Reuters ON THE COVER

Voters swept Mahathir Mohamad

to power on a wave of
anti-corruption outrage that led
to the criminal charges against
former Prime Minister Najib Razak.
But as the economy slows, can the
fragile coalition government keep
up its fight against pervasive graft
and double-dealing?
CK TAN Nikkei staff writer

Protesters listen to
Mahathir Mohamad speak
at an anti-1MDB rally in
Kuala Lumpur in 2016.

Nikkei Asian Review - Special excerpt from Feb. 11-17, 2019 Print edition.
Nikkei Inc. No reproduction without permission.
 ON THE COVER

KUALA LUMPUR Toh Yen Kee was filled
with optimism when Prime Minister Mahathir
Mohamad was swept into power last May. She was
so optimistic, in fact, that she quit her job as a top
executive at a multinational company in Singapore,
where she lived for 23 years, and returned home
to work for the Malaysian government. Her new
position in the finance ministry pays about 90%
less, but she says it was worth it.
“When the new government won the election, I
basically told myself, ‘if not now, when?’” Toh told
the Nikkei Asian Review.
Like many in Malaysia, Toh saw the defeat of
the decadeslong ruling party led by former Prime
Minister Najib Razak as a turning point for the
country. Now was the moment, Toh believed, to
do her part to reduce pervasive inequality and the
rampant graft that had long plagued her nation
-- and drove many people like her to abandon their
homeland for opportunities elsewhere.
Former U.S. Attorney “I did not like the corruption, and I [hoped to
General Jeff Sessions,
on Malaysia help] clean up the country because I thought a lot
under Najib Razak of people suffered” as a result of it, she added.
Mahathir became prime
minister in May 2018, in
what was Malaysia’s first
opposition victory since
independence in 1957.
For Toh and millions of other Malaysians, a key and Rosmah Mansor, his wife.
test of the country’s ability to tackle corruption is Rosmah has been charged with
expected to begin on Feb. 12, when Najib will face some 20 counts of corruption,
court on dozens of charges related to the scandal- money laundering and tax evasion.
plagued 1Malaysia Development Berhad, widely Revelations about her vast collections
known as 1MDB. Najib’s legal team is attempting of jewelry, watches and designer
to delay the trial date. handbags have captivated -- and
The looting of 1MDB, a state fund set up to angered -- ordinary citizens. She has
create economic opportunities for Malaysia, has denied the allegations.
been called “kleptocracy at its worst” by the U.S. “How did she accumulate such
Department of Justice, which alleges that public wealth when the majority of us live a
officials conspired with others to steal public funds modest life?” asked Abdul Aziz,
worth $4.5 billion. a courier .
Najib himself has been hit with 42 counts Najib’s trial in the Kuala Lumpur
related to 1MDB, including money laundering High Court marks the first time a
and receiving $681 million of proceeds from illegal former Malaysian leader has had
activities in his private bank account. He has to defend himself against criminal
denied the allegations. charges. “I remain hopeful that justice
Since Najib’s arrest on July 3 last year, will be done. It will be a long process, I expect,”
Malaysians have been transfixed by the case. The said Bridget Welsh, a Malaysia expert and associate accused of using 1MDB funds to buy artworks by
authorities have hauled sacks of cash, jewelry and professor of political science at John Cabot
luxury goods worth an estimated 1.1 billion ringgit University, Rome.
($268 million) from 10 properties linked to Najib There is also a lot riding on the hearings for
Mahathir, who has pledged to get to the bottom of
the 1MDB scandal and crack down on corruption.
Yet many still remember when, during his first
stint as prime minister in the 1980s, his decision to
sack three Supreme Court judges sank the country
into a constitutional crisis.
Now, after nine months in power, backing for
the ruling party remains intact, though grumbles
over slowing economic growth are beginning to
grow louder. A deeper slowdown could shake
the feeble foundations of Mahathir’s four-party
coalition, formed with the sole purpose of
unseating Najib.
“Never again,” said
Mahathir on Jan. 29 at the
launch of the National Fugitive financier Jho Low is
Anti-Corruption Plan. He accused with two others of
siphoning $2.7 billion worth
reminded the hundreds of civil
of 1MDB funds.
servants and corporate leaders
who gathered to stay away
from graft, considering the
“tremendous damage” wrought
by the 1MDB scandal.
The government captured
international attention with
Getty Images
employees, who have been indicted
in relation to bond issues that raised
$6.5 billion for 1MDB between 2012
and 2013.
Lim Guan Eng, Malaysia’s finance
minister, announced in January that
the government was seeking $7.5
billion in compensation from Goldman
connected to the scandal. Tim Leissner,
a partner at the bank during the 1MDB
fundraising, and two individuals
-- including Malaysian businessman
Low Taek Jho, known as Jho Low --
are accused of misappropriating $2.7
billion in proceeds from the bond sales.
Goldman has publicly apologized
for Leissner’s role in defrauding the
Malaysian government.
Jho Low, the flamboyant financier who is
Van Gogh and Monet, remains at large. Malaysia
and Singapore have requested assistance from the
International Criminal Police Organization to track
down the 37-year-old Malaysian, who is believed
to be in China and has maintained his innocence
through a spokesman.
Yusmadi Yusoff, a lawyer and senator from
the ruling coalition, said the scale of the case is
“unprecedented” for Malaysia.
“The accused will try to do anything to protect
themselves,” he said. “Legally, it is about the law
and the evidence presented in court. It can only
get to the bottom of the case if the stakeholders
focus until the end, and are not distracted by its
political dynamics.”
STRAINS IN THE COALITION
Apart from going after the alleged
perpetrators, the Mahathir-led
government has embarked
on plans to cut spending on
infrastructure projects -- some of
which may also be tied to official
corruption. The government
is probing whether payments
made on certain China-backed
projects signed by Najib’s
government were used to bail

