For many decades, the name Malaya described a largely peaceful, prosperous (at least for rulers) collection of princely states and directly ruled colonies that stretched from the Thai border on the Malay Peninsula to the northern quarter of the East Indian island of Borneo (now called Kalimantan by the Indonesians).

Adventurers/naturalists/imperialists like Sir Stamford Raffles and Sir James Brooke (the latter a founder of a line of the “white rajahs” of Sarawak and the former effectively the creator of Singapore) had a hand in helping shape British suzerainty over the region in the 19th century. 

Malaya/Malaysia also provided a safe but exotic location for fiction — from Conrad’s Lord Jim to Paul Theroux’s The Consul’s File, with stops along the way for evocative writing by Somerset Maugham and Anthony Burgess. There have even been a few potboiler Hollywood films featuring a little bit of everything — from family dramas to communist rebels — like The Planter’s Wife/Outpost in Malaya.

The region’s wealth derived largely from prodigious quantities of tin and vast amounts of cultivated rubber and palm oil from plantations carved out of forest cover. There were also crops of copra, rice, and tropical hardwoods. The arrival of significant numbers of the Chinese diaspora over the past several centuries, and then indentured labourers from India all helped make the ethnic mix of Malaya/Malaysia that much more complex. 

Following the British army’s 1950s crushing of a communist rebellion in Malaya — “The Emergency” — waged largely by local Chinese people but aided and abetted by a still-revolutionary China, Malaya gained its independence from Britain. Once the two states of Sarawak and North Borneo were added to Malaya (but not the oil-rich sultanate of Brunei) and then as the largely Chinese island of Singapore was expelled from Malaysia — the modern state of Malaysia was born. The two Borneo provinces had been added partly to help draw the ethnic mix towards the ethnically Malay side (broadly conceived) of the balance sheet. 

Simultaneously, neighbouring Indonesia under President Sukarno and Malaysia were locked in a dispute — named confrontasi — by the Indonesians — over the incorporation of those two colonies (and thus the very legitimacy of the new nation) into Malaysia that threatened to become actual warfare and complicate an already-combustible Southeast Asia. That crisis had helped, in turn, to give impetus to Washington’s cold warriors fixated on the possibilities of yet another domino falling to the “Sino-Soviet bloc”, thereby adding fuel to an ultimately doomed American military commitment in Vietnam. 

Once Malaysia’s geopolitical issues with Indonesia had been resolved (largely because of the effective end of Sukarno’s rule and his designs on Malaysia and the more inward turn of the successor generals who were more focused on hunting down communists, would-be communists, dissidents and yet others of whom they disapproved). Malaysia’s luck was now seemingly turning dramatically. In addition to Malaysia’s other economic resources, significant offshore reserves of petroleum and natural gas had also been discovered, and these new resources turned out to be easily exploitable in the shallow seas of the southernmost reaches of the South China Sea.

Although a lack of natural resources has not been Malaysia’s problem, a frequently combustible ethnic balance has been. While ethnic Malays represented a majority of the population, the considerable Chinese minority (and, to a degree, the still-smaller Indian minority) had risen to relative economic ascendancy. Anger about this near-economic hegemony contributed to ethnically based rioting against Chinese communities in 1969 that thoroughly rocked the nation, and helped highlight the predicaments of its divisive landscape. 

Out of such lessons, the bumi putera — literally “sons of the soil” or indigenes — policy was born, offering significant economic support and encouragement for Malay entrepreneurs and would-be entrepreneurs to help them break into the economic world. National sovereign wealth and investment vehicles were established to nurture those efforts for ethnic Malays to move up the value chain in dealing with the country’s primary products, as well as encouraging national investment in heavy manufacturing such as automobile production and hi-tech developments (including a whole hi-tech “new city”, located near the national capital). 

Much of this was effectively funded by harnessing the increasingly abundant oil revenues of the national petroleum company, Petronas. As an aside, these policies have, over the years, even had an impact on South African economic thinking, based in part on the way the Malaysian example had advantaged the original inhabitants of the country, as well as the fact that they seemed to be working rather well. Such success has, over the years, given some hope and encouragement to proponents and practitioners of BBBEE in South Africa.

Over time, Malaysia’s national investment fund has become an increasingly flush cash cow and reservoir of fund for innovative investments — and, inevitably, for the miscellaneous scammers, flim-flammers and fraudsters who also came to feast on this cash. Not surprisingly, some of this took the form of corruption between politicians, fast-talking would-be investors, and businessmen (inevitably associated with the purchase of yachts and other toys), along with morally compromised international banks and investment firms looking for a fast buck or two or three or a couple of billion or so of them. But the scale in Malaysia eventually became, well, rather gargantuan.

