The business of ethics

Is the nature of business prone to unethical behaviour?

Advertisements

Are widespread business malfeasances a reflection that the business case always trumps ethics?

The Volkswagen emissions scandal, price gauging by the pharmaceutical industry, the LIBOR scandal, the sub-prime crisis, the Enron and Arthur Anderson scandal, Milken and junk bonds, the TESCO accounting and horsemeatscandal, the China milk scandal, the Rana Plaza fire, the exploitation of workers, all add to an endless litany of unethical business practises. These unethical behaviours appears to be widespread traversing many industries in developed and developing economies across small and large firms involving individuals at all levels of authority.

What is driving this malfeasance?

One way to analyse this complex issue is by framing it as the choice firms make in maximising profits and the consideration they have for societal welfare (e.g. valuing the workers, consumers, families, communities, and the environment) in their pursuit of profits. Stated simply, do businesses prioritise the business case over ethics.

There has been an increased focus on business ethics. A contentious subject, it is broadly explained as the philosophy that scrutinises the ‘rights’ and ‘wrongs’ of business behaviour. Many-a-theory and ideas contribute to modern business ethics but the utilitarian theory appears to dominate. In the utilitarian conception, business ethics is one that optimises pleasure and minimises pain while considering the preferences of those affected by the decisions businesses made (making the most number of people happy).

But in reality whose ‘pleasure’, whose ‘pain’, and whose ‘preference’ is considered?

Revisiting the Volkswagen (VW) case, the complexity becomes apparent.

There is no doubt that VW was involved in unethical behaviour and was practising bad business ethics. It actively pursued deception to penetrate the US auto market. It had an elaborate scheme that involved external partners (Bosch) to design a sophisticated cheat device.

But why a world leading company, from a country known for its precision engineering and industrial prowess, in an economic union known for high regulatory standards, selling a sophisticated product and service, in the world’s most sophisticated market, would resort to such behaviour remains puzzling?

Several hypotheses have emerged to explain this puzzle. They range from firm specific factors such as the governance and corporate culture and style of its CEOand corporate amnesia; to external factors such as low consumer buy-in for green technology; business schools that produce graduates who have little conception of ethics or are ‘blind’ to ethics; the failure of regulatory systems or to a widespread culture of gaming the system across all industries.

The inability to come to a consensus on the primary factor demonstrates the complexity of the issue but also why business ethics remains a contentious subject.

Returning to the trade-off between the business case and ethics may provide a parsimonious explanation. Corporate profits and shareholder value are tangible while ethics may not be so. Certainly the hit that VW has taken makes ethics tangible now to the firm. But if those hits (the pain) do not outweigh the gains (pleasure) that VW and its key stakeholders (the board, senior management, partners such as representatives from the state of Lower Saxony and Bosch) derived from 2009-2015, then it may be that the preference for the business case over ethics was the rational choice.

What do you think?

Sumesh Nair is a senior lecturer in marketing at Murdoch University (Singapore campus) and Greg Lopez is research fellow at Murdoch University Executive Education Centre.

Be part of Murdoch University’s new Executive Masters in Leadership, Strategy and Innovation.  

This article first appeared in Pulse

Malaysia’s Mr Clean

What is the legacy of Abdullah Ahmad Badawi, Malaysia’s fifth prime minister? Does power corrupt even the most ‘ethical’ of Muslim leaders.

In Malaysia, is being a Muslim a prerequisite to being an ethical leader?

The iconic former spiritual leader of the Pan-Malaysian Islamic party (PAS), the late Tok Guru Nik Aziz Nik Mat, stated that only a Muslim could be the prime minister of Malaysia. His popular argument was couched in terms of majoritarian politics but a deeper introspection suggests that the Tok Guru had a vision for a Malaysian state that was ruled by Islamic scholars.

An analysis of Malaysia’s fifth Prime Minister, Datuk Seri Abdullah Badawi, who ruled from 2003 to 2009 and is considered the most qualified “Islamic” leader among Malaysia’s six Muslim prime ministers, raises more questions than it resolves.

To-date, the most comprehensive analysis of Tun Abdullah Badawi years as prime minister is Awakening: The Abdullah Badawi Years in Malaysia, a book edited by Bridget Welsh and James UH Chin and published in 2013.

While extensive it does not provide any definitive answer (the editors acknowledge the difficulty in attempting to do so). The book certainly provides an interesting analysis. It also most certainly provides several interesting facts and raises several interesting issues in relation to whether being a Muslim is either a necessary or sufficient condition to providing ethical leadership in Malaysia.

Tun (then Datuk Seri) Abdullah Badawi – popularly known as Malaysia’s Mr Clean – would fit the Tok Guru’s conceptualisation of a “good leader” and certainly an “ethical leader.”

