Malaysia: What Next in 1MDB Saga?

Date: May 2018

Location Malaysia – Recent election

What: Nonagenarian Mahathir Mohamed wins the election.

Outcome for hotel investment inside and outside of Malaysia

Led by sprightly Mahathir Mohamad, the opposition coalition scored an unexpected victory in Malaysia’s general election. What will it mean for 1MDB?

Malaysia’s former leader made a staggering return to seize power after his opposition alliance defeated sitting Prime Minister Najib Razak’s Barisan Nasional party.

Early results indicated Mahathir’s coalition had taken 112 seats, a sufficient number to form a simple majority in the country’s 222-seat legislature.

Concerns over scandal hit wealth fund 1Malaysia Development Berhad or 1MDB, and the promise by Mahatir of more intense scrutiny of Chinese foreign direct investment in Malaysia appear to have influenced voters.

A defeat for Najib and his party was predicted to expose what has until now remained under cover on 1MDB.

Kleptocracy at its Worst

The shock election upset by Malaysia’s opposition could now translate into renewed momentum in the hunt for billions that U.S. prosecutors allege was pilfered from 1MDB.

While America’s top prosecutor Jeff Sessions called 1MDB “kleptocracy at its worst” last year, officials haven’t made as much headway as might be expected – largely because until now, official Malaysia hasn’t cooperated with the investigation.

When U.S. prosecutors first alleged that $5 billion had been pilfered in 2016, a report by Malaysia’s attorney general on the scandal was reportedly stifled. Regulators have successfully taken banks like Banca della Svizzera Italiana, or BSI, Falcon Private Bank, DBS, UOB, and Swiss giants UBS and Credit Suisse to task, but not gotten to the heart of the scandal.

Loose Pocketbook

For example, alleged 1MDB linchpin Jho Low remains AWOL, the Malaysian businessman who made a splash in New York circles with a loose pocketbook successfully blocked the impounding of his superyacht recently.

In Switzerland, where the attorney general is investigating the scandal, the probe has also stalled – because of Malaysia’s refusal thus far to cooperate. Without a victim, there is no crime, goes the oft-quoted thinking. The election of Mahathir, who promised to “squeeze” 1MDB money from Najib and associates, blows the case open again.

Book of Hope

In March Mahatir’s coalition issued a 60-point election manifesto, dubbed as “Buku Harapan” (Book of Hope). Among a list of ten actions it promised to undertake in the first 100 days, if elected, included the setting up of a Royal Commissions of inquiry into scandal-ridden institutions, including 1MDB .

The matter is of utmost political delicacy, and Najib, who was effectively identified as “Malaysian Official Number-One” by U.S. prosecutors, has much to lose.

A Face-saving Deal?

He and his family allegedly pocketed millions which was then used for election campaigning, film production, and diamonds for First Lady Rosmah Mansor.

Mahathir, who was PM from 1981 to 2003, only surfaced from retirement because of an opposition in tatters. Najib is his former protege; the two may well reach a backroom barter over the future handling of the 1MDB scandal that allows both to save face.

Impetus to Investigation

The result leaves many unanswered questions, but gives impetus to a two-year-long investigation spearheaded by American prosecutors and spanning several countries including Switzerland, Singapore, and Luxembourg.

THPT Comment: Knock-on effect for hotels overseas bought in the past few years, overpaid in some cases as part of said corruption? Perhaps some of our Asian readers might like to mail us with their thoughts…

First Seen: fiNews Asia