Will 1MDB fallout push Najib out?

QUESTION TIME 1MDB’s impact on the financial markets is more than just worry about whether potential defaults will impact the banking system and whether the government’s finances will be adversely affected when it stands by to honour 1MDB’s many obligations.

These questions have been largely answered – the central bank, Bank Negara Malaysia, has already said that 1MDB does not pose a systemic risk to the domestic banking sector, although it may depress the profits of some banks.

Various analysts believe that the federal government, which owns all of 1MDB through Minister of Finance Inc, has the capacity to take care of 1MDB’s obligations, which amount to RM42 billion.

So why is the ringgit more depressed than it should be and what is really the concern about the situation in the country? The problem is not directly related to the economy but politics. An increasing number of people are considering how the overall political situation in the country will change if Najib Abdul Razak, for whatever reason, decides to step down.

It is more than likely that it is the political situation which is causing the ringgit to be even more volatile than the currencies of other countries that have yo-yoed against the US dollar, but generally trended downwards against the greenback. That the US dollar is strengthening is indisputable, the roots being the strong possibility of upward increases in US interest rates some time later this year.

The pressure on Najib increased when former prime minister Dr Mahathir Mohamad stepped into the fray over the 1MDB issue, accusing the self-styled strategic development company of not being able to account properly for its debts of RM42 billion. Now, that’s something that lots of others agree with.

However, Mahathir’s premise for his interference has not always been from the perspective of high moral values – he often repeats that the reason why Najib has to go is that if he stays on he may well lead Umno and Barisan Nasional into defeat in the next general elections. The elections have to be held on or before 2018, still some three years away.

Najib has maintained, without offering much by way of evidence, that 1MDB is in good shape and that all monies are intact and can be accounted for. This runs counter to the many reports written on 1MDB and its various shenanigans, which includes pieces written by both KINIBIZ online and KINIBIZ magazine.

In fact KINIBIZ online was the first anywhere to write an extensive series of reports on 1MDB outlining its various mistakes, including underpricing bonds, overpaying for assets, paying too much to Goldman Sachs, dubious investments, suspicious money trails, influence from outside parties and so on.

Position full of holes

All analyses indicates that Najib’s position with respect to 1MDB – that basically the company is okay and only needs time to put its affairs in order – is full of holes and does not hold water. There is much that 1MDB has not given satisfactory answers to and it looks like for many questions, there will be no good replies.

The billion ringgit questions then are, will Najib step down? And if he does, who will take over from him?

Jun 18, 2015 – malaysiakini
By P Gunasegaram
Will 1MDB fallout push Najib out?


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