Abdullah Badawi comes from a line of prestigious religious leaders. His paternal grandfather, Syeikh Abdullah Badawi Fahim, was Penang’s first mufti after independence. His stature was such, that it is widely reported that it was he – Sheikh Abdullah – who advised Tunku Abdul Rahman (Malaysia’s first prime minister) that 31 August would be good date to declare Malaya’s independence. Syeikh Abdullah also helped establish Hizbul Muslimin, a party that promoted Islamic tenants. Members of Hizbul Muslimin were also often members of the United Malays National Organisation (UMNO).

Abdullah Badawi’s father, Ahmad Badawi also became a mufti. He also joined UMNO and was a member of the Penang legislative assembly from 1959 until his death in 1978. Interestingly, both Abdullah Badawi’s father and grandfather were among the founders of PAS. There is no doubt that Abdullah Badawi understood the role of leader from an Islamic perspective and the role of Islam in promoting good governance.

Abdullah Badawi did not become a mufti but graduated with a degree in Islamic Studies from the University of Malaya (although he was offered a scholarship to study economics). This would have solidified his lived experience of Islam in leadership and governance. He joined the Malaysian civil service after graduation. In 1978, he resigned from the civil service and stood for election in the Kepala Batas constituency held by his father since 1959.

Although UMNO had begun to use Islam as a political strategy in earnest since the time of Dr Mahathir Mohamed, Malaysia’s fourth prime minister, it was Abdullah Badawi who was the first prime minister to formally introduce Islam into mainstream Malaysian public policy making. He did this through the introduction of Islam Hadhari. While Islam has always had an elevated position in Malaysia Abdullah Badawi made it the hallmark of his administration. These efforts further strengthened the already formidable powers [pdf] (both formal and informal) of “Islam” in Malaysia.

But was Abdullah Badawi an ethical leader and did all these Islamic overtures improve governance in Malaysia?

Here are some fascinating insights extracted from Welsh and Chin’s book.

Abdullah Badawi’s son
Kamaluddin Abdullah was a businessman with moderate holdings before Abdullah Badawi became prime minister. After his father became deputy prime minister and prime minister, Kamaluddin’s holding company, Scomi Group, was perceived to have grown into one of the largest companies in Malaysia and Kamaluddin became one of Malaysia’s richest men. In 2004, Kamaluddin was ranked by Malaysian Business, a leading business magazine, as the 32nd richest man in Malaysia, with a net worth in the region of US$ 100 million.

Abdullah Badawi’s son-in-law
Khairy Jamaluddin, the current Minister for Youth and Sports, married Abduallh Badawi’s daughter in 2001. When Badawi became prime minister, Khairy Jamaluddin, then a political novice with no experience in government was accused of running his father-in-law’s government through his control of the ‘Fourth Floor Boys’ – a group of young professionals who manned the policy-making unit of the PM’s office. Khairy Jamaluddin himself held the posts of ‘special officer’ and Deputy Principal Private Secretary (2003-2004) in the Prime Minister’s office.

After resigning from the prime minister’s office, Khairy Jamaluddin joined a merchant bank, ECM Libra. In 2005, one year after Abdullah Badawi became prime minister, Khairy Jamaluddin helped in the merger between ECM Libra Capital Bhd and the Malaysian government-owned Avenue Capital Resources Bhd. A year later in 2006, the three founding members of ECM Libra – Lim Kian Onn, Kalimullah Masheerul Hassan and David Chua – announced that they were each selling one per cent of their shares in the company to Khairy Jamaluddin. The deal was transacted at 71 cents per share for a total of approximately US$ 2.6 million. Khairy Jamaluddin was able to finance it through a soft loan from the founders.

Abdullah Badawi’s other family members and friends
Abdullah Badawi’s brother, Ibrahim Badawi, Chairman of LSG Sky Chefs-Brahim’s Sdn Bhd was criticised for being given a long term catering contract by state-owned Malaysian Airlines. The terms were deemed so favourable that even the minor caterers complained.

Another close business associate of Abdullah, Patrick Lim was able to buy a prime piece of land belonging to the Penang Turf Club. Using his company, Abad Naluri Sdn Bhd (a private limited company), Patrick Lim proposed to build a multi-million development project called Penang Global City Centre and managed to secure federal approval for the project.

Abdullah Badawi’s name also appeared twice in The Independent Inquiry Committee into the United Oil-for-Food Program chaired by Paul A Volker. The Oil-for-Food program was established by the United Nations to allow Iraq to sell oil in exchange for food, medicine and other vital supplies. The Iraqi government however abused the program by demanding kickbacks from these contracts.

Mastek Sdn Bhd was at that time owned by three persons: Noor Aishah Dato Mahmood (Abdullah Badawi’s sister-in-law), Faek Ahmad Sharef (Noor Aishah’s ex-husband) and Jaya Sudhir (a businessman).

