Political-funding scandal comes at bad time for Malaysia
(TMI) – The storm sweeping over emerging markets has hit Malaysia at an especially fraught moment, with Prime Minister Datuk Seri Najib Razak embroiled in a US$700 million (RM2.6 billion) funding scandal.
The country’s economic difficulties are bad enough by themselves. The political turmoil makes them all the harder to deal with.
Najib denies accusations that almost RM2.6 billion found its way from a state investment fund into his private accounts, and Malaysia’s anti-corruption commission has declared that the money represents donations from anonymous Middle Eastern sources.
This explanation failed to satisfy the thousands of protesters who took to the streets of Kuala Lumpur last month to demand Najib’s ouster.
Leaders of the ruling Umno, which has governed the country since independence in 1957 and has long prized loyalty over accountability, will certainly support Najib when they meet today.
But they need to ask themselves whether maintaining the political status quo is worth the continuing damage to Malaysia’s financial reputation and prospects for growth.
China’s slowdown and plunging oil prices – Malaysia derives 22% of its income from oil-related sources – have hammered the ringgit, which has fallen for 11 weeks running. The currency stands near lows last reached during the 1997 financial crisis.
Bank Negara has spent almost a fifth of its reserves trying to halt the slide. Although a full-scale crisis may not be imminent, the country is among the most vulnerable in Asia to a rise in US interest rates.
The situation requires a government that commands trust. Yet while Swiss authorities have started a criminal investigation into the fund, Najib has stalled a domestic probe by removing the attorney-general and reassigning four members of a committee coordinating the inquiry.
