Malaysia: 1MDB Corruption Scandal Continues

Singaporean authorities recently seized a number of bank accounts linked to Malaysia’s state investment fund, 1Malaysia Development Berhad (1MDB), as part of an ongoing international investigation into alleged corruption that has ensnared Malaysian Prime Minister Najib Razak and his government. A global investigation has been launched after an unusual payment of $681 million from companies linked to 1MDB was channeled into the private accounts of Mr. Razak, who is also the founder and current chairman of 1MDB. However, the country’s Attorney General recently concluded that the money constituted a donation from the royal family in Saudi Arabia and has mostly been returned. Nonetheless, this finding has not prevented investigations by U.S. and Swiss authorities. In the midst of this scandal, Mr. Najib’s administration has undertaken a widespread crackdown on dissidents and has dismissed politicians in critical posts. In particular, the jailing of opposition leader Anwar Ibrahim has presented the most controversy. Human rights groups such as the United Nations Working Group on Arbitrary Detention found that Anwar’s imprisonment violated prohibitions on torture or other inhumane treatment. Anwar’s five-year sentence also carries a five-year ban on running for office after his release, suggesting political motivations behind his imprisonment.

Malaysia is certainly no stranger to corruption within its government. Ranked 54 out of 168 countries on the Corruption Perceptions Index, it has a corruption score of 50 in 2015. The index ranks countries on a scale between zero (highly corrupt) and 100 (very clean).

In accordance with the changing societal perception towards corruption, Razak's government has lost the approval of a majority of Malay voters for the first time since his election, according to a poll conducted by the Merdeka Centre. Only 31 percent of Malaysian voters are satisfied with the current government-- the first time the rating has fallen below 50 percent since the Merdeka Centre began recording data in February 2012.

In August last year, over 50,000 protesters gathered at five designated areas in the Malaysian capital as part of a two-day rally organised by the activist group Bersih. One of the largest in Malaysia’s history, the protest called for Razak to step down, as well as for reforms to increase government accountability. The protest’s effectiveness as a vehicle for political change is still in question given the lack of a credible opposition figure backing it.

Dennis Ignatius, a career diplomat who was Malaysia’s high commissioner to Canada between 2001 and 2008, stated in an interview, “Dozens have been charged with sedition for speaking out or harassed under a number of different security-related provisions. The Internet is being censored; a number of websites critical of the government have been blocked.... The economic consequences have also been disastrous.”

A study done by Oxford Economics predicts that Malaysia's economic growth will slow to 4.2 percent in 2016 from 4.7 percent in 2015. This would be the slowest growth rate since 2009 at the peak of the Global Financial Crisis, when Malaysia's economy was in recession. In particular, eroding investor confidence in the country’s state-run enterprises is expected to contribute to this drop in growth.

With independent investigations brought forth by foreign agencies, Malaysia is being thrown into the spotlight. However, what these developments mean for the political climate is hard to say. The ruling party-- which has held power since Malaysia’s independence in 1957-- lost the popular vote in the last elections, but still obtained a majority of seats in parliament. If the ousting of Najib’s adminstration or the election of a new party is to occur, the change will have to come from not just the public, but also from within the political machinery.