Getty Images
its forceful moves against out 1MDB, including the 81
Goldman Sachs and two of the billion ringgit East Coast Rail Source:
U.S. investment bank’s former Link, construction of which has Malaysian police

Nikkei Asian Review - Special excerpt from Feb. 11-17, 2019 Print edition.
Nikkei Inc. No reproduction without permission.
 ON THE COVER

Malaysia’s economy stutters In a survey released on Jan. 30 by the Malaysian

Real GDP growth (in percent) Forecast for FY2018 Institute of Economic Research, indexes that
cut to 4.8%, from gauged consumer and business sentiment declined
7 5.5% to 5.6% in the last quarter of 2018, compared to the
6 optimism that prevailed in the aftermath of the
5 May 9 election.
“I feel those [second quarter] figures are a

AP
4 reaction or overreaction [to the election win].
3 After that, people start to rationalize, and when
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
they start to rationalize, the figures start going
FY2015 ’16 ’17 ’18
down,” said Zakariah Abdul Rashid, MIER’s
Fiscal year ends in December Source: Central Bank of Malaysia
executive director.
In a research note, Singapore’s
United Overseas Bank said that
Mahathir says all of these probes recent anti-corruption initiatives
into alleged corruption by the Najib “reinforce” the government’s
government are crucial to restore commitment to reform and
confidence in the economy. addressing economic issues.

Getty Images
“Previous offenders will be But the analysts also noted that the
prosecuted, but more importantly, implementation of these measures

