Asia Pacific

Malaysia to probe Najib government's $2 billion payment to Chinese pipeline firm

Reuters, AP

Malaysia’s finance minister has announced plans to report to the anti-graft agency upfront payments of billions of ringgit the previous administration made to a Chinese firm for two pipeline projects that have barely begun.

Since taking office two weeks ago, Lim Guan Eng has been driving a campaign to expose financial scandals in the administration of former Prime Minister Najib Razak, unseated in a stunning election defeat last month.

Lim said Tuesday that Najib’s government had paid 8.25 billion ringgit ($2 billion) or 88 percent of the total value of two pipeline projects awarded to China Petroleum Pipeline Bureau (CCPB), although they are less than 15 percent complete.

“We have discovered that the payment schedules for the above contracts are based almost entirely on timeline milestones, and not on progressive work completion milestones,” Lim said in a statement.

In November 2016, CCPB won the contracts to build a 600-km (370-mile) petroleum pipeline along the west coast of peninsular Malaysia, and the 662-km (410-mile) Trans-Sabah Gas Pipeline in eastern Sabah state.

Lim said the contracts were negotiated directly by Najib’s office, and the former prime minister had ignored red flags raised by the attorney-general’s office on both deals.

In March 2017, the finance ministry raised 85 percent of the project funding from China EXIM Bank through a wholly owned subsidiary, Suria Strategic Energy Resources (SSER). The rest was raised by issuing sukuk, or Sharia-compliant bonds.

“Both the China EXIM Bank borrowings and the sukuk are secured with federal government guarantees,” Lim added.

In a statement posted on his Facebook page, Najib said the negotiations and execution of the two projects complied with the necessary procedures and laws.

The ex-premier said he welcomed an inquiry into the projects, but cautioned Lim against making “serious, politically motivated public allegations” that could negatively affect Malaysia’s foreign relations and international trade.

Telephone calls to CCPB’s office numbers listed on its website were not answered.

Lim said he had ordered a report filed with the anti-graft agency, and the ministry would consider seeking China’s help to decide if money laundering figured in either deal.

Najib and his family were dogged during the last three years of his near-decade-long rule by a scandal over billions of dollars allegedly siphoned from state fund 1 Malaysia Development Berhad (1MDB), and it became a key reason for his May 9 election defeat.

1MDB is also the subject of money laundering investigations in at least six countries, including the United States, Switzerland and Singapore.

Najib has denied any wrongdoing.

Last week, Lim said Malaysia would have to pay debts of about 50 billion ringgit racked up by 1MDB.

Also Tuesday, anti-corruption investigators questioned the wife of Najib about alleged theft and money laundering involving the 1MDB fund.

The prosecution of Najib and his wife, Rosmah Mansor, over the 1MDB scandal, which helped lead to Najib’s stunning ouster in May 9 national elections, could be sped up with the government’s appointment Tuesday of a new attorney-general.

The appointee, distinguished lawyer Tommy Thomas, is the first person from outside Malaysia’s Malay majority to hold the powerful position in more than half a century. His Najib-appointed predecessor had stifled investigations.

Rosmah, accompanied by her daughter and son-in-law, didn’t speak to reporters as she was escorted into the Malaysian Anti-Corruption Commission office, where she was questioned for three hours. She was summoned nearly two weeks after Najib was questioned twice by the agency.

In another blow to the former first couple, their lawyer, M. Puravelan, said that he is no longer representing Rosmah and Najib. He said another prominent lawyer Yusof Zainal Abideen had also withdrawn. He said they didn’t quit because of disagreement over legal strategies for the 1MDB case but declined to elaborate.

Najib set up the 1MDB fund when he took power in 2009 but it accumulated billions in debts. U.S. investigators say Najib’s associates stole and laundered $4.5 billion from the fund from 2009 to 2014, some of which landed in Najib’s bank account. They say $27.3 million was used to buy a rare diamond necklace for Rosmah.

New Prime Minister Mahathir Mohamad reopened investigations into 1MDB that were suppressed under Najib’s rule. He has also banned the couple from leaving the country. The country’s new anti-graft chief has said Najib, who denies any wrongdoing, could soon face criminal charges.