On the 19th floor of a skyscraper at 3 Lockhart Road in Hong Kong’s Wan Chai district, a company was alleged to receive at least €36 million from an offshoot of the French defense company DCN. Terasasi Ltd is indeed an enigma company.
The 19th floor’s main tenant is a company called Union Alpha, the Hong Kong arm of an accounting firm that provides “professional services to meet clients’ daily business needs, both in Hong Kong, Greater China and globally,” including auditing and assurance services, management consulting, accountancy and other services, according to the firm’s website.
Terasasi, however, is at the center of allegations that at least some of the €36 million was funneled through its accounts to Malaysian Prime Minister Najib Tun Razak as a commission on the sale of two Scorpene submarines purchased from the French defense company Thales International, also known as Thint Asia.
It seems that two directors (initially Terasasi was incorporated in Malaysia, but listed in the Hong Kong Companies Registry later) are Najib’s associate, Abdul Razak Baginda who was once head of the Malaysian Strategic Research Centre, and Razak Baginda’s father, Abdul Malim Baginda. The former was at the center of a 2006 investigation into the death of Mongolian translator, Altantuya Shaariibuu.
At the Paris Tribunal de Grande Instance, the French investigating magistrates Roger Le Loire and Serge Tournaire are enquiring the sale of the two Scorpene submarines to Malaysia. It was disclosed that a company Perimekar Sdn. Bhd. received another €114 million as a commission on the sale of the vessels, from an offshoot of Thales and DCNS known as Amaris. Perimekar at the time was wholly owned by another company, KS Ombak Laut Sdn Bhd, which in turn was also controlled by Razak Baginda and his wife, Mazalinda. Perimekar is now 20 percent each owned by the Armed Forces’ Superannuation Fund LTAT and Boustead Holdings.
(A subsidiary of Boustead Holdings, Boustead Naval Shipyard Sdn. Bhd. had recently received an amended letter of acceptance from the Defense Ministry for a RM$9 billion contract to build and deliver six second-generation patrol vessels with combatant capabilities for the navy (Business News, The Star, 2nd. October 2013)); part of the evolving littoral combat ships scandal is articulated in a theedgemarkets commentary.
The magistrates have documents that show that the money was funneled from Thint Asia to Terasasi — €3 million when Terasasi was still domiciled in Malaysia, and €33 million after it was incorporated in Hong Kong. There is no indication at this point where the money went. French investigators, however, theorize that it was part of €146 million that may have been funneled to officials of the United Malays National Organization and Najib, who traveled with Abdul Razak Baginda several times to France as defense minister at the time the country purchased the submarines from DCNS. (An earlier scale model of the original proposed submarine can be seen inside a glass-case in Galeria Seri Perdana, former residence of Mahathir in Bukit Damansara; the former prime minister’s dedicated kitchen to make loaf bread can also be visited, and be sighted).
According to the French news agency Agency France Press the probe by the French investigating magistrates involves three contracts for the submarines which were signed on June 5, 2002. Also according to the documents received, the contracts had two components: the sale of two submarines built by Thint and the Spanish shipbuilding firm Izar, for €920 million; and the delivery of “logistical support” from Perimekar Bhd (amounting to €114 million) to train the first batch of 200 Royal Malaysian Navy personnel.
The contracts cited by AFP included the €114 million amount paid by the Malaysian government to Perimekar. The second, called “C5 contract of engineering business,” was concluded in August 2000 between DCNI, a subsidiary of DCN, and Thales International Asia valued at €30 million. The third was the “consulting agreement” signed in October 2000 between Thint Asia and Terasasi.
The French investigators, while studying one of the invoices issued by Terasasi in August 2004 for €359,450 sent to Thint Asia, expressed that, “it appears that… the amounts paid to Terasasi ultimately benefited Najib, the defense minister, or his adviser Razak Baginda.”
According to the proceedings in this case, the French authorities say Terasasi apparently received regular payments from Thint Asia, including one for €360,000 that was accompanied with a handwritten note saying “Razak wants it to be paid quickly.” There is no indication if the Razak in question was Najib Tun Razak or his friend, Razak Baginda.
A lawyer with Solitary Human Rights Group, Breham was engaged by the Malaysian reform NGO Suaram, had indicated that DCNS often budgeted between 8 to 12 percent of its total receipts as “commissions” to grease hands in third-world countries. Breham said Perimekar had received the commission for “supporting the contract,” which he said was a euphemism for unexplained costs, and also for “housing the crew” of the submarines in France.
Further, a confidential memorandum made available to Asia Sentinel (see also: Kua Kia Soong’s article states that: “The beneficiaries of these funds are not difficult to imagine: the family clan and Razak Baginda relations. In addition, these funds will find their way to the dominant political party (UMNO).”
