1MDB finished, Mahathir to go after Najib

June 15, 2015

COMMENT: Now we are told that the Auditor-General will submit a preliminary report to the Parliamentary Public Accounts Committee at the end of June.

Then we hear from PAC Chairman, Nur Jazlan that the preliminary report will not be made public. What is up? They are playing games while we continue to watch the unfolding spectacle.

If it is a preliminary report then one  can assume that there dato-din-mericanmay be material changes in the final report, which can then be released to the public but at the sole discretion of Prime Minister Najib. He has assured us that the whole IMDB matter will be resolved in two months. But he is shrewd enough not to tell us how.

Earlier we were told that by the Second Minister of Finance,  Najib’s latest 1MDB mouthpiece, that 1MBD will be restructured. It will be liquidated and its assets and liabilities taken over by a new entity at a price that remains a mystery like everything else about the affairs of 1MDB.

Yes, Tun Mahathir is right; the money is missing. The taxpayers will bear the burden of massive losses. 1MDB will  enter the Guinness Book Records as the grand lady of all Malaysian scandals, outstripping Bank Negara forex losses incurred by Tan Sri Nor Mohamed Yakcop in 1992 during the Mahathir era.

The Prime Minster as Chairman of 1MDB Advisory Board, Tan Sri  Lodin Wok Kamaruddin and his Fellow Directors, CEO Arul Kanda Kandasamy  and others should be investigated and charged for criminal breach of trust and fraud. It is ideal. But in Malaysia  it is a tall order.

As long as he is in power, Najib will remain above the Law; the MACC will not investigate him; the Auditor-General will finally receive his divine inspiration to absolve the Prime Minister from responsibility for this financial fiasco; the Attorney-General will decide that the matter requires no further action and the Inspector-General of Police will  remand those who dissent under the new laws and the Sedition Act. With Najib as Prime Minister, his cronies in 1MDB will be protected.

That is Malaysia today. A powerful man can act with impunity. No one knows that better than Tun Dr. Mahathir himself. Having subjugated Parliament, destroyed judicial independence and muted the civil service,  he created a premiership vested with absolute power and made it impossible for anyone to contest against the incumbent UMNO President.

All the Tun has to do now is to go to the top of the highest mountain yell as loudly as he can in the hope that we  who  are deep down in the wooded valley can hear him.--Din Merican

1MDB finished, Mahathir to go after Najib

 by James Sivalingam

The former PM believes 1MDB won’t be resolved, the monies are gone.

Mahathir Lawan Najib

Former Prime Minister Mahathir Mohamad has said that he has no issues with Prime Minister Najib Abdul Razak pledging to resolve the 1MDB scandal.

However, that would not stop him from continuing to criticize Najib. “The 1MDB funds are lost. They would never be able to resolve it.”

“I am not just blindly criticizing, but exposing things that aren’t right,” said Mahathir on the sidelines of a Proton event. “I have never complained about things that are done the right way.”

Mahathir has taken to his blog to try and unravel several 1MDB transactions which, given the information available, don’t appear to tally and disappear implicitly into financial “black holes”.

For one, 1MDB and the Prime Minister have not shown proof of the existence of the money from the Cayman Islands, charged Mahathir.

He was explaining why he keeps saying that 1MDB monies are missing. His critics claim that he has no proof that monies are missing. Statements without documentary proof are, as we have seen, quite useless, reminds Mahathir in virtually throwing up his hands at the very outset. “We need proof of all the investments and payments made by the 1MDB.”

“But no proof has been shown except for the acquisition of the power plants and purchase of government land in Kuala Lumpur and private land in Penang.”

Until signed documentary proofs are shown, not just statements by the Chief Executive Officer or Prime Minister, he argued, “we have to assume that the money borrowed by 1MDB has disappeared.”

Datuk Seri Ahmad Husni never let Arul Kanda play games with you on 1MDB

June 7, 2015

Datuk Seri Husni never let Arul Kanda play games with you on 1MDB

by Alexander Winifred


najibhusni3Dato’ Seri Husni and PM Najib

The Finance Ministry-owned 1Malaysia Development Bhd’s (1MDB) attempt to explain its RM42 billion debt to silence detractors may have backfired.

Instead of putting to rest all the allegations about the “missing” money, the summary of 1MDB’s expenditure and debt released on Wednesday only raised more questions about the government development fund’s dealings.

