Malaysia: 1MDB still looms large
Bankers and investors in Kuala Lumpur continue to live in the shadow of the scandal.
In these deal-starved coronavirus times, in a Malaysia still haunted by the 1MDB scandal, bankers and business people in Kuala Lumpur have resorted to gallows humour.
One tall story doing the rounds describes a Swiss government official arriving at Kuala Lumpur International Airport and, presenting himself at immigration, claiming to be the minister of ports and shipping for the landlocked European country. An immigration official protests “you can’t be that minister, there’s no sea in Switzerland”. The Swiss official responds: “But Malaysia has a minister for law and justice.”
Another variation holds that the Swiss official says he’s carrying a briefcase containing millions of dollars, ensuring he is waved through regardless. These jokes point to a sense of resignation over the level of corruption in Malaysia, a country that is still recovering from the 1MDB scandal.
In such a climate, it was something of a surprise in Malaysia when in July, the disgraced former prime minister, Najib Razak, was found guilty of corruption for his role in the decade-long 1MDB drama.
Najib was sentenced to 12 years in jail but, pending appeals, he has been allowed to remain a member of parliament. He wields a crucial vote for prime minister Muhyiddin Yassin, whose ruling coalition includes Najib’s former long-ruling fiefdom, the United Malays National Organisation (UMNO). Yassin’s wobbly majority is thought to be just two seats at best after he bounced the even wobblier alliance between Mahathir Mohamad and Anwar Ibrahim last February.
So much for Anwar’s appeal, when Asiamoney spoke to him last November, for Malaysia to develop a new, post-1MDB narrative to rescue its economy and its reputation in the banking market. Now, with Anwar and Mahathir out in the cold, there’s zero chance of that happening any time soon, not least from the frozen-out Anwar himself.
It has been pretty chilly in KL banking circles too, as deal flow dries up and bankers consider what the implications are for their businesses of Goldman Sachs’ $3.9 billion settlement with the state over its 1MBD shenanigans. There has been 1MDB collateral damage for many large banks operating in the country.
The continued pain of 1MDB, and the impact of Covid-19, has added to general wariness of Malaysia and kept deal volumes weak. So far in 2020, 11 IPOs have been sold on the domestic stock exchange, but all of them were tiny and worth just $72 million between them, according to Dealogic data. There were 20 deals worth $391 million during the same period last year, including the $265 million listing of poultry producer Leong Hup International.
The continued pain of 1MDB, and the impact of Covid-19, has added to general wariness of Malaysia
1MDB is proving a particular nightmare for AmBank, the Malaysian bank at the centre of the illicit 1MDB transfer to Najib. Not only has it endured a torrent of embarrassing revelations, aired in Najib’s High Court trial, about how it handled Najib and his Malaysian associate Low Taek Jho (commonly known as Jho Low, the alleged mastermind of the 1MDB heist), but AmBank is now facing a civil lawsuit from its one-time star client, Najib himself.
Najib claims AmBank had unlawfully disclosed information about his accounts at the bank – aired at his trial – to Low, who is now a fugitive sought by a brace of international legal authorities. Najib claims the information disclosed included account balances, details of cheques, credit and debit remittance transactions and bank account statements. AmBank has unsuccessfully sought to strike out the Najib case.
As the 1MDB spectre hangs over AmBank, its share price refuses to recover, trading near 10-year lows. Net profit at the bank dropped 10.9% for the year ending March 31. AmBank CEO Sulaiman Mohd Tahir joined AmBank in 2015, just months after he was appointed CEO at the more muscular CIMB, while Najib was still prime minister. Tahir has repeatedly declined to be interviewed by Asiamoney, but his competitors haven’t and they say – with some sympathy – that it was a career choice he may now be regretting. Whether or not that is the case, it is clear that Tahir’s AmBank, and Malaysia itself, are still a long way from recovering from the impact of 1MDB.