The report stated that Iraqi officials gave Mastek a large allocation because of Faek Ahmad’s relationship to Abdullah Badawi. Iraqi officials referred to Faek Ahmad as ‘Mr Faek Ahmad Shareef/for the benefit of Abdullah’.

Support for Prime Minister Najib Razak
Most surprisingly, in the recent scandal involving Prime Minister Najib Razak, Abdullah Badawi instead of supporting calls for the prime minister to resign, has come out instead, in support of the prime minister.

While the book provides extensive coverage of the Badawi administration and of Abdullah Badawi himself, the question if being a Muslim is either a necessary or sufficient condition to providing ethical leadership remains unanswered.

Yet, Tengku Razaleigh Hamzah, Malaysia’s longest-serving parliamentarian, in the forward of Welsh and Chin’s book, may have provided some resolution to this burning question:

So the best way to conclude Tun Abdullah Ahmad Badawi’s stewardship of the country is to say that he has failed to live up to the legitimate expectations of the people. People say that he failed miserably to translate the aspiration of the people in wanting real reforms for the country. Perhaps it could be said, he fell into the same trap as many third world leaders as he too succumbed to corrupting tendencies of power.

 

This article first appeared in New Mandala.

Greg Lopez is research fellow at Murdoch University Executive Education Centre, Murdoch University and visiting fellow, Department of Political and Social Change, Australian National University.

The Malay Supremacy Gambit — How Far Will It Go Under Najib Razak?

How far will current Prime Minister Najib Razak allow for the strategy of Malay Supremacy to prevail in Malaysia?

In Malaysia, the 3Rs – race (the Malay race), religion (Islam) and royalty (the Malay Sultans) – ideology (code word for Malay supremacy) and strategy has underpinned the ruling party’s grip on the Malaysian community. Since the twelfth general election in 2008, however, the efficacy of this ideology and strategy appear to be on a downward slide, especially among urban Malaysians. The critical question now is: What extent will the prime minister and the leaders of UMNO use the politics of Malay supremacy to remain in power?

One of the most outspoken is the Sungai Besar United Malays National Organisation (UMNO) division chief, Datuk Jamal Md Yunos, who is organizing a “red shirt” rally for Sept. 16 (which coincidentally is Malaysia Day) to teach the Democratic Action Party (DAP) Chinese not to be rude to Malays. He has also warned non-Muslims to avoid Kuala Lumpur. Already rumors are spreading and the recent Low Yat riot comes to mind.

But the story is rapidly evolving. After fierce criticism from a wide spectrum of society, including from former UMNO stalwarts and public disavowal from prominent Malay associations,  the ‘theme’ has now changed. It appears that it is no longer Himpunan Maruah Melayu (Rally for Malay Dignity), but rather a Himpunan Rakyat Bersatu (Rally for Citizens Unity). Questioned for its legality earlier, the rally is now legal according to Malaysia’s Inspector General of Police. It is now being organised by the Malay martial arts sports association, Pesaka (the National Silat Federation), whose chair is the former Malacca Chief Minister, and current UMNO senator, Tan Sri Mohd Ali Rustam.

Despite the cosmetics, the motive remains.

It’s a common practice for leaders in the Malay community, especially from UMNO, to rally their supporters by appealing to race, religion and royalty; the symbols of Malay supremacy in Malaysia. Legitimate challenges within Malaysia’s narrowly defined democratic space are interpreted as “humiliating Malays” by those at risk of losing power. This is entirely predictable and was seen most clearly at Malaysia’s thirteenth general elections. It is important to note that its antecedents are likely in the creation of the Malayan state.

The force of this ideology was seen most vividly at Malaysia’s third general election in 1969, when UMNO performed poorly and ethnic riots between Malays and Chinese took place on May 13. Accounts vary as to what actually happened, but the underlying message was that while Malaysia is a “democracy,” power must always remain with the Malays, and preferably under UMNO. Otherwise, the loss of Malay supremacy would see them become marginalized within their own nation (as argued by their proponents).

Since then, the specter of May 13 is often raised for a host of different reasons, from justifyingaffirmative action for the Malays to banishing ideas for further democratization. Ironically, it is theDAP – the most successful opposition party and predominantly Chinese – that is always the reason given as to why another May 13 could happen.

The specter of May 13 is also commonly used by beleaguered UMNO leaders to rally their supporter. When UMNO was split in 1987, a certain UMNO Youth leader was alleged to have unsheathed a keris(Malay dagger) and reportedly vowed that the keris would be bathed in Chinese blood. UMNO general assemblies (including its Youth and Women’s assemblies) are routinely filled with symbolismsuch as this, accompanied with cries of protecting and “ennobling” (memartabatkan) the Malay race, the Malay language, the Malay culture, the Islamic religion and the Malay Sultans.

