According to reports in The Wall Street Journal, Malaysian investigators are now looking into a line of inquiry trying to prove that former Prime Minister Najib Razak used funds from a China-backed infrastructure program to pay off looming debts incurred from the fiasco that was the 1MDB sovereign wealth fund.
Prime Minister Mahathir Mohamad’s time if office has been marked by a decided slamming of the brakes when it comes to projects initiated by Najib: He’s signaled no-steam ahead for the high-speed rail link between KL and Singapore, plans for an MRT 3 have been halted, and over US$20 billion of Chinese infrastructure projects under the One Belt One Road initiative have been frozen. Members of the new government claim that contract values appear inflated, and that there are signs of corruption.
After further investigations, the new government believes that offshore companies were used to receive cash intended for the Chinese projects, and used to pay off the nearly US$700 million in debt that creditors demanded 1MDB cough up. Behind the brokering, WSJ alleges, were Malaysian officials linked to Najib.
Malaysia’s tenuous position with China right now is nothing to be scoffed at: We’re currently on the hook to repay Chinese banks BILLIONS for financing these Najib-era projects. Currently, representatives from both governments are trying to figure out a compromise in restructuring, with China’s Foreign Minister visiting KL just yesterday to see if diplomatic channels can be used to achieve an agreement.
Of particular interest to Malaysian officials is a US$2.5 billion series of oil and gas pipelines from peninsular Malaysia to Sabah, on Borneo island. The WSJ report writes that Mahathir’s government believes the money from this project went to pay off 1MDB debts.
For its part, China is denying any involvement in corruption, though the One Belt One Road initiative is not without worldwide criticism, citing rampant cronyism and neo-imperialism as the country moves to increase their influence throughout Southeast Asia.
In the initiative, China gives other countries money to build roads, bridges, and ports, and in turn, they’re indebted to China is sundry ways: Whether through crippling loan repayments, or like in Sri Lanka’s case – unable to pay off their debts, China has simply taken over their port, and surrounding land, and operate it themselves.
Sounding dark to you? Where there is murkiness and money in Malaysia, you’re bound to find one figure, and that is the fugitive financier synonymous with 1MDB, Jho Low.
Former Malaysian officials are alleging that he was a central player in negotiating the Sabah pipeline, and other China deals, during Najib’s tenure. For his part, Low has denied any wrong doing. Then again, he also claims the super yacht he lived on for years isn’t his, so …
WSJ alleges that securing Chinese money was tantamount to staying afloat for Najib’s increasingly beleaguered accounting books: By 2017, 1MDB had incurred US$10 billion in debt, and had very few assets to show for it. Abu Dhabi was calling to settle a US$1.2 billion loan it gave 1MDB when they were facing default in 2015.
Remember when in the lead-up to the election, Najib alleged that 1MDB was just a series of investments that didn’t quite work out? Seems like the story is a lot more complicated than that.
What does this mean for Malaysia right now? Well, Low is still on the run and wanted by the Malaysian government. Could a Chinese government wanting to salvage billions in deals be willing to give Low up, if he is, as some suspect, hiding out in the country?
Will Najib, currently serving as an MP while out on bail, take responsibility for the billions that went missing from 1MDB, or the current US$8 billion worth of debt the fund still has to repay?
We. Shall. See.