Summary: 1MDB is only a sample of what could go wrong. Providing government guarantees to business ventures is the root of the problems. Political will is needed to change this by WALKING THE TALK. The society need to rid of “Shadowy Business Structures” as they are the “dark world of finance” – which could only means future troubles. The dark world of finance is the roots of financial crisis (e.g. US Subprime), it needed to be eliminated. This should be the focus of our politics – to have the POLITICAL WILL to do it (by ALL SIDES of the political divides).

The biggest mistake of how we all treat the 1MDB affair is to politicize it.  In this piece, I will focus on what are the possible solutions that could be done to turn around the company, and to make sure that it could become something that: 1) makes money (instead of losing money), 2) benefits the people of Malaysia (instead of becoming a burden), and 3) succeed as a business venture.

I will divide these writings into 3 sections (for easiness of reading and easier to follow the logics of my discussions).

Part I – the Politics

Part II – the Economics

Part III – the possible solutions to 1MDB

I have to start to lay down the politics and what are the possible solutions that we as a society could take (Part I; then followed by economic analysis – to make sure that I back my arguments with economic arguments, facts and figures (Part II); and finally to zoom in specifically to 1MDB (Part III). I took this approach mainly to emphasize that 1MDB is ONLY one of the problem that we face. Before we can address 1MDB as a company specifically, we have to address first the roots of problems – politics and the economic management  (Part I and II). Then only when we deal with 1MDB, it is based on clarity rather than pure speculations.

Before I jumped in to the Politics, let me state clearly: I am not attached or linked or have any leaning to any political parties or siding with any sides of the various political divides. This make my stands clear – since some would label me as UMNO (from my past association with UMNO), and some would label me as an opposition (from those who believe that I am with Dato’ Seri Anwar Ibrahim). As Treebeard (Lord of the Rings) have said: I am on nobody’s side; my true side is for my own welfare, and the welfare of my children and grandchildren.

With that let me jump right on to the political analysis, “without fear or favor”