The current Deputy Home Minister, Nur Jazlan, wrote the following in 2011:

The party has failed to offer new ideas to attract the young Malays to support its ideology, which in recent years has drifted more to the right. The prime minister, Dato Seri Mohd Najib Tun Razak, through the concept of One Malaysia has tried to bring UMNO back to the center space of national politics, where race and religious tolerance is at equilibrium.

But his message doesn’t seem to resonate with the majority of the delegates and even among his bench of Supreme Council members, who may have come to a conclusion that another event of racial and religious strife in the country is the best way to retain Malay power.

The Deputy Home Minister concedes that the thinking at the highest levels in UMNO is that racial and religious strife can bring benefits to the party.

In cables leaked exclusively to The Sunday Age by WikiLeaks, several of Singapore’s highest ranked foreign affairs officials – Peter Ho, Bilahari Kausikan and Tommy Koh  – raised serious concerns over key politicians in Malaysia, including the then-Deputy Prime Minister Najib Razak.

The Sydney Morning Herald reported the following:

According to one cable detailing a meeting in Sept. 2008, Kausikan told U.S. Deputy Secretary of Defense for East Asia David Sedney that ”the situation in neighboring Malaysia is confused and dangerous,” fueled by a ”distinct possibility of racial conflict” that could see ethnic Chinese ”flee” Malaysia and ”overwhelm” Singapore.

”A lack of competent leadership is a real problem for Malaysia,” Kausikan said, citing the need for Najib Razak – now Malaysia’s prime minister – to ”prevail politically in order to avoid prosecution” in connection with a 2006 murder investigation linked to one of Razak’s aides.

”Najib Razak has his neck on the line in connection with a high-profile murder case,” Kausikan said.

Ho’s March 2008 assessment of Malaysia, given to another U.S. official, is also unflattering, and includes claims that former Prime Minister Mahathir Mohamad has been ”throwing stones” at his replacement, Abdullah Badawi.

”The political knives will be out for Abdullah’s son-in-law, United Malays National Organization politician Khairy Jamaluddin, whom nobody likes because he got where he is through family ties,” the cable records Ho saying. ”As for … Najib Razak, he is an opportunist. Although he has not been critical of Singapore, he will not hesitate to go in that direction if it is expedient for him to do so. Najib’s political fortunes continue to be haunted by the … murder scandal.”

Prime Minister Najib Razak is under intense pressure to resign. To compound his already numerous problems, a recent documentary by Al Jazeera once again raises serious questions of his alleged involvement in the murder of a foreign national.

If Najib’s supporters are of the opinion that sparking social unrest would be to his advantage, they may want to look back in history on how his father came to power.

If supporters of UMNO begin to think that such disturbances are likely to help it retain power in Malaysia, it would indeed be a frightening prospect, especially as divisions within the party have become all too apparent. Former prime minister Mahathir Mohamad appeared at a recent anti-government rally, urging UMNO’s members of parliament to replace Najib and has condemned the ‘red shirt‘ rally.

Those assessments made by Singapore’s foreign affairs chiefs on Malaysia are increasingly looking spot on.

Anticorruption reform in a setting of widespread corruption — The case of Malaysia

Top-down anticorruption reform measures in Malaysia are unlikely to be genuine as they undermine the basis of the ruling party’s access and control of patronage and power. This is compounded by the majority of Malaysians ambivalence towards patronage and corruption.

Top-down anticorruption reform measures in Malaysia are unlikely to be genuine as they undermine the basis of the ruling party’s access and control of patronage and power. This is compounded by the majority of Malaysians ambivalence towards patronage and corruption.

Transparency International warned that Malaysia is facing a major corruption crisis. It called on the Malaysian government to ensure independent investigation into corrupt allegations, and that prosecution and punishments are followed through, irrespective of who is implicated. Courageous words but misplaced.

Prime Minister Najib Razak had introduced a zero tolerance policy towards corruption since becoming premier in 2009. His administration has taken a plethora of initiatives to implement this policy.

Why is Transparency International surprised that levels of corruption has reached crisis point in Malaysia?

Melanie Manion’s “Corruption by Design – Building Clean Government in Mainland China and Hong Kong” provides one methodical way to analyze widespread corruption in Malaysia, and why reforms have failed. The excerpt of the book provides a nice synthesis of her framework:

…where corruption is already commonplace, the context in which officials and ordinary citizens make choices to transact corruptly (or not) is crucially different from that in which corrupt practices are uncommon. A central feature of this difference is the role of beliefs about the prevalence of corruption and the reliability of government as an enforcer of rules ostensibly constraining official venality (dishonesty). Anticorruption reform in a setting of widespread corruption is a problem not only of reducing corrupt payoffs but also of changing broadly shared expectations of venality (dishonesty).

