1MDB Is Only A Symptom of a Much Bigger Mess

The 1MDB Is Only A Symptom Of A Much Bigger Mess

M. Bakri Musa

www.bakrimusa.com

Only a few weeks ago that the CEO of 1MDB was telling everyone that the company’s assets far exceeded its liabilities and that it could service its humongous debts.

Today Arul Kandasamy is exposed for what he is, Najib’s campaign errand boy tagged with an impressive title and powered by a massive dose of dedak. Arul is but an inept executive and a bumbling campaigner. What can you say of a CEO who does not even know that his company is insolvent, and has been for months, or a campaigner who could not draw a crowd? As for the title “Chief” Executive, he is 1MDB’s only employee!

I could not care less about Arul or his erstwhile boss Najib Razak. Malaysians however are rightfully concerned with 1MDB as they would end up with the liabilities, now fast ballooning to be multi-billions. What a sorry and very expensive end to what started out as the first state-level, government-sponsored development agency, Trengganu Investment Authority (TIA), to manage the state’s oil revenue. It was a combined Alberta Heritage Fund and Norwegian Sovereign Fund wannabe. 

Najib morphed TIA into 1MDB and borrowed heavily. It is now near bankcruptcy, needing frequent bailouts. Instead of the promised bounty, 1MDB burdens the rakyat and their descendants for generations to come.

Despite that, many still do not or refuse to see the connection between those boxes of cash hauled from Najib’s residence and 1MDB’s insolvency. That scene was more like a raid on a drug kingpin’s house.

This 1MDB scandal is a symptom of a much deeper problem. Time to rethink the whole GLC concept. GLCs and their antecedents, the crown corporations, have a long history. They are not unique to Malaysia. Both capitalistic America and Communist China have GLCs, serving very different needs and objectives. 

Tun Razak gave Malaysian GLCs steroids to leverage and spearhead Malay participation in the corporate sector. His son, Najib, degenerated them into a not-so-sophisticated system for crooked politicians like himself to plunder the state. At least when the Sultan of Brunei wants some cash, all he has to do is raid the public treasury. As there is no differentiation between his and the state’s assets, raid is not quite the right term for that action.

In Malaysia however, Najib needed elaborate shell companies and trusts in such places as Panama and the Cayman Islands, as well as willing intermediaries like his stepson, that chubby moronic-looking fellow, and an Arab potentate among others for Najib to siphon off the state’s assets through a GLC. 1MDB is Exhibit A.   

The frequent exercise of one GLC selling assets to another, each with an ever-escalating price, is reminiscent of the tricks used by Icelandic rogue bankers that led to that country’s economic meltdown in 2008. All those associated paper-shuffling maneuvers with their expensive commissions and professional fees are just schemes to plunder the assets of those GLCs. 

Malaysian GLCs also have a negative influence on talented young Bumiputras, their idealism and brilliance squandered by the corrupt ways of these GLCs. Without those GLCs they could have started their own enterprises and be a local Bill Gates or Jeff Bezos, or shine at the local branch of IBM and Morgan Stanley. 

Yet another corrosive effect of GLCs is that they are but a not-so-subtle but very effective scheme to corrupt top civil servants. Be too critical of your political superior and you jeopardize your chance of a lucrative post-retirement job as Chairman of Petronas. Note that of the four Tan Sri’s connected to the earlier investigation of 1MDB who ‘retired,’ only former IGP Khalid, the snitch, was given the chairmanship of a GLC. That is not lost on those bureaucrats. 

The sultans too. A few millions thrown their way and they would titah(command) what a wonderful prime minister Najib was.

 As for the academics, a few thousand dollars for being on the National Professors Council would do it. Likewise the ulamas; throw some crumbs and they would quote ad nauseamhadith on the importance of obedience to leaders. 

My solution to the Malaysian GLC mess is as simple as it is inexpensive while being infinitely more productive and effective. It would also prevent future debacles like 1MDB or the many preceding ones like London Tin and Bank Bumiputra. 

Sell them all! Put the proceeds into a Trust Fund to benefit Bumiputras. Be a combination of the Norwegian and the Alberta variety. Like the Norwegian, be only a passive investor as an individual would with a mutual fund. Half of the income would be reinvested in the fund and the other half be spent as with the Alberta Heritage Fund to improve the quality of Bumiputras’ human capital. This would include supplementing the education of Bumiputras in STEM studies, acting as a source of venture capital for budding Bumiputra entrepreneurs, and providing business infrastructures as with building marketplaces and manufacturing food trucks, as well as modernizing the rural sector through mechanizing farms and rural areas.

I have earlier expanded on these ideas in my book Liberating The Malay Mind. 

Malaysia should not be satisfied with the current exercise of only punishing those corrupt and incompetent individuals in 1MDB and other GLCs. They should demand more. Get rid of the sources of the problem. Get rid of all GLCs. Sell them!