Asia Sentinel: Malaysia’s PM Sells His Country to China

The vulnerability of Southeast Asian countries to the combination of Chinese money and their own corrupt politicians has been laid starkly bare by a new report on Malaysia’s scandal ridden 1MDB.


Desperate to extricate himself from the massive misuse of funds supposedly raised for development by the state-backed sovereign fund, Najib has turned to China. The price has been Malaysia’s silence in the face of China’s claims to most of Malaysia’s South China Sea economic zone and failure to speak up following the Court of Arbitration’s ruling against China and its nine-dash line claim. Thwarted by the court of arbitration, China over recent months has been seeking – with considerable success – what it was clearly denied in court: by purchasing the loyalty of the littoral nations.


The Sarawak Report, an online publication with a remarkable record of access to leaked documents on thievery by leading Malaysian politicians, has revealed a plot, now close to realization, to use a Chinese state company as a conduit for dishonestly using public funds to plug gaping holes in 1MDB accounts.


These holes are the direct result of a billion dollar spending spree in the west by 1MDB on luxurious apartments, parties and the international jet set as well as direct and indirect payments to Najib himself and associates such as Jho Taek Low and Najib’s wife Rosmah Mansor’s son from a previous marriage. It is quite likely that before long, other of the clutch of countries investigating the scandal are going to go public with charges equally as damning as those made public last week by the US Justice Department, which named “Public Official No. 1” 34 times in the document. In all, Attorney General Loretta Lynch said, at least US$3.5 billion had been siphoned off the Malaysian taxpayer.


Now Najib is attempting to get China to cover that loss surreptitiously and in the process probably selling out his country over its rights in its own exclusive economic zone.  Chinese companies have already helped 1MDB’s cash situation by buying power stations assets at favorable prices. But those deals were aboveboard compared with the latest multi-billion ringgit scam.


According to the documents published by Sarawak Report, the plot is for China’s state owned China Communications Construction Company (CCCC) to be awarded the contract to build the high speed East Coast Rail Line (ECRL). Following official receipt of the award, CCCC is due on Aug. 5 to pay  US$850 million for certain 1MDB assets. CCCC will also assume responsibility for US$4.78 billion in interest and principal due of 1MDB obligations due between now and 2022.


In return for this enormous bailout, Malaysia’s Ministry of Finance is to undertake to pay billions to CCCC on top of the actual cost of the project.


The contract works thus:

Total contract value: MYR60 billion

Actual assumed cost of project: MYR27 billion

CCCC profit margin of 4.55 percent: MYR2.729 billion

Additional differential: MYR29.8 billion


The so-called “additional differential” is the amount needed to compensate CCCC for its support of 1MDB. Thus the Malaysian public is expected to pay double the proper price for the railway simply to bail out Najib and his corrupt associates. The amounts to be paid on behalf of 1MDB total an astonishing US$7.46 billion. This includes the debts due to Abu Dhabi’s sovereign wealth fund which is currently suing 1MDB over unpaid loan guarantees.

According to the Sarawak Report documents, the bail-out also reaches companies controlled by Jho Lo – and by mega rich former Sarawak Chief Minister Taib Mahmud, which were used to funnel money to Najib.


The deal also gives China additional advantages from which it would benefit for years to come, limiting Makaysia’s ability to open later projects to competitive bidding, notably the adoption of China’s rail technology for future major infrastructure. CCCC will get a 10-year break on GST and income taxes, allow CCCC to select suppliers and sub-contractors without reference to the government. Meanwhile the government will take responsibility for land acquisition along the route.


Publication of these details, which many in Malaysia may regard as indicating treason as well as corruption, are likely to make the Chinese nervous. It was bad enough that the US has launched criminal charges against many associated with 1MDB and which implicate Najib in all but name. The latest revelations add to the threat to Najib’s position and hence the possibility that any deal now signed with CCCC would later be repudiated by Malaysia as corruptly won.


Meanwhile it is astonishing that a ruling party that purports to represent the interests of the Malay people keeps a leader who so obviously not only has abused his position to make money for himself and associates, who has diverted vast sums from development to foreign luxuries, and, worst of all, has sold the national interest to a country that has been forcibly pressing its claims to a large part of Malaysia’s waters as well as Layang-Layang island off the coast of Sabah. It is no surprise that Malaysia’s considerable naval strength is doing nothing to halt Chinese fishing in its waters.