Corruption is widespread in Malaysia. In a discussion, Datuk Paul Low Seng Kuan – the minister in the Prime Minister’s Department in charge of governance and integrity, and Ravindran Devagunam, Performance Management and Delivery Unit’s (PEMANDU) anti-corruption director, captures succinctly the fact and the reasons why corruption is widespread in Malaysia.

Datuk Paul Low: If you have a Government that is in power for a long time, there tends to be a situation where it takes things for granted. If they have all the powers where people will not question them, then it is likely that abuse will occur. Therefore, we deteriorated in our fight against corruption. The best way is to have a check and balance. Not only in a system by itself, but also politically, where it should have a counter-balance with different views and debates on issues.

Ravindran: Corruption in this country has become an accepted norm. We have corruption in schools, kids have basically said it’s okay to take or give. It has become pervasive and society has become accepting of it.

Manion identifies the crucial first step on why Hong Kong was successful in its anti-corruption reform despite corruption being widespread.

The crucial first step was the creation of the Independent Commission Against Corruption (ICAC), an anti-corruption agency independent of the police force and civil service, accountable solely to the Governor, with its commissioner appointed by and reporting directly to the Governor. In creating the ICAC, the Governor signaled his recognition of the public confidence problem posed by an anti-corruption agency based in the police force, the government department perceived as the most corrupt in the territory. This argument is what Blair-Kerr characterized as the “political and psychological” rationale for an independent agency. The structural change was aimed not only at better enforcement but also at producing a shift in public perceptions, to challenge the prevalent view about government complacency.

Reforms in Malaysia fail because the Malaysian Anti-Corruption Commission (MACC) is not independent. It is a department under the Prime Minister’s Department from which it receives funding for its operations. The position and tenure of the Commissioner is not secured under the Federal Constitution.

More critically, the crucial first step – of making the Malaysian Anti-Corruption Commission truly independent – is not possible in Malaysia for two structural reason: (i) the political economy of Barisan Nasional and (ii) the general attitude of the majority of Malaysians towards patronage and corruption.

Barisan Nasional is a patronage machine. The line between patronage and corruption is grey. Former Prime Minister Tun Mahathir has alleged that Najib Razak had ‘bribed’ all the parliamentary members of UMNO. Was the ‘bribe’ patronage or corruption?

Prime Minister Najib Razak himself reminded his UMNO supporters that the RM2.6 billion ($700 million) was forthem. It is not surprising that the cabinet and Barisan Nasional leaders remain steadfastly behind him.

Beyond these quips, there is consensus in the political science field on the nature of Barisan Nasional as a patronage machine. Publications by acclaimed academics such as Nicholas J. White’s, “British Business in Post-Colonial Malaysia, 1957-70: Neo-colonialism or Disengagement” and “The Beginnings of Crony Capitalism: Business, Politics and Economic Development in Malaysia, c.1955-1970”; E.T. Gomez and Jomo K.S., “Malaysia’s Political Economy: Politics, Patronage and Profits”; Barry Wain’s, “Malaysian Maverick: Mahathir Mohamad in Turbulent Times”; but also the works of other eminent academics such as William Case, Harold Crouch, Thomas Pepinsky, Meredith Weiss, Bridget Welsh and countless others has demonstrated the centrality of patronage politics in Malaysia.

1MDB is simply an evolution of an entrenched system. The number of corruption scandals involving Barisan Nasional has grown in frequency and scale. That Malaysians had continued to vote [only in 2013 did the ruling party lose its majority] in the majority for Barisan Nasional is a testimony that patronage and corruption is accepted in Malaysia.

The fiasco surrounding the 1MDB also demonstrates why Barisan Nasional cannot initiate and implement anti-corruption reforms. It undermines the basis of Barisan Nasional’s access and control of patronage and power.

Genuine top-down anticorruption reform is unlikely to occur in Malaysia. Barisan Nasional will not reform until the attitude of the majority of Malaysians towards patronage and corruption change. Until then widespread corruption is a reality of Malaysian life.

This article first appeared in Forbes.

The unfortunate case of Malaysia’s prime minister

The feeling that Malaysia is now in an abyss is real. Malaysians fear terrible things are happening to them and their country because of poor leadership. The man who – rightly or wrongly – will be blamed for all of Malaysia’s woes will unfortunately be the current prime minister.

The feeling that Malaysia is now in an abyss is real. Malaysians fear terrible things are happening to them and their country because of poor leadership. The man who – rightly or wrongly – will be blamed for all of Malaysia’s woes will unfortunately be the current prime minister.

