail, head of regulatory practice at RHTLaw Taylor Wessing LLP in Singapore.
Investor Caution
Malaysia’s financial markets reopened with a roller-coaster ride Monday. While the ringgit and stocks initially tumbled, both recovered as trading went on, with analysts pointing to reassurance from Mahathir’s economic appointments. The FTSE Bursa Malaysia KLCI Index was up 1.1 percent at 3:29 p.m. local time, after sliding as much as 2.7 percent, and the currency was flat after a drop of about 1 percent against the dollar.
The government will formulate an economic policy that restores investor confidence in Malaysia after the 1MDB scandal, Lim Guan Eng, who was named Finance Minister, said in a briefing on Sunday in Penang.
The latest drama unfolded on Saturday after reports emerged that Najib planned to fly to Indonesia with his wife in a private jet, prompting an angry crowd to gather at a local airport. Hours later, the immigration department said it blacklisted Najib, and Mahathir confirmed he personally placed travel restrictions on his former protege.
‘Very Complex’
Najib said he’d respect the order, and apologized “for any shortcomings and mistakes.” By nightfall, he had quit his position as leader of the United Malays National Organisation, which until last week had run the country since independence in 1957.
Mahathir has said his predecessor “will have to face the consequences” for any wrongdoing with 1MDB, which was first set up in 2009 to fund infrastructure projects with Najib as chairman of its advisory board. On Saturday, Mahathir said he wanted a new probe concluded “as quickly as possible.”
“It is a very complex thing because it involves a lot of people, it involves a lot of decisions made, and the money you know has to be investigated as to the money laundering,” he said. “We have to contact America, Switzerland, Singapore.”
While assets seized by other governments could be returned quickly, it would take more time to hunt down missing funds, said Lim Chee Wee, a Malaysia lawyer and former member of the anti-corruption agency’s operations review panel from 2014 to 2016.
“I am confident that through extensive and persistent investigation, it should be recoverable — albeit through the passage of time,” he said.
‘Genuine Donation’
Najib said he’d respect the order, and apologized “for any shortcomings and mistakes.” By nightfall, he had quit his position as leader of the United Malays National Organisation, which until last week had run the country since independence in 1957.
Mahathir has said his predecessor “will have to face the consequences” for any wrongdoing with 1MDB, which was first set up in 2009 to fund infrastructure projects with Najib as chairman of its advisory board. On Saturday, Mahathir said he wanted a new probe concluded “as quickly as possible.”
Mahathir Mohamad
Photographer: Ore Huiying/Bloomberg
“It is a very complex thing because it involves a lot of people, it involves a lot of decisions made, and the money you know has to be investigated as to the money laundering,” he said. “We have to contact America, Switzerland, Singapore.”
While assets seized by other governments could be returned quickly, it would take more time to hunt down missing funds, said Lim Chee Wee, a Malaysia lawyer and former member of the anti-corruption agency’s operations review panel from 2014 to 2016.
“I am confident that through extensive and persistent investigation, it should be recoverable — albeit through the passage of time,” he said.
‘Genuine Donation’
Under that scenario, Malaysia’s Police, Anti-Corruption Agency and Central Bank (Bank Negara) would reopen investigations and submit reports to the new Attorney General, who would decide whether to bring charges against Najib. Mahathir over the weekend didn’t name a candidate for the role.
In 2016, the then-attorney general cleared Najib after saying the money in his account was a “personal donation” from a Saudi royal family member, and most of it was returned. Saudi Arabia said it was a “genuine donation,” without explaining the purpose of the funds.
“It’s been cleared, there’s been no wrongdoing — I stand by it,’’ Najib said in an interview last month. “You cannot just accuse somebody of being a thief or anything unless there is evidence.’’
Now Najib must wait to see if any new evidence is uncovered. While he can appeal the travel ban, authorities have broad powers to keep it in place for an extended period if they can show the cases are proceeding without unreasonable delays.
The new Attorney-General would have to show there was bad faith or malfeasance in the initial decision to clear Najib in order to bring charges, according to Eugene Tan, an associate professor of law at the Singapore Management University.
His advice for Najib: “To expect that earlier exonerations would be revoked, and that he can expect criminal charges and civil suits.”
Dr. Mahathir announces coalition won significant majority of seats and will seek to restore rule of law in Malaysia.
After six decades of uninterrupted rule by one political bloc, Malaysia’s democracy showed it can work — ousting that bloc and the nation’s incumbent leader in a seismic shift. The irony is that it took a onetime scourge of democracy to come back from retirement to topple the party that ruled since independence from Great Britain in 1957 — the same party he led as prime minister for 22 years.
That man, Mahathir Mohamad, declared in his 90s that his new mission in life was to oust Prime Minister Najib Razak and the ruling Barisan Nasional coalition. They had become corrupt and too addicted to power, he claimed. Never mind that as Prime inister Mahathir did much to centralize power. Never mind that Najib’s career was nurtured by none other than Mahathir.
Najib claimed the opposition, now on the cusp of taking control of government, is a motley collection of parties. True enough. That’s how Parliaments work.
How would the opposition rule? Like Mahathir last time around or more freewheeling? How would leadership issues within the opposition resolve themselves, chiefly the relationship between Mahathir and Anwar Ibrahim, now languishing in prison? (Put there the first time by Mahathir.) What will be the administrative priorities of an opposition that probably doubted it could ever win?
It almost doesn’t matter for now, because first the nation and the world can savor that this system, constructed on theoretical possibilities, has been shown to work. Gerrymandering and crackdowns on the press can’t suppress political and economic tides indefinitely. Ironies abound. Nobody in the media in the 1990s, when I worked in Malaysia, would have considered Mahathir a friend of a free and vibrant press.
Barisan Nasional had struggled in recent years and, as a result, had become more dictatorial and more dependent on xenophobic appeals to rural Malays and political Islam. How the opposition functions in government and what the role of smaller parties looks like is anyone’s guess. And all this assumes, of course, that the government allows the opposition to take office. There’s never been a change of power in Malaysia, since independence. The party was the government and the government was the party.
Not to get completely swept up in the moment: Over the longer run, Malaysia’s economic and political direction will be governed by interest rates and fiscal and regulatory policy, just like most countries. Mahathir himself isn’t exactly a political novice. And there are broader macroeconomic forces also at work, including China’s relative economic strength, what happens with global trade and developments in technology.
The economic and social distortions caused by the existing regime’s preferences for powerful Malays, members of the majority ethnic group, may not go away soon. They were cemented during Mahathir’s previous tour of duty.
Malaysia faces its share of challenges in this new era. And with a former Prime Minister returning to power, it’s fair to wonder how much will really change. There’s also no getting away from the fact that the once-unstoppable Barisan Nasional has lost the election. That’s already a huge change.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Din Merican: the Malaysian DJ Blogger 