CIMB Chairman Nazir Razak: Malaysia’s government needs to improve transparency after 1MDB scandal

Key Points
  • CIMB Chairman Nazir Razak, who is Malaysian Prime Minister Najib Razak's brother, said the government needed to improve transparency over the 1MDB scandal.
  • Nazir expected greater caution from investors and consumers leading up to Malaysia's general election, which was likely by early next year.
  • But Nazir added that he expected the current government would maintain power.
Malaysia oil and gas remains strong: CIMB Chairman

The Malaysian government needs to improve transparency in the wake of the long-running 1MDB scandal, CIMB Chairman Nazir Razak, the prime minister's brother, told CNBC.

"It's been a very painful number of months in the international media," Nazir told CNBC's "Street Signs" on Thursday on the sidelines of the WEF Asean conference in Cambodia. "I think they are trying to complete the financial restructuring of 1MDB, but I think the government still needs to improve in terms of overall transparency and understanding of what exactly transpired."

In April of 2016, Nazir voluntarily took a leave of absence from his bank during CIMB's investigation into his role in distributing around $7 million in political funds for his brother in the lead up to the 2013 elections.

Nazir was cleared by CIMB's independent investigation and returned to work about a month later.

Questions about movement of funds from 1MDB came to widespread attention when the Wall Street Journal reported that in 2013 nearly $700 million had flowed from the debt-ridden fund to Malaysian Prime Minister Najib Razak's personal bank account.

Najib, who also chaired 1MDB's advisory board and launched 1MDB as a pet project to promote economic development, has repeatedly denied wrongdoing and, under pressure from the outcry caused by the report, said the funds were a private donation from a Middle Eastern country he declined to name at the time, but was later identified as Saudi Arabia. He has denied benefiting personally from the funds.

Last year, the U.S. Department of Justice moved to seize more than $1 billion of assets it said was tied to an international conspiracy to launder funds funnelled away from 1MDB.

That complaint said officials at 1MDB, their relatives and other associates diverted more than $3.5 billion from the state fund and laundered it through complex transactions and shell companies.

Nazir Razak, chairman of CIMB Group Holdings, in Hanoi, Vietnam, on Thursday, Dec. 8, 2016.
Maika Elan | Bloomberg | Getty Images

In January of 2016, Malaysia's Attorney General Mohamed Apandi Ali said Najib had committed no criminal offense. But globally, investigations have continued in locales as varied as U.S., Switzerland, Singapore and the Seychelles.

The next election will be the full country's first chance to express their concerns over the 1MDB scandal at the ballot box.

CIMB's Nazir said he expected the general election (GE) would be called late this year or early next year, and noted some concerns about how that would affect sentiment.

"Generally, ahead of the GE there can be a little bit of caution with investors, and consumers as well and I think that's related to expectations of the results and at the moment, the picture's not so clear," Nazir said. "But I think it will evolve that the government most likely will get back in. So as that settles down, then I think sentiment will improve and things will pick up."

Nazir's brother Najib also leads the United Malays National Organization (UMNO) party, which has been in power since the country's first election in the late 1950s, via a coalition government called Barisan Nasional (BN).

Malaysia's opposition parties also tend to be fragmented, with infighting helping to solidify BN's grip on power.

Additionally, opposition leaders can face various forms of harassment. In 2014, opposition leader Anwar Ibrahim was convicted and jailed for five years on sodomy charges, in a case he described as politically motivated. It's the second time Anwar has been jailed on sodomy charges.

The Malaysian press can also be subject to government restrictions. Online news site Malaysian Insider, which was covering the 1MDB scandal, was forced to shut down in 2016 after the government blocked access to the site.

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