Wednesday, March 21, 2007

Anti-graft war backfires in Malaysia

Anti-graft war backfires in Malaysia
By Ioannis Gatsiounis

KUALA LUMPUR - It has become evident to many Malaysians that Prime Minister Abdullah Badawi's war on graft never really got started.

But few would have predicted that three years on, Abdullah and his family would become the target of a mounting chorus of accusations, linked to the same allegations of corruption, nepotism, and abuse of power that the once-reform-minded premier has so publicly campaigned against.

Much attention has focused on the meteoric rise of Abdullah's only son, Kamaluddin, and his son-in-law, Khairy Jamaluddin - both for the most part political and business unknowns before Abdullah assumed the premiership in 2004. While their role cannot be overlooked in what increasingly has the markings of a family business empire in the making, Abdullah's approach to managing the country has done little to break the endemic patronage that has long hobbled Malaysia's political and economic progress. Indeed, his style of governance may in fact be encouraging it.

A turning point in Abdullah's premiership arguably came last October in the run-up to the general assembly for the ruling party he heads, the United Malays National Organization (UMNO). At the time, Abdullah's promise to battle corruption "without fear or favor" was meeting resistance among the conservative party's old guard. Then, on the eve of the assembly, in an apparently unprecedented move by a Malaysian prime minister, Abdullah reportedly distributed RM3 million (more than US$856,000) to each division chief for "development" purposes.

Opposition critics at the time said the gesture smacked of vote-buying. Abdullah for his part has denied any foul play. At the very least, the gesture signaled to the party's old guard that Abdullah is as committed as his predecessor - former premier Mahathir Mohamad - to oiling UMNO's patronage machine. And even where the UMNO elite have not benefited directly from Abdullah's style of governance, they have been able to take stock in what appears to be a man being swallowed by the system he had earlier promised to change.

Most recently, Abdullah was accused of procuring a new $50 million jet for his personal use. The plane, he explained, was being leased from a government company for use by top officials, including the king. Either way, Abdullah's administration has shown a special fondness for the country's royal sultanates. His government directly awarded a RM400 million palace project to two little-known companies, Kumpulan Seni Reka and Maya Maju.

In response to the contract, opposition leader Lim Kit Siang asked in Parliament: "Who are [the companies]? Are they a crony company? Why wasn't there an open tender? Why wasn't there a contract? Why do we need this new palace?" Those questions are still being debated, but the opposition is making much hay of the allegations for its own political benefit.

Meanwhile, Abdullah's own family members have during his term likewise, fairly or unfairly, found themselves at the center of controversy. His son Kamaluddin's business activities, including his position as leading shareholder of Scomi Group, a local oil-and-gas company, have come under particularly sharp scrutiny. Scomi's share price skyrocketed 588% four months after listing on the local bourse in May 2003.

While the growth of Malaysia's energy industry has since certainly played a role in pumping up the company's shares, Kamaluddin's family clout is also thought to have inflated investor confidence. Mahathir, now a vocal Abdullah critic, estimates that Scomi has secured RM1 billion worth of government contracts during Abdullah's tenure. Industry analysts, meanwhile, are perplexed as to how Kamaluddin, 38, could suddenly be worth an estimated $90 million.

More controversially, a Scomi subsidiary, Scomi Precision Engineering, was fingered in 2004 by US and European intelligence officials for supplying dual-use centrifuges to Libya, which allegedly could have been used in the country's covert nuclear-weapons program. The company was hastily cleared of any wrongdoing by both the Foreign Ministry and police, even as the United States was applying pressure for full disclosure about Scomi's business dealings.

Defending family honor

Meanwhile, Abdullah has stoutly defended his son's independence as a businessman, saying that Kamaluddin "has never abused his ties with me ... He has never asked help from the government or anything that required a bailout for him." Abdullah has likewise defended his son-in-law Khairy's recent advances in politics and business, which have drawn opposition scrutiny.

Khairy, deputy chief of UMNO's youth wing, has been described in some political circles as "Malaysia's most powerful 31-year-old". Several of Khairy's closest confidantes are also known to be close to Abdullah, including businessman and newspaperman Kalimullah Hassan, whom the premier appointed editor-in-chief of the UMNO-controlled New Straits Times newspaper.

Both Khairy and Hassan have been linked to controversial financial dealings at ECM Libra-Avenue Capital. On December 27, 2005, ECM chairman Hassan along with two other company co-founders announced that they would each sell 1% of their shareholdings in the company to Khairy in a deal that was transacted at 71 sen per share, for a total of RM9.2 million. Khairy is on record saying that the deal was financed through the company, but many viewed his invitation to join ECM as a way to earn the company valuable political connections.

Soon thereafter, ECM acquired government-linked financial company Avenue Capital Resources and reportedly was not required to raise any outside capital to make the multimillion-dollar acquisition. Critics, including most prominently former premier Mahathir, say the deal lacked transparency. ECM has persistently denied any foul play.

Khairy has also been loosely linked to Khazanah Holdings, the state-run investment arm that Abdullah chairs and which manages an estimated RM25 billion worth of government funds. Two years ago, Khairy was widely tipped to become Khazanah's chief operating officer, but amid a public outcry the appointment didn't go through.