  1. We as a civil society should not prolong 1MDB as a matter of politics. The longer it dragged on, it could become what we economist called “self-fulfilling prophecy”. That is it will go down in the path that we wish to happen by pushing it to be exactly as we wish. This is exactly what some wants it to be, that is for 1DMB to go bust, so as to make it as the reason for the downfall of Dato’ Sri Najib.
  2. We have to understand, with as little bias as possible, based on clear facts and figures, the roots of the problem (which actually are lost in the heavy politicking going on). At the root of the problem is “providing government guarantees”, which for all the years since mid-80’s had been the practice of our federal and now even the state governments. Guarantees are in two forms, “explicit” and “implicit”, explicit guarantee is already problematic, and implicit is even worse. The recent US sub-prime financial crisis of 2008 already shows how much of a time bomb these guarantees are. And for those with so-called “Shari’ah tendencies” – government guarantees is purely incompatible with the “Maqasid (purpose) of Shari’ah”. I had not seen any evidence of Islamic government of the past providing financial guarantees to business ventures.
  3. We have to give constructive ideas and solutions, regardless of political leanings. Non constructive criticism only push something to doom, instead of avoiding it. Many wars of the past, could be avoided if society had taken a different path of solving issues. But many chose the path of war, which is destructive. The US political leaders, in the sub-prime crisis realized the magnitude and scale of the problem, decided to combine the forces from all political divides, to take the bull by the horn and wrestled it to the ground. They had the political will, and the society as a whole also had the political will to do so. We as a society need to change our outlook and approach. Our leaders (from all sides), need to be constructive, rational and clear minded – for the benefit of the society at large.
  4. We have to be extremely cautious with politicians and political statements from all sides of politics. But economics is something real and it will really bite. Politicians say what they don’t really meant, and do what they don’t really need. Dato’ Sri Najib had to defend 1MDB, as it is a must for him – because of the political pressure applied upon him (he has no other choice, except to do that); But is it really necessary for him to take it as his personal matter? Or is it that we as a society push him to take it so that it will be his doom (as some wishes it to be)? And on the side of the coin, are the opposition (including Tun Dr. M, Tan Sri Muhyiddin, PKR, DAP, etc.) sincere in their criticism? To be factual, Tun Dr. M is the Father of Inventor of these so-called government guarantees of projects, Dato’ Seri Anwar (of PKR), Tan Sri Muhyiddin, and everyone else, were part of that Malaysia Inc. I, which were further perpetuated and expanded by people like Tan Sri Nor Yakcop (in Malaysia Inc. II). And now DAP is continuing the same thing for Penang projects, Pakatan is continuing them in Selangor. We the public are blind by our so-called political zeal. Isn’t 1MDB is just part of a bigger problem of all our practices, if I may say?
  5. Be aware of “The March of Folly”. A small crisis could grow to be a full scale crisis if we (from all sides of the divide) keep continuing marching on the path of doom and destruction (March of Folly). As it stood today, we the Malaysian society as a whole, are treading on this path of folly. We succumb to all sides of political divide to further tread a downward path of economic malaise – by acceding to politicians, who are ALL (both sides of the divides) hungry for power and positions. None of them tell us clearly WHAT THEY WILL DO (differently), if they got into the positions of power. Furthermore, we should look upon qualities of leaders who will WALK THE TALK. But instead, it is proven that almost none are willing to do that, if the path is not personally advantageous to him. As clear example, Lim Guan Eng should have taken a leave from the Penang CM post when he was charged; but instead he took the path to stake the whole democratically elected Penang state government as his personal “gamble”. This is outright undemocratic in spirit (if not in form). For me as an example, I resigned from all my ABRAR posts when I was charged by the Securities Commissions in 2000, and I spend the next 11 years fighting in the court until the Appeal Courts decided in my favor 3-0 (the Sessions Court judged me guilty in 2003, and then the High Court reversed the decision in 2006, and finally the Appeal Court rejects the appeal by the SC to overturn the High Court decision by a unanimous decision of the 3 member bench, in 2010). Some have said that my charge was politically motivated by Dr. Mahathir’s government as a crackdown on Anwar’s supporters. That’s the politics, but the economics of it is to “destroy the whole Abrar Group”, which what really bites. Regardless of what will be the damage to you personally, you must walk the talk. The folly in my case is to destroy a full-fledged Bumiputera organization, due to political expediency ( I state my case because I am only one of the sample, there are so many others face the same fate). What further destruction that we wish to happen now, so that the politicians could further expand their political expediency? Should we all cry loudly “enough is enough”.
  6. We should be interested in the solutions offered to 1MDB rather than the doom of 1MDB. Why? If we think that 1MDB is public asset (which is factually true), then we should be interested in how to SAVE 1MDB, not its destructions. For example, if we think that the whole (gross) assets of 1MDB of say RM50 billions, which translates to “your assets” of RM1,666 per person (and for me X13 for my whole family = RM21,666); how this could be preserved instead of becoming negative say -20,000 (if it ever becomes a full liability, instead). This is what we should be interested in hearing or knowing. And for those who are so interested in getting Dato’ Najib to be out: what would they do instead of Dato’ Najib, to make good of “our stakes” in 1MDB. If their interest is to make sure that “my family assets” to become minus RM20,000 ( total loss of RM40,000 and we could be counting for more), then I should be extremely cautious.

Last but not the least – let me just go back to the ROOT OF THE PROBLEM – Providing Government Guarantees to business ventures and the practices of governance that we have today.

I would strongly encourages that ALL POLITICIANS should work hard to enact laws of parliament to do the following (very much in line to what the US had done post Sub-Prime Crisis):

