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Explained: Malaysia’s ex PM and the multi-billion dollar 1MDB scandal

Former Malaysian Prime Minister Najib Razak now faces multiple charges of money laundering, abuse of power, and criminal breach of trust.

Written by Om Marathe |
Updated: April 7, 2019 5:59:51 pm
Explained: Malaysia's ex PM and the multi-billion dollar 1MDB scandal Former Malaysia’s Prime Minister Najib Razak leaves Kuala Lumpur High Court in Kuala Lumpur. (Photo: Reuters)

Former Malaysian leader Najib Razak was slated to face on Wednesday the first among several trials investigating his role in the multi-billion dollar 1MDB scandal while he was Prime Minister.

The international scandal has been roiling the South East Asian country in recent years, and led to Razak’s poll demise in 2018, ending his 10-year rule.

InPics | Malaysia’s former leader Najib in the dock as graft trial begins

The 1MDB scandal

Razak founded the 1 Malaysia Development Berhad (1MDB) as a platform to bring foreign investment to the country. In 2012, American banking giant Goldman Sachs was roped in to raise investments, and over $6.5 billion were raised in the following year. The firm charged $600 million in fees for its services, and billions were allegedly pocketed by Razak and members of his inner circle. Malaysian authorities have now charged Goldman Sachs for making false and misleading statements, with penalties to the tune of $3 billion.

The US Justice Department, which began investigating the alleged scam, also found that over $730 million had reached accounts held by Razak himself. The money was used to buy properties in the US and the UK, paintings by Monet, Picasso and Warhol, large amounts of expensive jewellery, and even for financing films including the ‘Wolf of Wall Street’ and ‘Daddy’s Home’. Razak has insisted that the money was given as a donation by a Saudi royal.

Razak now faces multiple charges of money laundering, abuse of power, and criminal breach of trust. The 65-year-old Razak’s prosecution, where a former head of government has been charged over graft charges, is seen as a rare occurrence. His wife Rosmah Mansor, known for her penchant for luxury goods, is also charged with money laundering and tax evasion.

The Malaysian economy’s recent underperformance and high debt-to-GDP ratio has been alleged to be partly because of the 1MDB scandal. According the financial rating agency Moody’s, this ratio now stands at 50.8%, a high figure compared to other countries in the region.

Malaysian politics now

Since its independence from Britain in 1957, Malaysia has been led by the National Front, a coalition with Razak’s United Malays National Organization (UMNO) party at the forefront. The country has a highly centralized system of governance, and three of its seven Prime Ministers have come from the same family.

Najib Razak is alleged to have used the political apparatus for personal gains during his 10-year rule, with his role in 1MDB being only one among many accusations against him. While systemic corruption has been endemic in Malaysia, the massive scale of the 1MDB scandal outraged voters, leading to the formation of the Alliance of Hope, a coalition of parties across the political spectrum. The coalition rallied behind Razak’s mentor and former Prime Minister Mahathir Mohamad, who had deserted Razak after the scandal broke.

The opposition alliance came to power with a convincing victory in the 2018 elections, making the 93-year-old Mahathir the oldest elected government leader in the world. Mahathir, who ruled the country from 1981 to 2003, is credited with heralding modernizing reforms in Malaysia.

The other important player in Malaysian politics is Anwar Ibrahim, who lost to Razak in the 2013 election despite winning over 51% of the popular vote. Razak sent Ibrahim to jail on charges of sodomy, a move widely criticized by civil society groups.

Razak as leader

Razak hails from one of Malaysia’s most influential families, with both his father and uncle having served as Prime Ministers in the past. He assumed the role himself in 2009.

As Prime Minister, Razak was accused of controlling the country’s courts, undermining media freedoms, jailing political opponents, and halting investigations targeting him. He has also been accused of murder. After his election defeat in 2018, Razak and his wife made a failed attempt to escape to Indonesia.

He also maintained close ties with US President Donald Trump, and was one of the few world leaders to have golfed with him. Trump called Razak his “favourite Prime Minister”. Razak’s daughter is married to the nephew of former Kazakh strongman Nursultan Nazarbayev.

The UMNO party, which represents ethnic Malays, worked to appease Islamic hardliners under his rule. Instances include a blanket ban on non-Muslims using the word ‘Allah’, and the investigation of a youngster for ‘liking’ a post related to Israel on Facebook. He even considered including Indian Muslims under the long standing and controversial Bumiputera policy, which places Malysia’s large ethnic Chinese and Indian minorities at a disadvantage against ethnic Malays.

Razak has also been criticized for his shoddy handling of the crisis in the aftermath of the two crashed Malaysian Airlines planes. North Korean dictator Kim Jong-un’s half-brother and rival was murdered at a Malaysian airport on Razak’s watch.

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