In June this year, the minister responsible for transforming the Malaysian economy – Idris Jala – in an open letter to Bloomberg , complained that he hardly recognised the country that Bloomberg columnist William Pesek was writing about. In the open letter, Idris Jala provided a robust rebuttal to William Pesek’s derisive commentary on Malaysia.

Last week, Prime Minister Najib Razak was compelled to assert that Malaysia is not a failed state as public outrage reached a crescendo. Some even suggested that Malaysia is heading towards both a dictatorship and a  failed state. Najib Razak countered with statistics and examples.

Both the prime minister and his minister for economic transformation are correct that – on balance – the available analyses suggests that the Malaysian economy is healthy and the prime minister is not yet a dictator. Yet, both men also know that despite evidence to support their arguments; and after spending hundreds of millions of ringgit to prosecute their case, and also improve the prime minister’s image, the majority of Malaysians still thinklittle of him, his administration and the country’s performance. After the fatal mistake where he admitted that he “accepted” $700 million from a foreign donor (after first denying it) for the ruling party’s political activities (a story that is still unfolding), significant portion of his own supporters (from the United Malays National Organisation/UMNO) have also lost faith in him. This is most unfortunate for Najib Razak, but also his cabinet and the Barisan Nasional. 

During the East Asian Financial Crisis of 1997/98, then Malaysian prime minister, Dr Mahathir Mohamad (Tun Mahathir) managed to successfully pin the blame for Malaysia’s economic woes on the Jews. Najib’s party, UMNO, Razak is attempting a similar tactic of deflecting attention elsewhere by describing the Democratic Action Party as being funded by Jews, a charge strenuously denied by party officials. There is/are no external force/s that he and his allies can pin the blame on. He is being attacked by people from within his own party for what they perceive as unforgivable mistakes that are weakening the Barisan Nasional and UMNO further; and that these mistakes are of his own making. The majority of Malaysians have long registered their preference for another coalition and leader.

The leadership of Barisan Nasional and the present cabinet strongly backs Najib Razak. Beyond that small but powerful circle, support is thin. He is now being made thescapegoat for the Barisan Nasional’s, the UMNO’s and the country’s poor performance. All calamities befalling Malaysia and Malaysians are now being placed at his feet.

Despite being a prized product of the UMNO and Barisan Nasional system, Najib Razak is now a curse to many within the system that produced him.  The son of the architect of  the New Economic Policy and an UMNOthoroughbred, Najib Razak once glorified, is now houndedby the very people who made him the king of the hill. He has become a plague. It is no longer 1MDB but the prime minister that is the symbol of everything that is wrong with Malaysia.

On the 29th and 30th of August, 2015, rallies have been organised not only in Malaysia, but all over the world by Malaysians calling for Najib Razak’s resignation.

Will Najib Razak survive the weekend?

Stay tuned.

This article first appeared in Forbes.

Note: (1) I am holding off my article on the intra- and inter-institutional fights for awhile as I await new information. (2) Videos of grassroot UMNO leaders openly (and sometimes rudely) calling for his resignation are available on the internet. Here is a selection: [Video 1;Video 2; Video 3]. While other videos[Video 4] have exhorted the importance to attend the rally to demand change [Video 5].

Malaysia’s prime minister: A dead man walking?

Malaysian Prime Minister Najib Razak broke a cardinal rule in politics. He inadvertently admitted ‘guilt’ when the Malaysian Anti-corruption Commission cleared him of any wrongdoing in accepting a political donation. His position – vulnerable since his ascent to premiership – is no longer tenable as Malaysians question his sincerity and trustworthiness

Malaysian Prime Minister Najib Razak broke a cardinal rule in politics. He inadvertently admitted ‘guilt’ when the Malaysian Anti-corruption Commission cleared him of any wrongdoing in accepting a political donation. His position – vulnerable since his ascent to premiership – is no longer tenable as Malaysians question his sincerity and trustworthiness.

On July 2, 2015, the Wall Street Journal alleged that $700 million had gone into a personal bank account of Razak’s. The prime minister offered a non-denial denial:

Let me be very clear: I have never taken funds for personal gain as alleged by my political opponents – whether from 1MDB, SRC International or other entities, as these companies have confirmed.

Razak also labelled the report as political sabotage and threatened to sue the Wall Street Journal (more than a month after the allegation was made, at the time of publishing this article, the prime minister has yet to sue).

As the noose tightened around his neck, Razak went for broke.

On July 20, 2015, the Sarawak Report, a blog that had been systematically publishing reports on corruption and abuse of power in Malaysia, was blocked by the government. An arrest warrant for its founder and editor, Clare Rewcastle-Brown, was subsequently issued.

On July 24, 2015, the government announced that The Edge Financial Daily and The Edge Weekly, which had been reporting extensively on the 1MDB issue, were to besuspended for a period of three months.