Reuters
we must curb and stop future may face hurdles because some of
corruption,” the 93-year-old leader the changes will require a two-thirds
has said. majority in parliament. Mahathir’s
been suspended pending a review. A review of the board’s financial position But its efforts to fight corruption Alliance of Hope holds less than two-
But 1MDB is not the only scandal that found accounting fraud dating back to 2014, are beginning to be overshadowed thirds of the seats.
the Mahathir government has to deal with. forcing the new government to step in with a 19.9 by other pressing issues -- including “Investors have remained on the
Authorities have unearthed similar cases of billion ringgit bailout plan to acquire the board’s a slowdown in the economy, driven sidelines as they wait for greater
embezzlement in at least two other key state underperforming equities and properties. Abdul by sinking prices for key exports like palm oil clarity on reforms and policies,” the report said.
institutions under the purview of the Prime Azeez Rahim, the board’s former chairman and a and liquefied natural gas, and signs of policy In a risk analysis on Feb. 4, Fitch Solutions
Minister’s Department. lawmaker in Najib’s political party, was charged drift by the Mahathir government. The economy warned of a possible decline in the popularity of
One is at Tabung Haji, or the Hajj Pilgrims in January with graft and money laundering is projected to grow by 4.9% in 2019, a modest the Mahathir-led government. The inability of the
Board, that manages the 73.5 billion ringgit amounting to 144.6 million ringgit. improvement from the 4.8% estimated for 2018. ruling coalition to reduce living costs and inequality
Akhbar Satar worth of savings by Muslims for pilgrimage to The other is the Federal Land Development
Transparency International
Malaysia president and
Mecca, Saudi Arabia. The board invests in equity, Authority, or Felda, an agency set up in 1956 by
former government fixed income and properties to provide returns to Razak Hussein -- Malaysia’s second prime minister
anti-corruption agent the depositors. and Najib’s father -- to eradicate poverty among
rural Malays by giving them jobs on plantations.
New management, installed by Mahathir’s
government last July, discovered that the agency’s
Mahathir’s fading mood boost cash flow was “almost empty.” Corruption was
Business conditions Mahathir elected alleged in its subsidiaries, and poor management
Consumer confidence 21-year high was blamed.
150
Optimistic Its former chairman, Isa Samad, was accused in
December of graft related to real estate investments
100
Mahathir’s government with the board’s approval. Like the pilgrims board’s
has cut spending on 50
Pessimistic Azeez, Isa was appointed by Najib to chair Felda
1MDB-linked under the former ruling party’s practice of awarding Malaysia’s 1MDB
construction. The corporate leadership positions to loyalists. fund, created in 2009,
0
controversial Tun Razak Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 was intended to Source:
Exchange project,
Felda’s management has now turned to fund nation-building U.S. Department of
Reuters

FY2017 ’18 disposing of assets, including international hotels,

pictured, was revived in Fiscal year ends in December projects for Justice
June 2018. Source: Malaysian Institute of Economic Research to pare its debts and raise cash. the country.