“Companies don’t usually borrow funds for operating expenditure. It appears 1MDB may not have followed good business practices,” said Tan Sri Ramon Navaratnam, a former World Bank alternate ExectuiD and Deputy Treasury Secretary-General, referring to 1MDB’s RM5.8 billion borrowings for financial expenditure.

“The revelation by (1MDB president and CEO) Arul Kanda Kandasamy essentially revealed nothing that we don’t already know. The questions which we asked, however, remained completely unanswered,” said Public Accounts Committee (PAC) member and MP Tony Pua, who has emerged as an outspoken 1MDB critic over the last few years.

Most of the questions were aimed at 1MDB’s placement of a large percentage of its investment funds into overseas tax havens, said to be an unusual move.

1MDB had placed as much as RM15.4 billion of its borrowings into the largely engimatic investment funds in the Cayman Islands (Brazen Sky, RM6.1 billion) and British Virgin Islands (1MDB Global Investments Ltd (1MDB GIL), RM5.1 billion), as well as RM4.2 billion into Abu Dhabi-based Aabar Investment PJS.

Aabar, a subsidiary of the International Petroleum Investment Co with links to the Abu Dhabi royal family, last reported total assets of US$10.15 billion (RM37.54 billion) after it had been delisted from the Abu Dhabi Securities Exchange and taken private in 2010.

According to its website, Aabar holds a 21.6% stake in RHB Capital Bhd, the owner of RHB Bank Bhd and RHB Investment Bank Bhd. Brazen Sky’s funds are reportedly managed by Hong Kong-based Bridge Partners.

Bridge Partners’ website does not contain information about its management team or track record, but it does list about 70 business deals (mostly with Chinese firms) it has conducted as a financial advisor.

“We don’t have much (of an) idea about these overseas fund managers,” said Phua Lee Kerk, chief strategist at fund manager Phillip Mutual Bhd.

Phua said it “was a little abnormal” that 1MDB would choose to put such significant portions of its investment funds into foreign funds in tax havens, based on his understanding of the company.

“Generally, funds in tax havens are perceived to have higher returns but also carry higher risks. What we see in these funds is usually low transparency in nature,” said Phua.

He said companies with similar structures to 1MDB, which he likens to a sovereign fund, would normally only invest 10%-20% of their excess profits into high risk funds, usually associated with overseas hedge accounts.

The bulk of funds under a sovereign fund manager would usually be invested directly into businesses, instead of into little-known funds such as Brazen Sky and 1MDB GIL.

“In my opinion, it would have been better to give such large amounts to local fund managers to nurture the industry,” said Phua.

“I would very much prefer to have taken a conservative approach and after all, it’s the rakyat’s hard-earned money,” he said. “What exactly was the RM6.1 billion of investment in Brazen Sky which was parked in Cayman Islands?

Najib and !MDB ExecutivesThey must hang together

“Why is it that despite Arul Kanda announcing that all of Brazen Sky’s investments have been “redeemed”, there’s still no cash at all in the BSI Bank Singapore?” asked Phua, a former head of a firm listed in Singapore’s second bourse.

Despite earlier saying it would wait for the Auditor-General’s report on 1MDB, the PAC commenced an investigation in late May.

“The Prime Minister’s statements and public responses made it necessary for the PAC to carry out (its own) inquiry as soon as possible,” Dr Tan Seng Giaw, Deputy Chairman of the committee, told The Malaysian Reserve yesterday.

Tan said the PAC’s investigation would concentrate on 1MDB’s financial governance, including “how, why, when and where 1MDB had acquired its funds, the ways these have been spent, the total amount of debts incurred and the interests”.

Meanwhile, the announcement of a formal inquiry by Malaysia’s central bank on Wednesday was welcomed but seen as overdue.

Bank Negara Malaysia (BNM) could have completed its enquiries easier if the authority had begun its investigation earlier, said the head of leading anti-corruption watchdog Transparency International’s Malaysian (TI-Malaysia) affiliate.

TI-Malaysia President Datuk Akhbar Satar said action in the “earlier stages” of concern would have facilitated smoother evidence gathering by the authorities.

BNM now needs to perform the investigation without fear or favour, said Akhbar, who formerly led the Malaysian Anti-Corruption Agency’s Training Division as its Director.