On July28,  2015, the prime minister sacked his deputy and four other ministers in a cabinet reshuffle in an effort to strengthen his control of the government and the United Malays National Organisation (UMNO). With the changes to his cabinet, Razak alsoneutralized the Parliamentary Public Accounts Committee that had been vigorously investigating the 1MDB affair. He also removed the attorney general, who as part of a high-level task force (involving the Attorney General’s Chambers, the Central Bank of Malaysia, the Malaysian Anti-Corruption Commission (MACC) and the Royal Malaysian Police) was believed to have been preparing corruption charges against the prime minister.

After pulling off such a brazen act with a high degree of skill, the prime ministerblinked.

On August 3, 2015, the MACC announced that the $700 million channeled into Razak’spersonal bank account came from donors. In doing this, Razak inadvertently confirmed the Wall Street Journal’s report and opened Pandora’s box.

This admission of ‘guilt’ has taken the toxicity of the prime minister to an all-time high. But even more damaging than the legal implications of the matter (i.e. was itcorrupt for Razak to solicit donations on behalf of UMNO; is it certain that the donations were for UMNO; who donated; what were the donations for; were the donations used at the 2013 general elections; did the donation break Malaysian laws; etc) is the question of trust and legitimacy.

Malaysians will now once again question Razak’s honesty and sincerity in denying all other allegations made against him, his family and his administration. After all, if theWall Street Journal’s  preposterous allegation is correct, could all the other preposterous allegations also be true?

Malaysians will begin to wonder if there is truth to the preposterous allegations made by the suspended The Edge Finance Daily and The Edge Weekly.

Malaysians will begin to wonder if there is truth to the numerous preposterous allegations made by the blocked Sarawak Report.

Malaysians will begin to wonder if there is truth to the many preposterous allegations on 1MDB made by members of the opposition.

Malaysians may also begin to wonder if there is truth to all other preposterous allegations made about the Prime Minister, his wife and his family.

Malaysians will begin to wonder if there is truth to the preposterous claims being made by Bersih 2.0, namely that elections are neither free nor fair in Malaysia.

UMNO members will begin to wonder if there is truth to the sacked Deputy Prime Minister Tan Sri Muhyddin’s preposterous premonitions about UMNO’s future.

Having realized this faux pas, the prime minister and UMNO are currently engaged in rear-guard action to correct the mistake. But for an embattled prime minister already suffering a serious trust and legitimacy deficit, this may be too late.

One should not, however, dismiss Razak outright. It goes without saying that a dead man walking can be very unpredictable and dangerous.

Note: It appears that the government and its agencies (e.g. the Attorney General’s Office, the MACC, the Central Bank) are divided on 1MDB. It appears that some have aligned their efforts to protect the prime minister, while others are intent on removing him, and some who are just doing their work. I discuss this in next week’s article.

This article first appeared in Forbes.

Can Malaysia’s prime minister survive?

It is one thing for the Prime Minister of Malaysia and President of UMNO to pick off his rivals within or without UMNO one at a time. But it is altogether a different ball game when the Rakyat, the opposition parties and significant segments of UMNO are united in scalping the Prime Minister.

It is one thing for the Prime Minister of Malaysia and President of UMNO to pick off his rivals within or without UMNO one at a time. But it is altogether a different ball game when the Rakyat, the opposition parties and significant segments of UMNO are united in scalping the Prime Minister.

The President of the United Malays National Organisation (UMNO) is always the Prime Minister of Malaysia. It is UMNO that decides who becomes the Prime Minister of Malaysia. Leadership crisis in UMNO always have serious implications to national leadership and Malaysia.

The leadership crisis within UMNO occurs almost every decade. The outcomes of these leadership crisis are balanced as the context is important in determining the survival of the incumbent.

The first leadership crisis happened almost as soon as UMNO was established. Leaders from UMNO’s Islamic Department left in 1951 to form the Pan Malaysian Islamic Party of Tanah Melayu, now known as the Pan Malaysian Islamic Party or PAS. Then, this group argued for the centralisation of Islamic affairs, something that the then leaders of UMNO were not prepared to do. The incumbent was not challenged directly and survived. 

The third leadership crisis was the “palace coup” within UMNO. A poor showing by UMNO in the 1969 elections lead to a pogrom against Malaysian Chinese as segments of the Malay community vented their anger at the Malaysian Chinese minority in selected locations. The numbers are disputed but at least some 6,000 Chinese homes and business were destroyed and 184 were killed. Tun Abdul Razak (the father of the current prime minister) took over as prime minister replacing the liberal Tunku Abdul Rahman. A new “more assertive” Malay leadership group replaced the old “more accommodating” one. This “new leadership” included Tengku Razaleigh Hamzah, Musa Hitam and Dr. Mahathir Mohamed, launched the New Economic Policy (NEP) – an extensive affirmative action policy which covered all aspects of the Malaysian economy and society – aimed at reducing socioeconomic disparity between the ethnic Chinese minority and the Malay majority on the Peninsula as well as the indigenous communities of Sabah and Sarawak collectively termed Bumiputera (“sons of the soil”). The incumbent was forcefully removed. 

