Decades later, Forex losses continue to haunt Mahathir

Former Malysian prime minister Najib Razak speaking Michael Wuertenberg

The revelation of multi-billion dollar Forex losses stirs up yet another storm in Malaysia’s political scene.

By Joelyn Chan

Malaysia’s political landscape has been fraught with endless power struggles. In 2016, there were 62 political parties. Key characters like Prime Minister (PM) Najib Abdul Razak, Former PM Mahathir Mohamad and former Finance Minister Datuk Seri Anwar Ibrahim complicate the scene further.

Past Forex losses are sensationalised to create Malaysia’s new scandal

The dust has not even settled on Malaysia’s recent 1Malaysia Development Berhad (1MDB) scandal. Now, the nation is in for another shock. Earlier this year, Former Bank Negara Malaysia (BNM) assistant governor Datuk Abdul Murad Khalid claimed that BNM’s 1990s forex losses were greater than reported. He urged the authorities to probe and uncover the truth.

He said, “The total losses then were US$10 billion, which is equivalent to about RM40 billion today. The money would have increased to US$26.66 billion, or more than RM100 billion, if it had been kept in government savings, calculated at four percent compound interest annually.”

Since then, the government has ordered a Special Task Force (STF), followed by a Royal Commission of Inquiry (RCI), to investigate the whole truth. In July, the Malaysian RCI’s initial finding reported losses amounting to RM31.5 billion (US$7.5 billion). The extent of losses is yet to be fully established, with various speculations of the exact figure.

Najib estimated that losses were around half of the RM60 billion (US$14.3 billion) international reserves in the 1990s. With an ‘A- financial rating’ and reassurance from RM431.7 billion sitting in the international reserves, he dismissed the risk of bankruptcy.

Ulterior political motivations drive investigations for forex losses scandal

A plausible reason for this late forex investigation is the impending 14th General Election (GE14). Mahathir’s lawyer, Haniff Khatri Abdulla had pointed out market talk over BNM’s possible forex losses had surfaced since 1992. BNM’s 1992 and 1993 annual reports showed a reduction in reserves and disclosed forex losses. The authorities did investigate the forex losses case. It was closed off with BNM Governor Tan Sri Jaffar Hussein removed from his position. Someone has already taken responsibility previously, but things were still getting blown up.

Malaysia’s Multimedia and Communications minister, Datuk Seri Salleh Said Keruak, said, “The BMF (Bumiputera Malaysia Finance Limited) and Forex scandals make Mahathir the last person in Malaysia qualified and credible enough to ask Prime Minister Najib Tun Razak to step down from office citing 1MDB as the excuse.”

Ever since Najib rejected Mahathir’s request to support his son in UMNO, Najib and Mahathir have been rivals. Both parties capitalised on every single opportunity to smear each other’s name and weaken support for the opposing party. Today, the political parties and the press are once again sensationalising this past issue to sway the hearts of voters.

Exploiting the use of RCI

Since 2016, the 1MDB corruption saga involved Najib, who allegedly misappropriated US$3.5 billion. By dredging up forex losses incurred during Mahathir’s 22 years of premiership, he diverted the excessive attention placed on the still unconcluded 1MDB.

“Diversion is one of the goals, and the other is to dilute the 1MDB issue into something about executive inaction on a financial scandal,” said Tawfik Ismail, a former senior UMNO official.

At 92, Mahathir has withstood countless of political battles and earned his reputation. Critics suspected the RCI was formed by the administration of Najib to shame Mahathir, then PM. This news might not mark the downfall of Mahathir, but the speculations and suspicions were enough to dent Mahathir’s image.

Both the timing and the choice of the personnel-in-charge pointed to a possible dirty play of politics. The RCI was not necessarily required. Formation of RCI for the forex losses case was swifter than the 1MDB case, which still did not have any RCI plans in place. The STF concluded the forex losses as a prima facie case and warranted the RCI. From the day Khalid called for a probe in forex losses to the Cabinet’s approval for RCI’s formation, it took less than eight months. This speed was rather fast for an incident that happened 25 years ago.

Out of everybody, the Prime Minister’s office selected Petroliam Nasional Bhd (Petronas) Chairman Tan Sri Mohd Sidek Hassan to head the STF and RCI. Together with his panel, Sidek has the right to give recommendations for further actions, subject to the Attorney-General’s decision to prosecute. Given the close ties between Najib and Sidek, Sidek may just conveniently disregard any evidence to Mahathir’s favour. After all, Najib had shown kindness to Sidek and appointed him as Petronas chairman, after his post as government’s Chief Secretary.

Will this incident mark the downfall of Najib or Mahathir?

Observers may interpret Mahathir’s offer to testify as a sign of clear conscience, with the willingness to share knowledge without withholding information. Before he was called upon to testify for the RCI, he attended the proceedings as a neutral observer.

This case of forex losses is not the only RCI that Mahathir will be involved in, as discussion for RCI on 1985 Memali tragedy progresses. Mahathir is taking the RCIs in his stride, declaring “he is not opposed to a Royal Commission of Inquiry as long as the government establishes a similar public probe for the 1MDB scandal.”

Instead of Mahathir, former BNM adviser Tan Sri Nor Mohamed Yakcop was under fire in the latest proceeding. Nor Mohamed was the key person for forex trading, and he had not discussed forex trading activities, such as reading forex trading signals, with Mahathir or Anwar.

Mahathir did not allow these losses to distract his plan to oust Najib as PM. Najib’s plan to use this past forex news may backfire and end up drawing more attention on his unwillingness to accept STF or RCI for his 1MDB scandal. Onlookers may not know the real story, but they can still gauge for themselves. Mahathir possibly hid news of forex losses while trying to make Malaysia richer. Conversely, Najib alleged misappropriated funds for his personal gains.

Also, this chain of events has brought Mahathir and Anwar closer, as they unite against Najib. Even if Mahathir were found guilty, it would not be the end of his political agenda. Mahathir said he would not resign as chairman of the Bumiputera-centric Parti Pribumi Bersatu Malaysia (PPBM) or leave the opposition Pakatan Harapan pact even if he was later found by the RCI to have played a role in the forex losses.

At the moment, Mahathir remains undefeated with no intention to retire from the political drama. In GE14, PPBM remains a strong contender and continues to threaten Najib’s leadership in Malaysia’s predominant political party, UMNO.

About the Author

Joelyn Chan
Joelyn is a freelance writer based in Singapore. She graduated from Nanyang Technological University with a Double Bachelor in Accountancy and Business. During her free time, she explores the latest developments in fintech and business.