M'sia ‘won’t say yes or no’ to reports China offered to bail out 1MDB

The Malaysian government struck a note of caution on Tuesday in response to a report China offered to bail out the scandal-plagued 1MDB fund in return for the approval of infrastructure projects.

“[The government] knew that the price [of certain projects] was inflated, but whether there was such a deal, I have to check,” said Lim Guan Eng, the Malaysian finance minister. “I do not wish to say yes or no. I need to check the records to see if there were details explicitly mentioned.

“If this was something explicitly said, black and white evidence on deals, then we will pursue it.”

In the latest twist in the long-running scandal, The Wall Street Journal reported Chinese leaders offered to help derail investigations into 1Malaysia Development Bhd (1MDB), in exchange for the approval of infrastructure projects under Beijing’s multibillion-dollar “Belt and Road Initiative”, which involves the construction of roads, ports, railways and pipelines in more than 50 countries.

Citing the Malaysian government’s summary of the minutes from private, undisclosed meetings between senior officials, the Journal claimed Beijing promised to influence the US and other countries into dropping 1MDB-related probes, and also offered to spy on reporters investigating rumours of mismanagement and money-laundering within the fund. Specifically, the article claimed China’s domestic security force surveilled the paper’s office in Hong Kong at Malaysia’s request – this included wiretapping and data retrieval.

Eng promised the government would investigate these claims, particularly if the debts mentioned were factored into the East Coast Rail Link (ECRL) and the Trans Sabah Gas Pipeline, controversial projects which were backed by China.

The ECRL was among the projects agreed by disgraced former premier Najib Razak before his government was forced from power at last year’s elections. The total value of deals agreed, relying primarily on Chinese state-owned corporations and banks, was about US$34bil.

After Mahathir Mohamad led his Pakatan Harapan coalition to electoral victory, ousting Najib, he promptly suspended a host of projects, citing high costs and unsatisfactory terms.

Najib is currently on trial for multiple counts of abuse of power and money-laundering. Several other high-ranking officials from his government also face charges.

Lim acknowledged the discrepancies in projects, such as the Sabah pipeline, noting that RM8.3bil (US$2bil) had already been paid, despite the project being nowhere near completion.

“[It] is 88% of the entire project costs, even though the work done was only 10%,” Lim said. “Something is wrong there. That is so clear. You don’t have to be an accountant or lawyer to know that something is wrong. I will have to check on that.”

Meredith Weiss, a political analyst and academic, said that although China was not the first state to offer nations “an economic lifeline in exchange for access and influence”, the combination of Chinese opacity and Najib’s alleged corruption made the agreement “particularly problematic”.

“The Pakatan government is now really in a bind,” Weiss said.

“China may be especially disinclined now to renegotiate terms for its planned or in-train investments, if perks such as docking privileges for naval ships are now off the table, as they presumably are. Yet 1MDB aside, Malaysia needs investment – nor can the new government afford to irk the east coast by cancelling the ECRL entirely, for instance, or deal with white elephants the size of what Chinese-led projects in Johor could become.”

1MDB scandal: Arul Kanda Kandasamy publicly defended Malaysian state fund but now faces 20 years in jail

James Chin of Tasmania University’s Asia Institute said it would now be more difficult for China to sell major infrastructure projects to Malaysia.

“People will be suspicious that China has other motives,” Chin said.

“NGOs around the world will scrutinise Chinese investments even more. It also confirms what Mahathir was saying about the country being sold to the Chinese.”

The 1MDB scandal involved the looting of billions from sovereign wealth fund by several Malaysian government-linked officials, allegedly masterminded by financier Low Taek Jho.

Some of the money was channelled into Najib’s private accounts – funds he claimed were from Middle Eastern donors – although the rest was pumped into the purchase of a superyacht, star-studded parties that included the likes of Jamie Foxx and Paris Hilton, artwork by Van Gogh and Monet, and funding the movie The Wolf of Wall Street.

For the latest news from the South China Morning Post download our mobile app. Copyright 2019.

SCMP , News , Asia , Southeast Asia , China , Diplomacy , Politics