The Malaysian Political Situation and What the Future Holds :- The 1MDB RM 42 Billion Financial Scandal And RM2.6 Billion Political Donation Scandal Is A Litmus Test Of Malaysia Becoming Either A Rogue State Or Emerging As A Functional Democratic And Developed Nation.(e/c)

Speech By Penang Chief Minister Lim Guan Eng At The Asia Society Hong Kong Centre In Hong Kong On 21.8.2015.

I speak to you amidst a time of crisis in Malaysia both political and economic. Of late, we have been regularly grabbing headlines in the top broadsheets all over the world – the Wall Street Journal, the New York Times, the Telegraph and news sites in Hong Kong. Unfortunately, they are all for the wrong reasons.

As much as I would like to help you make sense of recent developments in Malaysia, I myself struggle to come to terms with the fact that we may have sunk to the lowest depths in our nation’s history since the bloody 1969 May 13 riots as evidenced by declining economic growth, rising inflation and the depreciation of our RM plunging to its lowest levels in history. How to rebut those who can shamelessly justify national leaders holding public office having RM2.6 billion in your personal account even if it is meant for UMNO?

Indeed how we deal with the RM 42 billion 1MDB financial scandal and RM2.6 billion political donation scandal is a litmus test of either Malaysia becoming either a rogue state or emerging as a functional democratic and developed nation.

As Professor Danny Quah, Penang-born Professor of Economics and International Development at the London School of Economics and Political Science recently wrote, Malaysia has become a “rogue state” – a state that has deviated from the ideals of democracy, rule of law, free speech and egalitarianism. And this is from an economist who was once served the Prime Minister when he served on Malaysia’s National Economic Advisory Council, 2009-2011.

Despite earlier denials, the Prime Minister Dato’ Sri Najib Tun Razak had to finally admit that an astonishing sum of USD 700 million had been transferred into his own personal account before the last General Election. He claimed that they were in fact “donations” meant not for his personal use but for the party – despite the fact that all senior party officials including his own UMNO deputy president and deputy Prime Minister had no knowledge of the extravagant donation, its source and the final destination especially the rather mysterious beneficiaries.

Najib’s response to public demands to come clean was to first close down Malaysia’s leading financial daily The Edge and its sister paper then banning the online website The Sarawak Report and threaten its owner with extradition from UK, for daring to publish expose after expose the 1MDB and the role played by Jho Low. We now understand why 1MDB is in the centre of a USD13 billion scandal that led to the shocking revelation of RM2.6 billion donation in Najib’s personal account.

Najib then proceeded to sack his deputy Prime Minister and Minister, and disrupt the special taskforce formed to investigate the Prime Minister’s financial transactions as well as the alleged links to the embattled sovereign fund 1MDB. Further he sacked the Attorney-General, harassed, detained and even transferred out officials of the Commissioner of the Malaysian Anti-Corruption Commission (MACC) and some members of the police force. Today a member of the Attorney-General Chambers special task force who had been detained was stripped of her PR status.

In addition to the high-handed action against his opponents, Najib also found it convenient to promote four members of the Parliamentary Accounts Committee (PAC), including its chairman, to the Cabinet. This had the effect of suspending the on-going investigation of 1MDB by the PAC until a new chairman is appointed for the PAC.

So, in one fell swoop, Najib had succeeded in silencing his major detractors, either by removing them from office, persecuting them, or in the case of the PAC members, co-opting them. Unfortunately, while Najib has extended his political life in the short term, the repercussions from all these draconian measures have been black blot on our country’s reputation.

The plunging confidence in Malaysia’s economy, public integrity and political accountability is reflected in the performance of the ringgit, which has dropped by 28% over the past year to over 4.2 to 1 US dollar. This effectively means that Malaysians are poorer by 28% in US dollar terms.

Penang has paid the price by dropping back to middle-income status when we are supposed to graduate to high-income economy this year. The World Economic Forum Human Capital Report defined a high-income economy as one whose Gross Domestic Product or GDP per capita reaches USD$12,467 or RM 40,841 based on the exchange rate of RM3.27 for USD$1.

Instead of RM40,841 as the benchmark to achieve high-income status, the 28% drop in the ringgit means that the benchmark has been increased to RM52,000. Penang was expected to achieve a GDP per capita of RM42,251 based on a population of 1,681,922 people and a GDP of RM71,063 million by this year 2015.

Based on the current exchange rate of a 28% drop in the value of the ringgit, Penang’s 2015 estimated GDP per capita of RM42,251 is still far off from the new revised high-income benchmark of RM52.000. This goes to show the cost to Penangites in terms of price inflation due to the drop in the ringgit, but also Penang missing out from being a high-income economy.

Meanwhile, the Malaysian stock exchange has suffered with the FBM KLCI dropping to a two-year low. Capital flight has resulted in the Malaysian bourse losing about USD3 billion in foreign funds for the year to date, compared to USD1.7 billion for the whole of last year.

