Malaysian Prime Minister Najib Razak, long embroiled in a multi-billion-dollar money laundering scandal now under investigation in at least six countries, hopes to have cause to rejoice after meeting with US President Donald Trump.
On September 12, Najib will be the second Southeast Asian leader to visit Trump’s White House, a highly anticipated meeting that could reset bilateral relations after a diplomatic downturn driven largely by the still unfolding 1Malaysia Development Berhad (1MDB) scandal.
The US Department of Justice has filed dozens of civil lawsuits seeking to seize dozens of US-based properties and other assets tied to 1MDB, a state fund Najib created and until recently oversaw. The charges claim Malaysian officials and their associates conspired to fraudulently divert US$1.7 billion from 1MDB to purchase assets in America.
Media reports have widely speculated that Najib is the unnamed “Malaysian Official 1” mentioned in the charge sheet. US investigators believe more than US$3.5 billion was illicitly siphoned from the state fund. The DoJ recently asked to stay its civil proceedings to avoid prejudicing an ongoing US government criminal investigation into the charges.
Najib’s 1MDB troubles extend beyond the US. Abu Dhabi’s sovereign wealth fund gave 1MDB five days to make a US$600 million payment owed to its International Petroleum Investment Company. Malaysia had vowed to make the payment from proceeds collected in a 1MDB asset sale rationalization plan. Switzerland and Singapore have also opened probes into alleged financial irregularities involving the fund.
The Malaysian leader appears keen to leverage the Trump visit as a diplomatic opportunity to deflect attention from his 1MDB troubles, emphasizing to his critics that he has been invited at the highest level of the US government while the DoJ-led cases and Federal Bureau of Investigation probe are ongoing.
US-Malaysia relations had improved significantly under former US President Barack Obama, but notably cooled after the 1MDB probe was launched, opening the way for China to steal a march. Najib has leaned heavily on China, now Malaysia’s largest trade partner and foreign investor, for financial sustenance amid a sluggish domestic economy.
Chinese state enterprises have stepped in to acquire a power generation business and other distressed 1MDB assets to relieve pressure on the indebted fund, adding further impetus to the strategic importance of bilateral ties while pulling Najib’s beleaguered administration closer to Beijing.
Najib also secured US$34 billion in economic and investment agreements with Beijing last year, including the first major defense deal between the two countries involving the purchase of four Chinese-made naval vessels. The two sides held their first joint military drill, involving more than 1,000 Chinese troops, in September 2015.
Those drills, including joint search and rescue, hijacked vessel rescue, and disaster relief were held partly in the Strait of Malacca, a strategically crucial waterway where as much as 80% of China’s energy imports pass. Strategic analysts predict the US would bid to block China’s passage through the narrow waterway in any conflict.
American media have framed Najib’s visit as part of an intensifying regional tug-of-war between the US and China for Southeast Asian influence, a contest Beijing increasingly appears to be winning.
CNN referred to Najib’s visit as “the latest salvo in the ongoing battle for supremacy in Southeast Asia between Washington and Beijing”, while a New York Times article noted that US Secretary of State Rex Tillerson “confronted a resurgent China everywhere he went” during last month’s Association of Southeast Asian Nations (Asean) summit held in Manila.
Najib is also expected to leverage his White House invitation to score political points against opposition figures who had earlier cast doubts he would be granted an audience with Trump because of his ongoing 1MDB legal troubles – though the US leader has been undeterred so far by the bad optics of fraternizing with controversial foreign leaders.
The US Department of Justice has filed dozens of civil lawsuits seeking to seize dozens of US properties and other assets tied to 1MDB, a state fund Najib created and until recently oversaw
“Najib wants to create the impression that the 1MDB scandal is a baseless accusation churned out by the opposition,” said Shamsul Akmar, an independent political analyst. “His supporters would also contend that if Najib is guilty of wrongdoings with 1MDB, surely Trump would not want to be associated with him, let alone receive him and be seen together.”
“Trump’s readiness to meet Najib only encourages his supporters to believe that [his] strategy of leaning towards China had made the US realize that it cannot take Malaysia for granted,” Akmar said. “That should give Najib the courage to urge Trump to assist in slowing down pursuit of the 1MDB case.”
The visit will also give Najib political ammunition to counter opposition criticism his government has become too dependent on China. It will require a fine diplomatic balancing act, however, to both please Trump and avoid alienating China at a time Beijing has given his 1MDB liabilities such a crucial financial lifeline.
Questions surround other aspects of US-Malaysia ties. Since Trump abandoned the Trans-Pacific Partnership, a multilateral trade pact which would have included Malaysia and several other Pacific Rim nations representing 40% of the global economy, his administration has failed to develop an alternative framework for engaging Malaysia and other Asean states.
Tillerson’s short post-Asean meeting visit to Kuala Lumpur on August 9 was viewed as more symbolic than substantive in moving relations ahead. “Tillerson’s visit did not indicate much except that Obama’s ‘pivot’ to Asia has really died down under the Trump administration,” said Wan Fayhsal, a political commentator at King’s College London.
The mismatch between what China can provide economically and what the US is prepared to offer has never been so stark. Yet it is conceivable that Najib and Trump could agree to restart negotiations towards a bilateral free trade agreement, particularly if Trump can spin a Najib gesture as a trade deficit-reducing win.
The mismatch between what China can provide economically and what the US is prepared to offer has never been so stark
At the same time, Najib will likely seek quiet top-level assurances that the US government will not seek criminal charges against his relatives and associates, not to mention himself. The complaint implicates Najib’s stepson and others of using 1MDB funds to purchase US luxury real estate, expensive paintings, a yacht, private jet, jewelry, as well as the production of a Hollywood blockbuster film.
Najib is not named directly in the suit. He has persistently maintained his innocence of any wrongdoing, including revelations that US$681 million in 1MDB funds ended up in his personal bank accounts. Najib’s government has claimed those funds were a political donation made by a Saudi royal family member to ensure his party’s re-election.
Malaysia’s next election is due by August 2018, though there is speculation Najib may call early polls later this year while the political opposition is in disarray. While Najib’s White House visit may help to put US relations back on track, it’s unlikely to win the same level of assistance China has given to steady his scandal-plagued, wobbly rule.
Nile Bowie is a writer and political commentator based in Singapore. He is on Twitter at @nilebowie