However, Ganendran Sarvananthan, 29, Khairy's close friend during his time in school in England, was in February 2006 appointed to the surprisingly senior position of Khazanah's executive director of investments.

It is of course entirely possible that there is no political connection to any of Abdullah's family's growing businesses, as the embattled premier has consistently argued. But with opposition criticism mounting, if Abdullah were true to his word about an "unconditional" anti-corruption drive, the authorities should have probed at least some of the allegations. To date, no such probes have been launched.

Rather, top appointments in the government's fight against graft could be viewed as hindering that process. Former Anti-Corruption Agency (ACA) officer Mohamad Ramli Manan recently filed a police report alleging that the ACA's current director general, Zulkipli Mat Noor, was involved in various crimes - from living beyond his means to sexual misconduct - when he was a top cop with the Royal Malaysian Police.

Ramli said the ACA had begun to investigate Zulkipli's conduct beginning in 1997, but since he filed his original complaint to the attorney general's office last July, there have been no signs that the relevant authorities plan to move on the case. The Parliamentary Select Committee on Integrity last week decided to call both Zulkipli and whistle-blower Ramli in for closed-door hearings.

As currently constituted, the ACA is not an independent outfit, but rather reports to the Prime Minister's Office. The agency's corruption-related arrests have risen from 339 in 2003, to 497 in 2004, and 485 in 2005, but critics contend that the ACA has merely netted minnows and not any big fish. Indeed, some of the agency's once-prime suspects have later landed in the Prime Minister's Office as top-level appointees.

Transparency and accountability have also arguably been impaired by Abdullah's frequent use of the Official Secrets Act (OSA), which gives the government the right to classify as a state secret any document it deems to be sensitive to national security. The government has used the OSA in many instances to avoid scrutiny, including for deals it strikes without tender with politically connected private companies, opposition politicians say.

No-man mission

Abdullah has frequently said that the fight against corruption cannot be a one-man mission. But his actions have hardly inspired cooperation among the ruling elite, let alone at the grassroots. Instead, his government has moved to take down self-fashioned whistleblowers and maintained sharp curbs on the media. The UMNO-backed New Straits Times newspaper group, for instance, is currently suing two bloggers for defamation over postings that were sharply critical of the government, and Abdullah has in press interviews supported the legal action.

To be sure, an anti-corruption campaign waged by the leader of a party that arguably institutionalized the practice in Malaysia was bound to be a slippery slope. And after three years in power, should Abdullah try to recommit himself to the fight he would run the risk of dissent within UMNO with new general elections on the horizon. "Abdullah has learned that this is the way to do business in UMNO if you want to stay in power," contended Tian Chua of the opposition Justice Party.

If it all sounds familiar, that's because it is. Corruption and patronage within UMNO reached endemic proportions during Mahathir's 22-year rule. He sought through any means possible to catapult the nation rapidly to developed world status by 2020. If someone could get the job done - in business or politics - to Mahathir it often did not matter how as much as when. Those practices continue largely unabated under Abdullah's government, in part because their consequences are not readily visible.

Malaysia still makes a convincing show that economically things are humming along. In the capital city, shiny modern trams dart and slither between glass office towers. Well-groomed highways connect the peninsula's far corners. Unemployment is low. The state-run media gloss over government abuses to paint a picture of economic progress and social harmony. And the unquestioning feudalistic masses digest what they are fed by pontificating politicians.

All the while, however, Malaysia has seen foreign direct investment drop from $3.8 billion in 2003 to $1.4 billion last year. Leaders have struggled to come up with a new vision for the country, with grand pronouncements about becoming an agriculture, biotech and high-tech hub showing few signs of materializing. Meanwhile, corruption is also having long-term adverse social consequences.

Recent opinion polls prioritized the need to tackle graft above rising inflation and unemployment concerns. political analyst Bakri Musa recently noted on his blog: "We are sending precisely the wrong message to our people. That is, in order to succeed or afford a mansion and other trappings of the 'good life', we do not have to study diligently or work hard but merely ingratiate ourselves to the powerful in order to hog our own little spot at the public trough."

Abdullah's sagging anti-graft campaign promises to become a big issue at the next general elections, which some believe could be called in the coming months. The opposition Justice Party has promised to weed out corruption should it come to power, and it has singled out corruption issues as the main plank for building up its meager support base. Yet the party's figurehead, Anwar Ibrahim, has been curiously silent on allegations of corruption linked to Abdullah, UMNO and his family.

Despite his insistence to the contrary, Anwar may be looking to re-enter UMNO, the party he was ignominiously ousted from nearly a decade ago on charges of corruption and sodomy. Rumors abound that he has quietly been cultivating close ties with Abdullah in preparation for just such a move. Despite opposition grumblings and signs of business-as-usual, the general public has hardly shown a level of outrage over recent corruption allegations that would indicate they intend to abandon Abdullah or UMNO's ruling coalition at the next polls.

Ioannis Gatsiounis, a New York native, is a Kuala Lumpur-based writer.

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