“Come out with the truth. This is an opportunity for 1MDB’s credibility in the eyes of the public to be restored,” he said. Malaysians are concerned that a 1MDB default would be disastrous to the economy, which is trying to break into the league of high-income nations by 2020.

In an interview on national television on Wednesday, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said Putrajaya would fail to meet its budget deficits if it was forced to shoulder the debt of the troubled company.

“What will happen? Our ratings will drop. When our ratings drop, our companies borrow from abroad, our currency value will drop like in 1998 when our ringgit at one point was over RM4, then how to pay debts?”

Ratings agency Moody’s said last week if governmental support for 1MDB moves away from fiscal consolidation measures, it could provoke a reassessment of its outlook for the country’s sovereign rating

Moral Legitimacy to Govern must be earned

June 7, 2015

Moral Legitimacy to Govern must be earned

by Terence Netto@www.malaysiakini.com

Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine ownself be true.
And it must follow, as the night the day,
Thou canst not then be false to any man.

  • Polonius, Act I, scene iii., Hamlet, William Shakespeare
Electoral mandates grant their winners the right to govern but the moral legitimacy to rule has constantly to be earned.DAP national vice-chair M Kulasegaran made the distinction between the two imperatives for governance when he remarked on the assertion of Prime Minister Najib Abdul Razak that he had the mandate of the people, enjoyed the backing of his party UMNO, and was buoyed by the the demonstrated support of crowds at public gatherings.

Najib contrasted the tableau of public endorsement with the criticisms of “one voice”, a reference to his severest detractor on the 1MDB issue – former Prime Minister Dr Mahathir Mohamad.

The PM has been going to places in Sabah and Sarawak where large gatherings and the enthusiasm of his greeters have led him to dig in his heels and resist urgings for his resignation over alleged mishandling of 1MDB funds.

Kulasegaran, MP for Ipoh Barat MP, observed that if Mahathir was the only critic of the PM’s alleged misdemeanours over the sovereign wealth fund, Najib would not find it necessary to go round the country ramping up support for his now beleaguered premiership.

“The number of his critics are now not small – they are legion, so he can’t say that it’s only Dr Mahathir who wants him out,” remarked the federal legislator.

“Furthermore, the PM mistakes the electoral mandate he had won in Parliament at the last election for the moral legitimacy to govern which has constantly to be earned,” argued Kulasegaran.

“The one is gained periodically when elections are held  but the other and deeper requirement which is the moral legitimacy to govern can be easily forfeited through disastrous decisions such as what appears to have happened in the case of 1MDB,” he explained.

“In that event, a mandate to govern gained earlier loses its bite as the moral legitimacy to hold the reins is steadily lost,” he said.

“No amount of public gatherings and demonstrations of popular support can substitute for the credibility that has oozed out of the administration,” he expatiated.

Kulasegaran said Najib’s non-appearance at yesterday’s public forum to explain the 1MDB issue “has stripped the thinning facade of legitimacy he had prior to the event and he now appears like an emperor without clothes.”

“It is now only a short step to him becoming a premier without credibility and a leader with the mandate but without the legitimacy,” he asserted.



1MDB Responses raise more Questions

June 4, 2015

1MDB Responses raise more Questions
— What’s Up, Mr. Auditor-General?

by Andrew Ong@www.malaysiakini.com

1MDB’s attempt to account for how its RM42 billion in loans was spent raises more questions than answers, according the company’s top two critics. Of the items listed, noted Petaling Jaya Utara MP Tony Pua and Pandan MP Rafizi Ramli, the most suspicious was the RM4.5 billion used for “cost of finance and working capital”

“To claim that RM4.5 billion was used as financing cost as part of the debt total is disingenuous. It means 1MDB borrowed more money to pay interest on its loans. It means all the assets it acquired don’t earn enough to even pay for the interests incurred,” Pua told Malaysiakini.

According to Rafizi, who is a certified chartered accountant, a financing cost bill of RM4.5 billion would mean that 1MDB’s financing cost was around 10.7 percent – a record of sorts.

Rafizi speculated that the financing cost probably included consultancy, arranger fees and interest. He explained the coupon rate of 1MDB’s bonds are between 4 percent to 6 percent, thus it could be concluded that at a 10.7 percent financing cost, 1MDB could have paid “exorbitant” financing fees and short-term interest. “One would have to wonder what kind of short-term financing and advisory (services) that 1MDB subscribed to because most of its debts are not due yet,” he told Malaysiakini.