Nikkei Asian Review - Special excerpt from Feb. 11-17, 2019 Print edition.
Nikkei Inc. No reproduction without permission.
 ON THE COVER
Takaki Kashiwabara
Cracks are emerging in among different ethnic groups could
the ruling coalition: lead to infighting, the researchers said.
Mahathir, center, with “The already strained unity of
coalition supporters
Mohamad Sabu, left, and
the coalition could be further tested,
Muhyiddin Yassin, right, and while a dissolution of the
following their election coalition is not our core view, the
win in May 2018 risks are rising.”
(TOO) GREAT EXPECTATIONS
Cracks in the Mahathir-led coalition
are beginning to show, surfacing
recently as politicians disputed the
status of the East Coast Rail Link,
or ECRL. Its construction has been
suspended since July pending renegotiations
with the contractor, state-backed China
Communications Construction Co.
On Jan. 26, the future of the project seemed to
have been decided when Azmin Ali, minister of
economic affairs, told reporters that the cabinet
had decided to scrap the project for good,
due to the high annual interest payment
demanded by CCCC.
Hours later, however, the statement
was flatly denied by Finance Minister Lim
Guan Eng.
Relations between Malaysia and
Beijing have already been strained since
Mahathir’s election, but poor handling of
Political scientist
an issue as important as ECRL could do
Bridget Welsh, more damage, warned Peter Mumford of Eurasia
on the mood of Malaysia Group, a risk advisory.
A sense of “general disappointment” among
supporters of both the ruling party and the
opposition has started to sink in after nine
months of coalition government, said Welsh of
John Cabot University.
“The measure of the government is less than
expectation, in part because expectations were
too high.”
Ethnic relationships continue to dominate
Hardly ‘shabby’ chic
politics in the country, “indirectly sidelining”
Malaysians who voted for a change from the
Rosmah Mansor’s taste for Hermes
Najib government’s racial rhetoric and policy, highlighted in 1MDB case
observed Welsh. The power struggle between
Mahathir and his designated successor, Anwar CK TAN Nikkei staff writer
Ibrahim, continues to fuel uncertainty, she added.
“It is a product of lack of trust between
individuals within the system, and this has KUALA LUMPUR It is the federal police force’s head necklace, believed to have
actually been quite destabilizing for “embarrassing for Malaysians of commercial crime, briefing been gifted to Rosmah by
the nation,” she said. when other countries tease reporters before cameras. “I Malaysian financier Jho Low.
Malaysians who voted in the the prime minister’s wife think this is the biggest seizure Low, still a fugitive, was
Mahathir-led government likely want for being shabby,” Rosmah in the country’s history.” pinpointed by the U.S.
a quick ending to the court cases Mansor, Malaysia’s former It took 150 police personnel Department of Justice as
surrounding 1MDB to dispel the first lady, wrote in her 2013 nearly a month to catalog the mastermind behind $2.7
country’s kleptocratic image. But graft authorized biography. “As the haul, which included 423 billion siphoned from the state
cases involving high-ranking officials a woman and as the wife watches, 1,400 necklaces, fund 1Malaysia Development
are often complicated and lengthy. of a leader, I have to look 2,200 rings, and cash Berhad, or 1MDB. In court
“Never underestimate white- presentable, neat and take equivalent to about $28.3 documents filed by the
collar criminals. Some of them care of my appearance.” million in 26 currencies. department on Oct. 3 last
are so powerful and rich that they No one could have accused Among Rosmah’s 567 year, online chat exchanges
AP
will buy witnesses to win,” said Rosmah of personal neglect. handbags was a custom- between Low and Tim
Akhbar Satar, president of the In public, she frequently made Bijan, worth around Leissner -- a former Goldman
Malaysian chapter of Transparency emerged from official cars 1.6 million ringgit, from the Sachs banker also charged Former first lady Rosmah Mansor
International, a nongovernmental swathed in colorful silks, appointment-only Beverly Hills with bribery and money faces some 20 charges related to
organization based in Germany. wearing designer sunglasses. boutique -- a status symbol laundering -- discussed the misconduct at Malaysia’s 1MDB
state fund. Her private hoard of
In the recently released Corruption Perceptions Yet even Malaysians favored by royal families and need to “suck up” to a 1MDB luxury goods took 150 officials
Index calculated by Transparency International, accustomed to seeing their heads of state. More than half official, widely understood to nearly one month to catalog.
Malaysia managed to advance just one notch to 61 well-turned-out first lady were the bags were by Paris-based be Najib, and send “cakes” to
out of 180 countries in 2018. shocked to learn of her vast couturier Hermes. his wife.
But the fact that action has been taken against appetite for luxury goods. The media were quick to Najib said the 22-carat electrify rural schools.
the perpetrators may result in a better ranking in A week after her husband, compare Rosmah to Imelda pendant was a gift from a Rosmah entered two not-
the future for Malaysia, Akhbar added. Najib Razak, was deposed as Marcos, the Philippine former member of the United Arab guilty pleas late last year, and
“It looks like only Mahathir is the one chasing prime minister, Malaysians sat first lady known for her Emirates royal family in an has otherwise remained silent.
down those involved in corruption,” he said. “We gripped by their smartphone penchant for designer shoes. interview with Al Jazeera last Najib, on the other hand, has
hope to see all ministries show to the public that and television screens as The items were gifts from year. He did not know its taken to social media almost
they are also anti-corruption.” police swooped on more friends and foreign dignitaries, whereabouts, he said. daily to criticize the current
After the euphoria of last spring’s election, than 10 properties linked to Najib has maintained. Arrested and released Mahathir government.
Malaysians are beginning to accept that the hard the former politician. Over Ordinary Malaysians, however, on bail like her husband Born to parents who were
work of banishing corruption in the country may weeks of raids, more than 1.1 have been skeptical. Najib, Rosmah awaits trial for small-town teachers,
well be a long-term project. The country seems billion ringgit ($268 million) “Normal people do not some 20 charges related to Rosmah wrote about her
encouraged by the steps made so far, but a more worth of goods were carried keep so much at home,” corruption and tax evasion. humble beginnings in the
pragmatic sensibility is taking root. out of Najib’s many houses said Yvonne Lim, a college One case alleges that Rosmah 2013 memoir.
“I told myself, there is honestly nothing for me and apartments: cash, jewelry, administrator. solicited a 187.5 million “I hope people accept
to lose” by taking the government job back home designer handbags. Rich as the haul was, there ringgit bribe from a company, the reality that I am a regular
in Malaysia, Toh said. “If I can’t make it here, I can “Of course we are was a conspicuous omission: helping them secure a 1.25 human being,” she said. “I am
always go back to the private sector.” shocked,” said Amar Singh, a $27 million pink diamond billion ringgit state contract to not perfect.”
Nikkei Asian Review - Special excerpt from Feb. 11-17, 2019 Print edition.
Nikkei Inc. No reproduction without permission.