The fourth leadership crisis came about when a rival faction – led by Tengku Razaleigh Hamzah and Musa Hitam – almost succeeded in toppling then incumbent President of UMNO and Prime Minister of Malaysia, Mahathir Mohamad in the 1987 party elections. Mahathir Mohamad then purged the leadership of the government and party of his challengers which included more than half the cabinet members (including Abdullah Ahmad Badawi, Malaysia’s fifth prime minister. Anwar Ibrahim, Najib Razak and Muhyiddin Yassin sided with Mahathir). In the post party election tussle, the High Court declared UMNO to be an “unlawful society” following irregularities in the party elections that Dr Mahathir had just won narrowly. Dr Mahathir then founded a new party called UMNO Baru (New UMNO) with all the institutional resources of the old UMNO. The purged members would form a new political party called Semangat 46 in 1989.  In 1990, at the 8th general election, for the first time in Malaysian history, two formal opposition coalitions would be formed to take on the BN. Members of Semangat 46 disbanded in 1996 to return to UMNO. But the idea of opposition parties collaborating with dissidents from the ruling party and receiving strong support from the electorate was now a reality. The incumbent was challenged directly and survived. 

In 1998, Dr Mahathir had his deputy, and heir apparent, Anwar Ibrahim put on trial for sodomy and corruption creating the fifth leadership crisis. This action, together with other social, economic and political development would polarise Malaysian society further between supporters of UMNO and supporters of Anwar Ibrahim. It would also give birth to the Reformasi movement that would catalyse the engagement of large swaths of Malaysians in politics for the first time.  Although short lived, once again, opposition parties would collaborate through Barisan Alternatif. This collaboration between civil society, opposition parties, dissidents from UMNO and ordinary Malaysians would lay the groundwork for UMNO’s greatest challenge a decade later. The incumbent pre-empted a direct challenge and survived.

Dr Mahathir resigned on 31 October 2003. There were growing signs that UMNO – let alone vast segments of Malays and Malaysians – were not happy with Dr Mahathir Mohamad. He accepted this signal and paved the way for his deputy, Abdullah Ahmad Badawi to take took over, thus averting a leadership crisis and revitalising UMNO’s fortunes. The incumbent averted a direct challenge by resigning.

Prime Minister Badawi performed well in the 2004 election. UMNO alone had 109 out of 219 parliamentary, just one seat shy of being able to govern in their own right. Badawi’s popularity and UMNO’s and the ruling coalition’s might did not go towards greater societal outcomes, as perceived by Malaysians. Instead corruption at the highest levels, rising religious and racial tensions, and other issues (such as crime, rising cost of living, etc.) began to erode Badawi’s support from the electorate. Also, after the 2004 elections, Anwar Ibrahim’s conviction for sodomy was surprisingly overturned in attempts to mend fences. However, upon his release from prison, Anwar launched a political campaign that saw the opposition coalition registering its best ever performance. At one point, he claimed that he had the numbers to form government in 2008. After Badawi’s dismal showing at GE12, he accepted the signals coming from UMNO and society. The incumbent averted a direct challenge by resigning.

UMNO’s current and sixth major leadership crisis – where Prime Minister Najib Razak has sacked his Deputy Prime Minister, Tan Sri Muhyiddin Yassin – is likely to be its last.

A key issue appears to be the inability of Prime Minister Najib Razak to “listen, hear, read or see” the signals.

Despite spending more than MYR58 billion (US$15 billion) , with the support of an electoral system designed to keep the ruling party in power against an opposition that various administrations have hounded since independence, and against an opposition leader that UMNO had sought to destroy for more than decade, 51% of the electorate voted against Prime Minister Najib Razak. He was unable to listen, hear, read or see this signal coming from the Rakyat.

More importantly, he is also unable to listen, hear, read or see the signals coming from within UMNO. This could be fatal. Powerful segments within UMNO are genuinely concerned that Prime Minister Najib is condemning UMNO to oblivion.

The alleged scandals linked to the current UMNO President and Malaysia’s current Prime Minister are simply too many and too large to ignore. That may be the primary reason why the Prime Minister is unwilling to go.

The doors within UMNO also appear to be closing for a direct challenge against the incumbent. This means the challenge will be taken outside the UMNO general assembly. This could be potentially disastrous for Malaysia.

What will the incumbent do?

Watch this space. The best is yet to come.

This article first appeared in Forbes.