Why didn’t they liquidate assets?

Rafizi’s estimate was based on an assumption that for the period of 2009 and 2010, financing for its RM6 billion loan was at 5 percent, or RM300 million per annum. And thus, he said, the balance of the financing cost (RM3.9 billion) would have been paid over the period of 2011 and 2013 for the additional RM36 billion in loans.

Therefore, he added, an average of RM3.9 billion over RM36 billion would roughly translate to 10.7 percent financing cost over the loans taken in this 3-year period.Meanwhile, Pua and Rafizi said 1MDB’s claim that RM15.4 billion was used for Brazen Sky Ltd, 1MDB Global Investment Limited and Aabar Investment PJS also warranted further explanation.

“What is RM6.1 billion for Brazen Sky? Where is the RM5.1 billion invested by 1MDB in Global Investment Limited? And why deposit RM4.1 billion with Aabar Investments PJS?” asked Pua.

Rafizi said the figures were already out in public domain, but what remains unknown is how the money was used and how much cash is left. “What exactly are these assets? If they are cash, why was it not liquidated to pay for the loans, without having to resort to (business mogul) T Ananda Krishnan or the IPIC (International Petroleum Investment Company) injection? It is precisely because 1MDB had failed to account for these details that the question of missing money arose in the first place,” he said.

Foreign exchange loss

On 1MDB’s claim that RM900 million was incurred on foreign exchange cost, Rafizi said this should be read as “foreign exchange loss” which was “deplorable”. “What kind of company allows RM900 million realised in foreign exchange losses? This is purely bad management and incompetence, if not outright dereliction of duty. Which transactions and what assets had caused such losses?” he asked.

Both Rafizi and Pua agreed that 1MDB’s explanation of where the money went did not help the company’s credibility crisis and instead led to more questions regarding its management.

Earlier today, 1MDB issued a statement to  explain how its RM41.8 billion in loans were used, in response to former Premier Dr Mahathir Mohamad’s claim that RM27 billion could not be traced.

1MDB President and Group Executive Director Arul Kanda Kandasamy said this information was fully disclosed in 1MDB’s audited accounts from 2010 to 2014 and was publicly available. “We trust this clarification would help to clear any confusion on this matter,” said Arul.

MACC’s Tunku Aziz responds to his critics and detractors

June 1, 2015

MACC’s Tunku Aziz responds to his critics and detractors

Din's MontageOne may disagree with Tunku Aziz about MACC. I too have been very critical of this  anti-Corruption watchdog (should I say lapdog of the Malaysian Prime Minister Najib Razak?) and my views about its Chief Commissioner Tan Sri Abu Kassim and the Commission itself can be read in this blog. Just click corruption or MACC and you can read them or go the blog’s archives.

I have always said that MACC is a dysfunctional, sick and toxic organization. I once received a letter from MACC almost threatening me with legal action for remarks I made by this sweet talking Tan Sri Abu Kassim. By reading about  the late Teoh Beng Hock and Ahmad Sarbani and the current  legal battle between the MACC chief and Lawyer Rosli Dahlan, you will understand why MACC abuses power.

The MACC favours politicians in power but it is quick to investigate opposition parliamentarians, civil society leaders and others. It makes a mockery of the report of the Tech Beng Hock Royal Commission of Inquiry and the one concerning the infamous Correct, Correct VK Lingam video tape issue. MACC does not understand  accountability and transparency.

All that said, I am happy to put Tunku Aziz’s statement of May 29, 2015 on this blog. He has the right to express his opinion and defend his organization. Read it carefully and then comment on it.This blog is about freedom of expression with responsibility.

I know Tunku Aziz well and our friendship spans over several decades and we are still very good friends although we have different views on politics, economics, intermational affairs and social policy. I agree with him about governance and ethics. I also share his take on Tun Dr. Mahathir. But I disagree with him on Najib Razak, his policies and actions.