  1. To enact laws that provides FULL COMPULSORY DISCLOSURE OF ALL FORMS OF GUARANTEES PROVIDED BY THE FEDERAL GOVERNMENT (all the explicit and implicit guarantees). Furthermore, we must have a clear cap or ceiling on the total  guarantees (including implicit guarantees). If possible, NO GUARANTEES to be provided to ANY FORMS OF BUSINESS VENTURES. This has to stop. [In the next article, I will provide the factual details (to my ability and knowledge) the full extent of these guarantees, as of today].
  2. To enact laws that ELIMINATES ANY FORMS OF FORMATION OF “SHADOW FINANCIAL ORGANIZATIONS” BY THE GOVERNMENT. (Note that 1MDB is only ONE of the MANY. Actually, many were formed during Tun Dr. M’s time, which in effect are still operating till today). The same practices are done by State of Penang, Selangor, and Kelantan (which are in opposition control), and off course all the BN controlled states (with Sarawak on top of the list), followed by Johor, Pahang and so on. In short, to eliminate any forms of the “Dark World of Finance” to be operated by any level of governments. I have to say that, as of today, we have these forms of “shadow financial structure” to be endemic within the whole country. Anybody who came to power will find extremely lucrative and convenient to continue with them as it serves them well. This is one of the major avenues of corruption to take place, albeit in hidden forms due to the “dark and shadowy” nature of its structures.
  3. To find ways to “STRIP OF INDIVIDUAL POWERS” of government officers. We inherit the British systems of power structure, whereby the Chief Executives (the Prime Minister, Chief Ministers, and followed by all the “little Napoleons” below them) had almost TOO MUCH POWERS vested in them, individually. They are good for effectiveness and inefficiencies of government operations. But Tun Dr. M had make it all to be “personal fiefdom” all the way to the bottom (right to Yang Dipertua Majlis Perbandaran and Ketua Kampung).

For PART A and B above, it would require ALL PARLIAMENTARY members to come together, by-partisan, to get such an Act in place. If that’s is impossible, then WALK THE TALK. Any level of government, such as State Government, or even units or divisions of Government COULD VOLUNTARILY, EVEN NOW, to perform it with full sincerity and intention for the sake of the people. Don’t come with lame excuses, if you really believe in it. My dear friends, all of this can be DONE even WITHOUT ANY NEW LAWS to be enacted. What’s needed is CLEAR POLITICAL WILL. Hence, I challenged the State Governments which are controlled by the Opposition to be first to do it (since they complaint the loudest). That would augur well for the public and show that they are sincere in what they say.

For PART C: it is an uphill battle. Nobody wants to let go positions of power, since it is extremely convenient (and useful). It will take real political guts and determination, as the rot has gone down to the bottom. Obama couldn’t change the US (despite the motto of his original campaign of “Change We Can”). For me, I want to see any real leader among us who is willing to do this – VOLUNTARILY. Then he is a man of WALK THE TALK and hence a true leader that’s worthy of leadership.

With this background, I will then focus on the economics, which is the next part of this set of writings.


Add Yours
  1. syuz

    Dr. Wan, i only recently discovered your writings in this platform..much to my regret. Keep it coming but your non partisan stand on party politics shouldnt stop you from making critical analysis on the ‘dark politics’ of the whole fiasco of 1MDB by certain politician(s) to whatever purposes. I would love to hear your take on that..


      Dear Syuz
      I had tried my best not to be partisan and keep my comments away from “politics” as to be on any politician. Frankly, I feel that it is unfair to judge Dato Seri Najib on “one event” namely 1MDB. If you can see from so many writings that I had made thus far – the problem is rooted in our system – i.e. systemic problem. My concern is the politicking may take us away from understanding the roots of the problem. Which is how had we (in particular Dr. M, Pak Lah before DS Najib) been managing. Previous PMs got away with lot more issues at their hand and we had suffered due to what had been done in the past.

      If we really want to make changes – then look at the roots. Work on solving it. And for that we really need all sides to agree on the issues and pull our act together. When Pak Lah mismanage Terengganu Inv Auth (TIA) (before it become 1MDB), everyone were silent. Should we go back and even look at what had happened then? This is the path of March of Folly as I said.


  2. kembang setaman

    Dr, while I agree with you about tackling the root cause to avoid a repeat of the 1MDB scandal (only word that appropriately describes it), there are also many immediate actions that we the public must strongly demand from the government to stop further hemorrhaging of the national treasury. That is why the 1MDB issue has and should continue to be politicised, because the PM and Finance Minister have too much discretionary powers when it comes to handling public money. You’ve mentioned GLCs in your analysis, but we shouldn’t forget the many newly minted agencies reporting directly to the PM/FM that has been allocated huge budgets running into billions of ringgits. PR1MA is one example–over RM4 billion allocated to date with nothing to show that is reflective of the money given, and reportedly planning to raise RM15 billion via government guaranteed papers for its planned ‘projects’. The person holding the keys to government should not be allowed another single minute on the throne simply because, based on the findings of the PAC, of not taking any decisive action on 1MDB’s previous management and board members, many of whom continue to hold high positions in public institutions of trust, for their collective failure to perform their fiduciary duties.

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