And so here we have the drama of Malaysia’s travails and some extraordinary developments in what had generally been seen as a rather successful version of economic growth, ethnic upward mobility, and generally non-violent democratic practice — and thus a model for other nations. There is one caveat about Malaysia’s politics, of course. Since its independence, Malaysia has essentially been ruled by the United Malay National Organisation (UMNO) political party, with minority partners from the Indian and Chinese communities, thus making it difficult for alternative political parties to shift power from the UMNO.

The cast of this national drama includes Najib Razak, Malaysia’s former prime minister; Mahathir bin Mohamad, the nonagenarian, a once and future and now-once-again former prime minister; the current Prime Minister Muhyiddin Yassin, a man who came to power without an election and who now commands a bare majority in the parliament; fugitive Chinese Malaysian financier Jho Low, now hiding somewhere in China; and, inevitably, Goldman Sachs, the global investment banking firm ensnared in the massive fraud. Naturally, there are others, even including Najib Razak’s stepson who was involved in financing the film, The Wolf of Wall Street, but let’s begin with the leads first.

Within the past few weeks, as this long-running play appears to be coming to a finale, as former Prime Minister Najib Razak was found guilty of abuse of power, breach of trust, and, crucially, money laundering, and sentenced to up to 12 years in prison and fines of about $50-million. Almost simultaneously, Goldman-Sachs entered into an agreement with Malaysia to pay a nearly uncountable pile of money — some $3.9-billion — for its part in the mess, but, crucially for them, escaping any criminal trials. 

Najib Razak still has to face dozens of further charges, which if proved, could make him an involuntary government guest for two decades. He is, however, still a member of parliament and his party has been back in power since February, enhancing chances he may not spend much, if any, time in the pokey. If the convictions stand, he could not, however, run for re-election in the future.

For nearly half a century, Najib Razak has been one of the masters of the universe in Malaysia’s political world. As the son and nephew of previous prime ministers, he had first entered the country’s parliament at age 22 and then eventually rose to the prime ministership himself. Generally seen as an untouchable, he had earned the sobriquet, “The Man of Steal” as around $4.5-billion (that is billion with a “b”) vanished from the Malaysian government investment fund — the Malaysia Development Berhad — that he effectively controlled. The long-time allegations about money going walkies while he was the man in charge have now, finally, resulted in convictions on various corruption counts, hefty fines, and years in prison to be served. 

There is a caveat here. Actually carrying out the sentence has been stayed, pending appeals in what may be years of legal actions reminiscent of a certain Stalingrad strategy. There are also the fact that the UMNO party of which Razak has been a long-time power broker is now back in the pound seats, after losing power to a reformist coalition that had brought the seemingly indestructible, nonagenarian former prime minister, Mahathir bin Mohamad, back into office in 2018, in an effort to clear out those Augean stables.

The severity of the most recent verdict has surprised some, in particular because Najib Razak’s own stepson had recently settled with the government in a deal allowing him to keep millions of dollars understood to have been stolen from the same development fund that had been looted by Najib Razak. Three months earlier, prosecutors had dropped money-laundering charges against the stepson, Hollywood producer Riza Aziz.

Aziz had been accused of receiving $248-million in government funds and he had been the producer of the film, The Wolf of Wall Street. Aziz was allowed to keep some $83-million in his agreement with the new attorney-general, when he had agreed to return assets worth more than $107-million. In the course of investigations, stolen money was traced by prosecutors to the purchases of a mega-yacht (why is it always a big, big yacht?) and an actual Picasso painting, as well as that investment in the smash Hollywood film about drugs, sex, thievery, stock fraud, and some astonishing corruption. (Soto voce: Are you really surprised?)

Coming up, there are supposed to be four more trials related to that orgy of pilfering from the investment fund. Upcoming trials will focus on much bigger piles of money that went missing from the fund.

It also seems that about a $1-billion ended up in Najib Razak’s own personal bank accounts that were instrumental in giving life to the national scandal that had led to the ouster of the UMNO from power back in 2018. Not too surprisingly, the court had declined to believe Najib Razak’s claim that all the financial chicanery had been carried out without his knowledge by a certain Jho Low, a wealthy Malaysian-Chinese businessman accused of being the key figure in the crimes, and who is now living somewhere in China. Or as Judge Mohamad Nazlan Mohamad Ghazali of the Kuala Lumpur High Court, said at the end of the trial, “After considering all evidence in this trial, I find that the prosecution has successfully proven its case beyond a reasonable doubt.”