Consumer prices increased more than expected in July at 3.3 %, compared with a year earlier on the effects of a weaker ringgit and the lingering impact of the goods and services tax (GST) in April. The latest report by Bank Negara Malaysia showed that economic growth rate of 4.9 % in the second quarter of 2015 compared to 5.6% in the first quarter.

Good news for the opposition?

With the economy heading towards contraction and the government in disarray, some might think that this would present a good political opportunity for the opposition. MIC is split asunder and the other component parties whether MCA, Gerakan or SUPP are completely irrelevant. BN is basically only left with UMNO.

The 1MDB episode, because of its size and scale, will undoubtedly leave a scar in Malaysia’s finances and economy. More importantly, it will also scar, if not splinter asunder the ruling party, Umno. The pressure is now mounting from within. Following the sacking of the Deputy Prime Minister, who is also deputy president of the party, more and more UMNO (but not MCA or Gerakan) leaders have spoken out against Najib. As the economy worsens, expect this pressure to intensify.

Unfortunately, we have not been spared our share of troubles. Pakatan Rakyat or PR comprising of DAP, PKR and PAS ceased to exist when PAS severed ties with the DAP in July 2015. PAS had abandoned its welfare state in favour of working together with UMNO to push for the immediate implementation of hudud laws and the shariah criminal code in Kelantan. After causing PR to split, PAS has even supported the Prime Minister on issues such as 1MDB and that two witnesses are required before proof can be ascertained!

At this point, some may feel like the death knell is sounding for our country. However, I would not jump to such morbid conclusions. Instead, I see our country currently undergoing a period of transition.

Malaysia is not yet a failed state, a rogue state perhaps but not yet a failed state. That is why Malaysia can still be saved if we dare to effect a change of government at the next general elections through clean elections. And like anywhere else in the world, change is always painful, especially when the context involves changing a government that has been in power for 60 years uninterrupted.

At the same time, the opposition coalition’s split may turn out to be a blessing in disguise. Many leaders within PAS disagreed with the hard-line conservative stance of the new leadership and opposed this new-found co-operation with UMNO, paying the price by being defeated in the party elections. These moderate PAS leaders who aspire for democratic ideals have now broken away to form a new, moderate and progressive Islamist movement, called the Gerakan Harapan Baru (GHB), or the New Hope Movement.

To date, the GHB has shown much promise with massive crowds at its public events and nearly half of PAS MPs joining it, whilst PAS has been reduced to holding internal party meetings. GHB have emphasised on promoting good governance and the well-being of the people. They also project a brand of Islam that is far more inclusive and progressive, propelling Malaysia forward as a moderate Muslim nation

Speaking Up For The Malays
Further, DAP is also slowly but surely gaining acceptance amongst the Malays with our Impian Kelantan project raising RM 2 million to build 47 homes for the massive flood victims. Prominent Malay personalities such as National Laureate Pak Samad Said and constitutional law expert Professor Aziz Bari are joining the DAP together with many young Malay professionals, youths and women. DAP intends to speak up for the Malays who are looking for new alternatives and are tired and disillusioned with the crony and corrupt politics of BN.

The Malay sense of anger and loss is highlighted by what Zalinah Anwar wrote,

“Time has run out for this old form of authoritarian politics and rule by a privileged elite out to enrich themselves and their cronies. In their magisterial book, “Why Nations Fail”, Daron Acemoglu and James Robinson argue with evidence across history and geography that authoritarian “extractive” political and economic institutions designed by elites in order to enrich themselves and perpetuate their power at the expense of the majority of the people are bound to run out of steam.

The pride we have in our beloved country is that was NOT our history. That was not how Malaysia began. But today this is where we are heading. Just look at the MARA scandal. An agency set up to redress a historical economic injustice against the Malays ends up led by people cheating the very group they are supposed to help, pocketing millions in barefaced shenanigans. A policy vehicle pumped with hundreds of millions of taxpayers money to eradicate poverty on the basis of race gets abused by the privileged elite of that race. This is yet another case of pagar makan padi. Those entrusted to protect you, instead betray you. And there are many more such scandals, just waiting to be surfaced.

Let’s ask some hard questions here. Why after decades of rigourous development planning, 40% of Malaysian households earn only about RM1,847 a month? Why after more than four decades of the NEP, 75.5% of those at the bottom are Bumiputeras? Why in spite of the billions poured into education and boarding schools, 64.3% of the Bumiputera workforce have only SPM qualifications? Why some 90% of the unemployable university graduates are Bumiputras? Why of the $54 billion worth of shares pumped to Bumiputera individuals and institutions between 1984 and 2005, only $2 billion remained in Bumiputera hands today? And why oh why should the Bumiputeras continue to raise a begging bowl and ask for more of the same kind of handouts from the same ruling elite? The bottom 40% get crumbs, while the cronies laugh their way to the bank.”