In Malaysia, capital flights can even be flown out by the Prime Minister. Between 2010 and 2013, this ethnocrat spent RM$86.4m for his private jets with an addition of RM$16.5m. on maintaining them. In addition to the cost of private jetting, a whopping RM$42 was spent annually on the Prime Minister’s foreign trips since 2008. Besides the Prime Minister’s jet, the country has six other VVIP executive jets for official use by the Yang di-Pertuan Agong, Deputy Yang di-Pertuan Agong, and the Deputy Prime Minister “to carry out official businesses of the nation”.
Some of these official businesses are not necessarily towards national diplomacy bonding because the government had admitted that Najib made a ‘private trip’ to Milan despite concealing the destination when asked in Parliament. His official Royal Malaysian Air Force plane Perdana One – an Airbus 319-115X(CJ) registered as 9M-NAA – flew to Milan from Washington on the 20th of May, 2012 and stopped at Dubai before returning home, all tracked by flight-radar-24.
On this particular trip alone, his two-day plus stays in London and New York cost the Malaysian taxpayers RM$849,175 and RM$1,606,402, respectively, while his remaining days spent in Washington was another whooping RM$452,985.
The other spendrift ethnocrat is Sarawak Chief Minister Taib Mahmud. Sarawak’s Taib is known for his immense wealth and string of assets – he is calculated to worth US$15bn. outstripping Malaysia’s richest capitalist tycoon Robert Kuok who has US$12.5bn., (Forbes, 2011) – by abusing his position not only as the Chief Minister of the state, but also as the State Finance Minister, and Planning and Resources Minister whereby these three ministries controlled 50% of the state’s operating expenditure of RM$1.2bn, and 80% of the state’s development expenditure of RM$3bn while the other ten ministers share the 20% balance. He is often seen travelling in a Rolls Royce, sporting a designer suit, wearing a walnut-sized ruby ring, and while at home residing in a well-guarded palace-like mansion in Kuching. “I have more money than I can ever spend” once telling his deprived rural populace in 2010.
Capitalism has not changed nor reduce inequality anywhere, more so an ethnocratic corporatism residing in Malaysia, thus confirming Marx’s view that relative amiseration of the rakyat would more than likely increase under crony capitalism.
Associate Professor Syed Farid Alatas of the Department of Sociology at the National University of Singapore presenting on a forum Eradicating Corruption: How Successful Have We Been? that the Malaysian political system is a systemic practice of corruption embedded into the state and politics – where corruption is the dominant means of doing business. Indeed, the major kleptocrats are not the mid nor low bribes but those high-level politicians-cum-crony capitalists and ethnocrats who engage in corrupt activities as means of accumulating capital while suppressing the poors from improving their livelihood.
The World Bank and the International Monetary Fund had assisted to underwrite for decades the many deceits committed by corrupt regimes. The World Bank’s limited focus on corruption ignores the much larger problem of transnational-border dirty money crossing. Whenever money that is illegally earned, illegally used or illegally transferred whether these are criminal proceeds from drug trafficking and racketeering, commercial proceeds from transfer pricing and shady business transactions, they are often hidden in tax havens. In fact, Western businesses and banks have facilitated and sheltered this type of dirty money for years. It is stated that for every One Dollar the western nations distributes in assistance across the table to the developing countries, they take back some Ten Dollars in illegal proceeds under the table to be transacted and reprocessed in the various developed countries banking systems, (Baker, R., Capitalism’s Achilles’ Heel, John Wiley, 2005).
Black Market Crimes in Malaysia
Total country Black Market value: US$2.99 Billion
Alcohol Smuggling: $268 million
Ecstasy Price: $16.0 per tablet
Heroin Price: $8.88 per gram
Human Traffickers Price: $6,588/person
Methamphetamine Price: $52.7 per gram
Book Piracy: $9 million
Counterfeiting: $772.5 million
Cigarette smuggling: $200 million
Counterfeit Pesticides: $19 million
Gas and Oil Smuggling: $175 million
Illegal fishing: $334 million
Movie Piracy: $36 million
Music Piracy: $23.5 million
Software Piracy: $657 million
Prostitution: $963.8 million
Video Game Piracy: $28 million
see also Haken, J., “Transnational Crimes in the Developing World”, Global Financial Integrity, 2011.
Indeed, some top Malaysian politicians, and their families, use offshore secrecy in Singapore and the British Virgin Islands, according to some recent leaked documents available to our research team. These files were obtained from the International Consortium of Investigative Journalists (ICIJ) in its Pandora Papers.
