Reading the tea leaves of 1MDB

The 1MDB scandal shows that Malaysia is in desperate need of political finance reform. But can the country clean up its messy ‘money politics’?

By the time this piece comes out–even if it’s only a few hours from the writing–the array of known ‘facts’ about Malaysia’s bewilderingly complex 1Malaysia Development Berhad (1MDB) scandal will almost certainly have changed.

There may well be another conspiracy theory or two making the rounds by then, and some creative new threat/spin/bombast from one or another of Prime Minister Najib Tun Razak’s currently trusted spokespeople. I have no special powers to exhume the real story of where the money came from or where it went, so I will leave that archaeology to others. Instead, I will focus on what the unfolding of this drama indicates politically.

First, a brief sketch of the 1MDB saga, for those who have been spared or have been ignoring the gory details. Problems with 1MDB, a state investment fund, are not new. Until recently, it was missed payments toward the fund’s USD11 billion in debt, as well as murky managerial roles and practices, that worried investors and rankled observers.

Yet reports over the past several months, particularly by UK-based Sarawak Report, Malaysia’s The Edge financial daily, and the Wall Street Journal, have also unearthed the convoluted path of roughly US $700 million into accounts under Najib’s name, most of it shortly before Malaysia’s May 2013 general elections.

After initial quasi-denials and bluster, Najib’s camp has all but admitted that yes, the PM’s accounts did receive these funds–but they were perfectly legal donations from some astoundingly generous supporter(s), not from 1MDB. (By now, ‘1MDB’ stands synecdochically for a huge mess of issues.)

In the meantime, most of the officials investigating the saga have been early-retired, snap-promoted, detained for investigations themselves, or otherwise shunted off the task; critical activists and media have been whacked more forcefully, with threats of wilder punches yet to come.

What does this debacle tell us about the workings of Najib’s United Malays National Organisation (UMNO) and its Barisan Nasional (BN, National Front) coalition, or Malaysia’s wider political framework?

In some ways, the saga confirms what we know: commitment to civil liberties is tenuous, for instance, and ‘authoritarian backsliding’ is appealingly easy (and difficult to reverse), given the lack of effective checks and balances in Malaysia’s political system. Three other factors are worth highlighting.

First, while UMNO is a strongly institutionalised party, it is also deeply personalised, not least due to patronage ties within the party itself. No one should have been shocked by Najib’s acknowledgement that he ‘will evaluate people based on their loyalty’, rather than on how ‘smart’ they are–even at a time when clear thinking would be a real help.

Nor is this emphasis on loyalty unique to UMNO; other BN as well as opposition parties, too, are known for their ‘warlords’ and ‘camps’, for dynastic tendencies, for entrenching leaders as symbols, and for offering little latitude to threateningly clever upstarts.

Fault Mahathir’s long, self-aggrandising durée, the feudal sultanates of Malaysia’s past, or the structure of intraparty elections–but the point remains that if loyalty to people trumps loyalty to principles, parties will lack the political will to fix problems beyond sacrificing boat-rockers and whistle-blowers.

At this point, UMNO appears to be floundering, searching for direction. Maintain the BN’s power-sharing model, however shallow? Ally with Parti Islam seMalaysia, PAS, for a Malay-unity government? Rally round Najib and hope memories are short? Reshuffle the spoils by flocking to a new supreme leader–or back to Mahathir (his own sullied slate wiped magically clean)?

Second, Malaysian civil society is in a weak position to intervene. On a macro level, the rise (and decline) of the opposition Pakatan Rakyat (People’s Pact) coalition and its component parties has been at the expense of autonomous voices; ever more political space has become effectively partisan.

Creative solutions are in short supply, too. Mass street protests clearly hold appeal; the organisers of Bersih 4.0 are hard at work as outrage mounts. Yet the impetus for participation seems to be more frustration and anger than a sense of empowerment to effect change.

At best, street protest is a blunt tool, however elaborate the demands expressed. As one poster to an email news-list quipped, beyond repression, the risk in breaking the proverbial camel’s back is that you might end up with just another camel.

Moreover, the key problems at issue are not ones that civil societal actors are structurally positioned to address. Changing UMNO such that dissidents can unseat a party president requires action within the party.

Disassembling patronage politics is a long-term process, requiring civic education as well as a stepped-up regulatory framework. Putting in place effective electoral reforms requires substantial legislative action; it is up to parliament, too, to call a vote of confidence or put in place a transitional government.

On that note, lastly, Malaysia is in desperate need of political finance reform.

Najib’s supporters are correct in insisting that even a ridiculously large, anonymous donation to a political party is not illegal in Malaysia, so long as it does not come with strings or from public funds.

Even spending much of that money on electioneering would be above-board; what the Election Commission regulates is spending by candidates themselves, during the (very brief) official campaign period.

Government and opposition parties alike benefit from being not required to tally up and report contributions, and able to spend fairly freely between elections (although recent efforts to pin the lack of reform on opposition parties and their shadowy supporters are risible).

Unfortunately, Malaysia cannot readily borrow reform ideas from elsewhere; context matters. Suggestions for public funding of campaigns, for instance, are gaining traction among opposition strategists–yet such fixes may miss the point.

‘Money politics’ in Malaysia refers less to desperate fundraising and the debts so incurred than to parties’ direct involvement in and ties with business, as well as cronyism and kickbacks in awarding government contracts.

The priority instead should be such steps as establishing and enforcing more realistic limits for campaign expenditures than are currently in place; keeping track of at least large donations; enforcing open tender and transparency; establishing and empowering a competent administrative apparatus to monitor total election spending; and ensuring key agencies like the Malaysian Anti-Corruption Commission maintain (or regain) authority and independence.

Without doubt, ‘1MDB’ is a fiasco on all counts.

We may never know the full story, particularly given the pace of efforts to stymie investigations. But Malaysia has no choice but to move forward somehow–and when the rot is at the roots, merely pruning the tree won’t suffice.

Much depends on where the impetus comes from … but only the tea leaves can tell whether the end result will be another limping camel or a fresh new ride.

Meredith Weiss is Associate Professor of Political Science at the State University of New York at Albany. She is currently a key investigator on an ANU research project led by Edward Aspinall examining money politics, patronage, and electoral dynamics in Southeast Asia.