Tunku Aziz thinks that the Prime Minister is doing a good job.  But I do not.  On the contrary, in my opinion our Prime Minister is a weak and corrupt leader and has turned out to be an unmitigated national disaster and must therefore resign. I am also of the view that Najib should be investigated and charged for corruption and abuse of power. MACC is will not dare do it, of course since it reports to the Prime Minister. Dr. Mahathir too should be made to account for his 22+ years of misrule. –Din Merican

Tunku Aziz’s Media Statement

MEDIA STATEMENT as issued by Tunku Abdul Aziz in conjunction with a press conference held on Friday May 29, 2015 at 11.00 a.m. at the Eastin Hotel, Petaling Jaya.

tunku-aziz Let me say at the outset that it gives me absolutely no joy in having to say to Tun Mahathir Mohamad that by spewing scurrilous lies about 1MDB without any conclusive proof of wrongdoing by the Prime Minister or anyone else for that matter, he has reduced himself, in the eyes of many, to a figure of fun and ridicule.

His recent performance in Ipoh was admittedly most amusing and kept the audience in stitches, especially when he threw caution and good manners to the winds by repeating vicious rumours about Najib and his family. It was all too personal. Tun Mahathir Mohamad has to make up his mind whether he relishes the idea of being treated as a stand-up comedian or a responsible, respected and revered leader of men. On current performance he presents himself as an embittered, vindictive man who apparently is prepared to gamble with his reputation in pursuit of an unworthy cause bordering on obsession. His motive is suspect.

Tun Dr. Mahathir Mohamad is a bundle of inconsistencies and contradictions. He froths at the mouth every time he accuses 1MDB of causing a staggering RM 42 billion to disappear without a trace. This, as it turns out, is pure fiction, of course. As matters stand today, the figure of RM42 billion that he has used with regular monotony to get at the Prime Minister is shown very clearly as a debt in the company’s books. Company borrowings are a normal part of operating a business as Tun knows only too well. For the sake of good order and in the larger interests of justice and fair play, Tun should eat humble pie, take a deep breath, admit his mistake and apologise to the Prime Minister and the top management of 1MDB whom he has maligned. And while he is about it, will Tun please also apologise to all Malaysians for misleading them?

When he was Prime Minister several massive scandals broke out. He cunningly side-stepped the Dr Mahathir and C Brownissue of accountability. He explained with that familiar self-satisfied smirk on his face that in the case of the loans given by Bank Bumiputra Finance (BMF) to the Carrian Group and two other Hong Kong companies, when someone who was ‘established’ in the business world asked for a loan, one should not scrutinise his application too closely. Tun perhaps needs someone to jog his memory a little. During his premiership, but for the grace of God and Petronas this country would have been left high and dry as a result of frenzied institutionalised gambling in several financially disastrous scams involving the Ministry of Finance, Bank Negara Malaysia, and the Employees Provident Fund among other agencies.

One of the biggest scandals in world banking history was the BMF affair that cost the country US$800 million. Other loans amounting to US$163 million were made to companies in Hong Kong. These were doubtful loans from the start and had to be written off. We are talking about the early eighties: and the losses if expressed in today’s value would be many times the amounts incurred some 30 years ago.

Then there was the ‘Tin Caper’ in which Malaysia played the star role of the ‘Mystery Buyer’ to make a killing by the apparently simple expedient of cornering the international tin market. That cost the country RM660.5 million in losses according to Datuk Seri Lim Keng Yeik, one time minister of primary industries .As if this was not enough, we followed this up with the most notorious financial scandal of all – the foray into the FOREX market using the nation’s reserves to gamble, leaving Bank Negara Malaysia dangerously exposed. Bank Negara Malaysia lost RM30 billion (RM58 billion at today’s value) in this gambling spree. Typically Mahathir denied responsibility and to this day he remains unrepentant, blasé, and unapologetic for the scandals that happened when he was the head of government. His manic gambling with Bank Bumi and BNM money scandalised monetary authorities around the world. Tun Mahathir lost heavily in the tin escapade which saw the collapse of the International Tin Council and the disappearance of the tin industry worldwide.

He effectively turned the once respected Bank Negara Malaysia, the Central Bank of Malaysia, into a rogue institution. In the event, RM30 billion, (RM58 billion in today’s terms) was lost. It took BNM at least 10 years to amortise, and close the books finally in 2003 on this, the most shameful betrayal of trust in our history. BNM was close to being brought to its knees given its colossal exposure and rapidly depleting national reserves. Tan Sri Tajuddin Ramli in his affidavit claimed that he was ordered to buy MAS at a vastly inflated price so that the government could cover the Forex gambling losses.