Before sentence had been handed down, Najib Razak had appealed for leniency, pointing to his long service as a public official and the fact the country had prospered during his nine years as prime minister. He said he had not solicited the $9.8-million payment from one of the investment vehicles of the national development trust, nor was it offered to him, and that he understood it had come as an anonymous gift from Saudi royalty. Apparently, it just happened. A miracle. 

Najib Razak still has to face dozens of further charges, which if proved, could make him an involuntary government guest for two decades. He is, however, still a member of parliament and his party has been back in power since February, enhancing chances he may not spend much, if any, time in the pokey. If the convictions stand, he could not, however, run for re-election in the future.

As The New York Times reported, “After the election [won by Mahathir bin Mohamad’s reformist party in 2018], the authorities raided properties owned by Mr. Najib and his wife, Rosmah Mansour, and seized more than $270-million in cash, jewelry, luxury handbags, tiaras and other valuables. Ms. Rosmah also faces corruption charges. Mr. Mahathir pledged to pursue justice against Mr. Najib and his cronies, but he lost support within his coalition and stepped down in February. In the months since, and against the backdrop of the coronavirus pandemic, Mr. Najib’s supporters have returned to power in what opponents have called a ‘coup’ and a ‘backdoor government.’ Mr. Muhyiddin, who formed a coalition with UMNO, was appointed prime minister without an election and has since refused the opposition’s demands for a vote of confidence in Parliament.”

But James Chin, a professor of Asian studies at the University of Tasmania and an expert on Malaysian politics, has added some cautionary notes about how this would all play out in the end. Chin says the verdict would likely be overturned on appeal eventually. He said:

“People should not be celebrating, because in the Malaysian context, many of the judgments in these political cases get reversed in the appeals court. I expect Najib to appeal, and he will probably win the appeal. In the long term, I expect Najib to get away with it as long as UMNO is in power.” 

However, this conviction, and any others to follow, may well dent the credibility of the new government headed by Najib Razak’s ally, Prime Minister Muhyiddin Yassin, the man whose party holds a bare majority in Parliament.

Ah, but then there was also the spectacle of Goldman Sachs’ involvement in this business. Yes, in crimes of theft of funds there are thieves and there are those who are relieved of their assets. But, in the background, there are the banks and others who help the looters get away with it all. In late July, Malaysia’s new government and the banking giant agreed on a settlement of a $3.9-billion fine to cover the extent of the company’s involvement in this mess. Earlier, the government had sought a lesser amount, but also criminal fraud charges against a baker’s dozen of the bank’s executives.

As CNBC reported on the settlement, “US investment bank Goldman Sachs has reached a $3.9-billion settlement with the Malaysian government over the multibillion-dollar 1MDB scandal, the two sides said on Friday.

“The deal includes a $2.5-billion cash payout by Goldman and a guarantee by the bank to return at least $1.4-billion in assets linked to 1MDB bonds, Malaysia’s finance ministry said in a statement. ‘We are confident that we are securing more money from Goldman Sachs compared to previous attempts, which were far below expectations,’ Finance Minister Tengku Zafrul Aziz said in a statement.

“‘We are also glad to be able to resolve this outside the court system, which would have cost a lot of time, money and resources,’ he said, adding the deal would resolve all outstanding charges and claims against Goldman Sachs. Malaysian prosecutors filed charges in December 2018 against three Goldman Sachs units for misleading investors over bond sales totaling $6.5-billion that the bank helped raise for sovereign wealth fund 1MDB (1Malaysia Development Bhd). Goldman Sachs has consistently denied wrongdoing, saying that certain members of the former Malaysian government and 1MDB lied to it about how proceeds from the bond sales would be used. The units of Goldman Sachs pleaded not guilty to the charges.”

Meanwhile, in another criminal issue, the current government is now pursuing broadcaster Al Jazeera which had broadcast a documentary about Malaysia’s efforts to crack down on undocumented migrant workers over coronavirus fears. As The Times reported that story, “The authorities announced that they were investigating Al Jazeera for sedition, defamation and violating communications laws. The broadcaster said seven of its staff members have been questioned by the police.”

The contemporary Malaysian experience can be read as a demonstration of the problems that almost inevitably arise from the overlap between long-lasting political power concentrated in a few hands, the opportunities to gain illicit access to rather large amounts of national resources designed for national benefit, and the amoral behaviour of international financial networks in helping it all work out to the benefit of the thieves. May there be some cautionary lessons for others, elsewhere, from these experiences. DM