Do not forget the unhappiness and the feeling of being forgotten by Sabahans and Sarawakians. Both East Malaysian states are tired of being exploited of their natural wealth, ignored and treated poorly when they are each equal partners with Peninsular Malaysia to form Malaysia in 1963. DAP’s Impian Sabah and Sarawak (Dreams) project to provide tap water and electricity to native people has also helped us to make inroads into the rural areas.

Couple this with the quiet rebellion amongst settlers at the collapse of Felda Global Ventures share prices from the original subscription price of RM4.55 per share to RM1.34 now. This reliable vote bank for UMNO is in ferment as the Felda settlers are still paying RM50-100 monthly for the shares they were compelled to purchase at RM4.55 per share that is now worth RM1.34.

Therefore, the stage is set for a realignment of political forces in Malaysia with the advent of a new political coalition that will replace Pakatan Rakyat. I believe that with the GHB, the foundations will be set for a stronger and more dynamic coalition of Malaysian political forces against the corruption, oppression and regression of the BN Government.

Is there a future for Malaysia?

The Pakatan Rakyat experiment may have failed as a political project. However as a model of governance, it is an unqualified success especially in Penang far surpassing what BN had achieved in 50 years. For instance, the Penang state government recorded budget surpluses of RM453 million in the 6 years we were in power from 2008-2013. This 6 year result is higher than the RM373 million in budget surpluses BN recorded in the 50 years it ruled Penang from 1957-2007!

In the 2013 General Election, Penang managed to increase our seats to 30 out of 40 while attaining a record 68% popular vote from the previous tally of 58%. Nationally PR beat BN in winning a combined popular vote of 52%, and should have formed the Federal Government if not for the gerrymandering and heavily lop-sided distribution of seats favouring BN.

Hence, while financial scandals and Malaysia have become almost synonymous, Penang is proud to maintain its unblemished record. This is mainly due to a few institutional procedures that we put in place.

One of the first things we implemented was, believe or not, an open competitive tender system. All this while, government procurement in Malaysia has been notoriously opaque, with those with “political cables” favoured over genuine contractors. By making our tender process completely online, we replaced political cables with computer cables, thus ensuring there was no avenue for corruption to take place.

Because public officials in Malaysia are known to enrich themselves and their relatives, we also took a strong stand against the scourge of nepotism and cronyism by institutionalising public asset declarations for all elected representatives in Penang, including the Chief Minister. In addition to that, we also expressly forbade all elected representatives and their family members from having any business links with the government nor permitted to apply or given any government land.

All these measures resulted in huge savings for the public purse, and we have put our budget surpluses to good use on social welfare programmes to help the needy and other vulnerable groups. Consequently, Penang is able to reduce our Gini Coefficient, which is the measure of income inequality, from 0.42 before to 0.37 in 2012. This is much superior to our national gini coefficient of 0.42.

Our good governance was received well by international investors. From 2008 to 2014, we managed to achieve RM48.2 billion worth of investments, which is 93% higher than the RM24.9 billion invested from 2001 to 2007. Furthermore, we have also embarked on an ambitious RM27 billion Penang Transport Master Plan project to develop comprehensive public transport infrastructure in Penang. This project, which will see the construction of highways, light rail transport and even water transport, will also see the first ever undersea-bed tunnel in Southeast Asia.

Finally, Penang has also adopted many best practices on sustainable living, including being the first state in Malaysia to ban free plastic bags, polystyrene containers and now shark’s fin as well. We have also achieved the highest recycling rate in Malaysia at 32% in 2015, when the national target is only 20% by 2020.

For our efforts, the Penang State Government has received accolades from Transparency International and the annual Auditor-General’s Report. We are also now ranked as the most liveable city in Malaysia by ECA International, overtaking Kuala Lumpur for the first time, and the 8th most liveable in Asia. According to International Living’s Global Retirement Index, we are also the 3rd best place in the world for medical tourism and retirement.

So, it would appear that while Malaysia under BN has gone rogue, Penang has become vogue.

In conclusion, the success of Penang and to a large extent Selangor as well, shows that we are committed to good and clean governance as the bedrock of our administration. This philosophy has paid off handsomely, and we have earned Malaysians’ trust.

We believe that we will prevail at the next general elections because Malaysians will no longer stomach such blatant misconduct that there is nothing wrong in receiving RM2.6 billion in donations placed in one’s personal account and is nobody business to pry and ask why. As Plato said, “We can forgive a child who is afraid of the dark, the real tragedy is when a man or woman is afraid of the light”.

It is critical that we demonstrate that we are prepared not only to govern, but to put in place the necessary reforms in order to get our country back on its feet. We believe we can replicate our success in Penang to save our beloved country and unite all in Malaysia.


—–Mandarin —–















马来西亚还没有失败,或许是一个流氓国,但是还没有失败。 如果我们在下一届大选通过干净的选举勇敢地改朝换代,马来西亚还是有救的。与世界各国一样,改变通常是痛苦的,特别是要换掉一个已经连续执政了60年的政权。