As these losses have never been satisfactorily explained, I urge the government to reopen the Forex case to establish whether any laws had been broken by the Mahathir administration in using the reserves held by Bank Negara Malaysia for the purpose of currency speculation. Those responsible who are still living today should be called to account for their actions. The government owes the people of Malaysia who have been left to pick up the pieces from this financial disaster a duty to effect a proper closure. I will be making a police report to get things started.

Mahathir’s Supporter takes a shot at Tunku Aziz.

Former DAP Vice Chairman Tunku Abdul Aziz Ibrahim has apparently bitten off more than he can chew in taking potshots at former Prime Minister Mahathir Mohamad who has questioned Najib Abdul Razak’s qualification to be Prime Minister and demanded that he step down. Mahathir’s beef with Najib is the scandal-ridden 1MDB, among others.

Former New Straits Times Political Editor Firdaus Abdullah, for one, has reminded Tunku Aziz in a series of tweets that those who stay in glass houses should not throw stones.“Don’t be a political prostitute cos you have an axe to grind,” tweeted Firdaus who also blogs as Apanama. “Don’t let me shame you.”

READ ON: http://www.freemalaysiatoday.com/category/nation/2015/06/01/dont-be-a-political-prostitute-tunku-aziz-told/

May 28, 2015

Phnom Penh

Corruption is the Root of Malaysia’s Scandals and Problems–Lessons to Learn

by P. Gunasegaram@www.malaysiakini.com


QUESTION TIME: Malaysia had no major financial scandals – as in billion-ringgit ones – until the infamous case of Bumiputra Malaysia Finance or BMF emerged in the early eighties and captured the imagination of the press and the public.

Before we are a bit quick to point the finger at former Prime Minister Dr Mahathir Mohamad  for that, let’s point out that Mahathir became Prime Minister only in 1981, after BMF, Bank Bumiputra’s wholly-owned Hong Kong subsidiary, started loaning money to George Tan’s Carrian group, eventually amounting to RM2.5 billion in all.

The loans were made between 1979 and 1983, which means that loans continued to be made to Carrian even after Mahathir became Prime Minister, implying that Mahathir cannot be totally absolved.

Carrian was a rising star in the Hong Kong property market then but subsequently went bust, making it the biggest bankruptcy in Hong Kong at the time. The scale of the scandal was simply enormous and record-breaking, putting Malaysia on the top of the list in terms of banking failure at that time.

The question is what was a unit of Bank Bumiputra, a bank set up to provide bumiputras access to funding as part of the effort to increase their participation in business, doing lending money to a Hong Kong property group? This was at that time, the largest banking scandal in the world and the interest in it spiked further when a Bank Bumiputra senior officer sent to Hong Kong to investigate was murdered and his body dumped in a banana plantation.

The end-result of the entire hugely complicated affair was that few people were brought to account and even the main person involved in the scandal, George Tan, spent just three years in jail. BMF’s then chairperson  spent a long time fighting extradition to Hong Kong from the UK.

Eventually he pleaded guilty in Hong Kong, but in an interview with Malaysia’s The Sun in a pub in London, he disavowed any wrong-doing in 2008, saying he was the fall guy. According to Lorrain (photo), Bank Bumiputra was getting deposits of RM50 million a month from national oil corporation Petronas and had nowhere to put it to use. Hence Hong Kong and the Carrian loans.

Much like 1MDB, it looks like a money-making scheme gone wrong. The underlying problem was a total lack of proper governance at the bank and the movement of money out of it. Was it a desire to make money for the bank and hence for the country or was it a plot to siphon out money for the benefit of individuals?

There have been many others scandals since – too many to go into detail in this article. Bank Bumiputra’s rescue several times in the billions of ringgit, Maminco, Perwaja Steel, Malaysia Airlines’ sales and repurchase, the Renong debacle, the huge forex losses at Bank Negara Malaysia (BNM) in 1992 – they all held one thing in common, the breakdown of corporate governance due to political interference.

The BNM scandal is worth going into in some detail. While official accounts put it at around RM10 billion, other estimates place it at around RM30 billion, the actual figure masked by adjustments to reserves, accounting tricks and even the alleged depreciation of the ringgit to improve BNM’s reserve position in ringgit terms.

Another dubious first

In BNM’s case, it was a political decision – Mahathir gave the go ahead for BNM to take positions – speculate in other words – on the foreign exchange market, to obtain gains for the country. That’s unheard of for a central bank, and BNM is probably the first and only central bank to have engaged in such activities on such a scale among the central banks of the world – yet another dubious first and a record breaker for Malaysia.

