The electoral triumph of Malaysia's ruling coalition in the country's largest state may be a well-needed confidence boost for Prime Minister Najib Razak as he battles a high-profile corruption scandal.
Sarawak, located in the island of Borneo, held its 11th state elections on Saturday, with the Barisan Nasional (BN) party securing 72 out of 82 seats.
The results effectively allow Najib to maintain the status quo and contain political risks from the 1Malaysia Development Bhd (1MDB) scandal, explained Trinh Nguyen, an economist at Natixis.
Last June, the 62-year old leader was accused of receiving $681 million in his bank account from 1MDB, a debt-laden state investment fund that is now under investigation in Malaysia and six other countries. In March this year, the Wall Street Journal, who first broke the scandal, updated that figure to more than $1 billion. Najib has denied any wrongdoing and was cleared by the country's attorney general in January, who attributed the initial $681 million to a legal political donation from the Saudi royal family that was mostly returned.
The country's finance ministry, the sole shareholder of 1MDB, recently dissolved the fund's board of advisers and said it would take over the remaining assets following 1MDB's failure to pay a $50.3 million coupon on a $1.75 billion bond in late April. Should 1MDB go into default, the government will have to assume 1MDB's obligations. But that may be a risky burden for Kuala Lumpur to bear, with state finances already hit by low oil prices—Malaysia is the world's second-largest exporter of liquefied natural gas.
As of January, 1MDB's debt stood at $12.5 billion, according to Reuters.