JUST days after the arrest of the secretary-general of the Rural and Regional Development Ministry on graft allegations, yet another Malaysian government official has been charged with corruption.
For an economy that is currently under assault from interest rate hikes in the U.S. and global economic slowdown, the continuing battering of the nation’s international reputation could prove further damaging to the floundering ringgit.
The most recent arrest of the former CEO of Tekun Nasional on allegations of accepting a RM36,000 (US$8,000) bribe is the latest in a long list of corruption incidents originating from within the corridors of power in this Southeast Asian nation. Tekun is a government agency in charge of providing funding to Bumiputera (the Malays and other native groups) to create and further expand their businesses.
Over recent months Malaysia has seen a string of graft allegations against government officials.
The arrest of the secretary-general of the Rural and Regional Development Ministry, who himself served as a board member at Tekun, occurred just days ago following the seizure of RM2.6 million (US$580,000) worth of cash and gold.
Prior to this, the Sabah Water Department was marred in scandal when a number of employees, including the director and deputy director, were arrested on money laundering charges back in October 2016.
More notably, these graft allegations are hitting the Malaysian government at a time when international investigations into the 1Malaysia Development Berhad (1MDB) scandal and the alleged involvement of Prime Minister Najib Razak are still ongoing.
The economy took an initial hit when the 1MDB scandal came to light, with investors hurriedly selling their stocks and seeking out other Asean markets with better growth prospects.
With international reputation playing such a large role in investor confidence, Malaysia cannot afford to dominate the headlines with these ongoing allegations.
The ringgit is currently at its lowest since the 1998 Asian Financial Crisis and was the worst performing currency in Asia in 2016.
Despite oil prices starting to recover in mid-2016, the ringgit has continued to weaken.
The recent rise has not had the positive impact it once would have due to the reduced contribution of oil-related income to the government’s budget. The 2014-2015 slump in the price of crude oil reduced the contribution from nearly 30 percent to the early teens, meaning the sensitivity between oil prices and the currency has also reduced.
This paired with the fact that the U.S. Federal Reserve is looking to raise interest rates has made the ringgit particularly vulnerable.
The hope is that the reduced cost of doing business brought about by the floundering currency and cheap commodities will be enough to entice investors back to Malaysian shores.
“Investors could re-look at Malaysia as a favourite FDI destination,” says Joanne Goh, a DBS regional equity strategist. “Investments into Malaysia can be expected to pick up, taking advantage of the lower costs and the resource-rich country.”
With this in mind and with new initiatives announced by Bank Negara, the country’s central bank, the government has been urging people not to panic and is taking steps to reassure investors with their prediction of a rebound in the second half of the year.
But while they are taking measures to combat the financial risks, they don’t appear to be concerned with the toxic issue of lack of confidence in the government.
With 1MDB investigations being carried out by authorities around the globe including Singapore, Switzerland, the U.S. and now Australia, Malaysia appears to be keeping itself firmly in the international consciousness but for all the wrong reasons.
The reputation of Malaysia has been dragged through the mud on the world stage and the seriousness and scale of the accusations will continue to unsettle foreign investors considering opportunities in Malaysia unless the government takes measures to tackle its declining image.
While the ruling party continues to put its own interests above that of the people, restoring investor’s faith in the nation will prove a struggle.