The shame is that except for this one blemish, BNM has been largely a well-managed and run central bank with impeccable people at the top with a reputation for integrity. It has been a reliable watchdog, keeping the nation’s banking system from spiralling down out of control under some of the worst economic conditions.

But the interfering hand of the politician – in this case Mahathir – and the approval of clearly taboo practices for central banks sullied that and resulted in covert foreign exchange operations that few knew about even within the bank and the huge losses of billions of ringgit eventually which could no longer be hidden.

It is worth remembering that all of the other ones apart from the BMF scandal occurred during Mahathir’s long 22-year tenure as PM. Even the BMF scandal ran for part of Mahathir’s time, when loans were actually increased to the Carrian group in an attempt to recover money eventually.

Mahathir’s successor Abdullah Ahmad Badawi had few such large scandals but there were many allegations of patronage made with respect to his son, son-in-law and brother, and also references made to the so-called fourth floor boys – a coterie of close advisers who were supposed to have great influence in decision-making. But to Abdullah’s credit, it was under his tenure that the government-linked companies (GLCs) transformation programme was started, an ambitious attempt to reform GLCs many of which were being managed badly with former civil servants at the top.

Khazanah Nasional, which is wholly-owned by the government, under Azman Mokhtar and which held many of the GLCs under its umbrella spearheaded the transformation, by bringing in professional managers as well as setting KPI targets, standards and rulebooks, amongst others.

Even the GLCs which were not under Khazanah were subject to scrutiny and new standards. There was a tremendous improvement in performance, accountability and adopting best practices although there was and still is greater room for improvement.

But his successor Najib Abdul Razak negated a huge part of the transformation when along came 1MDB, first formed as Terengganu Investment Authority or TIA, which in a space of five years had assets, many of them dubious and unverifiable, of RM51 billion and liabilities of RM48 billion. It was built on a towering edifice of debt never before seen in Malaysia, much of it guaranteed by the federal government.

1MDB is wholly-owned by the Minister of Finance Inc and is not subject at all to all the governance procedures required of other GLCs. It operates rather covertly, makes no public reports like Khazanah does yearly beyond what is required by statute and gives very little information of its operations.

Now evidence has surfaced in the form of an amendment to 1MDB’s memorandum and articles of association (MAA) in August 2009 that requires major financial commitments and other major decisions by 1MDB to be approved in writing by the prime minister.

If this had continued to be in place the question arises as to whether he had given approval to all of 1MDB’s major transactions. If he has not, that implies that many of 1MDB’s transactions would have been directly against the MAA.

As we saw this is not the first time such a lack of governance has happened in Malaysia. The question is why does it continue to happen.

The root causes

One root cause is the continued abuse of the bumiputera agenda. Such was the case with Bank Bumiputra where others took advantage of the bank, set up to help bumiputeras gain access to funding, to channel funds into Hong Kong for their own purposes leading to massive losses of money.

In subsequent years, Bank Bumiputra continued to lend money to well-connected bumiputra owners many of whom never repaid their loans, eventually making the bank bankrupt. That included UMNO which owed Bank Bumiputra RM300 million at one time for loans associated with the Putra World Trade Centre.

In the guise of helping bumiputras, much money was siphoned off out of financial institutions but very few people were brought to book. Such practices were accepted as part of the ordinary course of business.

Other reasons for such covert operations are to raise political slush funds which could be used during elections, although many suspect a huge part of these funds go into individual pockets where they are tacitly accepted as a part of patronage politics. Such reasoning and the channelling of funds into the pockets of party bigwigs around the country muffles criticism of the practices from within UMNO.

Also much of the public funds are wasted and lucrative contracts and concessions are awarded to privileged businessmen who contribute to party funds. Often, these businesses inflate construction prices to cream off profits while the inflated figures allow them to charge more for services they provide.

The underlying problem is the system – as long as there is money politics and excessive powers vested in the hands of the executive it will continue to happen over and over again. As long as no one is brought to account for past transgressions, it will encourage more people to cheat; after all what do they have to lose?

We simply need a commitment to cut corruption and patronage from the top downwards if things like 1MDB are not to happen again. If that’s not forthcoming from the current government despite all the pressure put on it, the public needs to exercise its democratic rights.

P Gunasegaram is founding editor of KINIBIZ which produces an online business news portal and a fortnightly print magazine.