According to some of the finer details from the leaked documents accessible to the Study Team on Rakyat-rakyat Malaysia, they show that Raja Nong Chik, who is the Lembah Pantai UMNO chief, is a shareholder and director of RZA International Corporation, a British Virgin Islands entity incorporated on Aug 21, 2007, through Singapore. The company is a mirror of Malaysian entity Kumpulan RZA Sdn Bhd, a 1979-founded company dealing in real estate and equities investment. Raja Nong Chik set up the offshore entity with his father, Raja Zainal Abidin Raja Tachik, a number of his sisters and brothers as well as other family members. Most of them are also shareholders and directors of Kumpulan RZA Sdn Bhd. Though RZA International was de-registered in 2009, the former Federal Territory Minister did not elaborate on the offshore investments made by his family through the company, emphasizing that the entity was “not used to circumvent taxes nor hide (….or obscure) transaction overseas.”
Illicit capital accumulation, and its subsequent outflow allowing crony capitalists and families to buy mansions and duplexes in Vancouver and Dubai, has deprived re-investment in home country resulting in sub-standard roads and inadequate water and electricity supplies in Sarawak and Sabah, fragmentation of natural forest cover, inequality in the national economic development with the ensuing disparity in income distribution and within the education system (Jomo. K.S. and Wee C.H., Malaysia @ 50 – Economic Development, Distribution, Disparities, Strategic Information and Research Development Centre, 2013).
A capital-endowed society with present economic uncertainty and unstable social environment a larger cohort of the corporatized world of oligarchies and their crony-capitalists shall still depend upon an ethnocratic government procurement of their goods and services. Some mega-projects may now be suspended, and though some capitalist producers of government demand may endure, the impact of government service provision to the poor and needy may be more socially burdensome – even unaffordable or unavailable soon, too.
This comes at a times when the nation is split by racial income differentiation (see chart below), and the appropriate narrative should be about a class structure argument – that the ruling class of oligarchs are distancing themselves from the oppressed working class and the agricultural peasantry favoring the crony-capitalists on the control and domination of the national economy with close-in-hand operation with the ethnocratic ruling power.
While income inequality has fallen generally from an average around the gini coefficient of 0.50 in the 1970s to around 0.45 since 1987, there has been little to no significant improvement since [look at the blue nation-wide line in the chart], (cf Snodgrass, D.R., (1980), Inequality and Economic Development in Malaysia, and Shireen, M.H. (1998), Income Inequality and Poverty in Malaysia; the Gini coefficient, also known as Gini index or Gini ratio, is a measurement in statistical dispersion where a Gini coefficient of zero denotes perfect equality whence everyone has an exactly equal income whereas a Gini coefficient of one expresses maximal inequality).
Though the income gap ratio between urban and rural in 2009 is about the same level as in year 1989, but in absolute terms, the income gap had in fact widened considerably. Indeed, it had jumped three times during the same period. Further, the gap between the rich and the poor had also remained wide. Despite the huge resources allocated towards rural development and for the poor, the income ratio between the rich and the poor, and of the peasantry population and the urban mass, has not changed much post 1990s.
The economic superstructure contradictions still persist.
In fact, the liberalization and privatization of the economy after the mid-1980s has resulted in widening inequality since 1990, (Ragayah, H.M.Z., “Income Inequality in Malaysia”, Asian Economic Policy Review, (3), pp. 114-132, 2008); and agreed by Dr. Muhammed Abdul Khalid, a research fellow with Universiti Kebangsaan Malaysia.
If we are to further assume household wealth within a class structure analysis then the distribution of wealth is even more skewed than those of income. In fact, the distribution of wealth – classified as real estate assets as they make-up of 96% of Malaysian categorized household wealth – indicates that the top 10% of Malaysian households per capita control 35% of the country’s wealth, while the bottom 40% owns a meager 8%. (Khalid, M.A., “Household Wealth in Malaysia: Composition and Inequality among Ethnic Groups”, Jurnal Ekonomi Malaysia 45(2011), pp.71-80).
There is this stark inequality of wealth permeating in the country (Khalid 2019):
According to the UNDP 1997 Human Development Report, and the 2004 United Nations Human Development Report, Malaysia has the highest income disparity between the rich and poor in Southeast Asia, even more acute than those in the Philippines, Thailand, Vietnam, Indonesia and Singapore. The UNHDP Report displays that the richest 10% in Malaysia controls 38.4% of the economic income as compared to the poorest 10% who controls only 1.7%.
That corruption had enabled the illicit outflow of capital with illegal means of business trading as the typical operations by crony-capitalists and the oligarchies; this should be viewed as a weapon of mass destruction of the impoverished poors. These are crimes of the state against its people.
However, an ethnocratic government enmeshed in the culture of “ketuanan” often refused to accept an authority being questioned, but is it not that the rakyat is the master as the public elects the politicians into office, and the civil servants are the servants of civil society? Therefore, the rakyat-rakyat are the tuans of the politicians and public servants.
We shall conclude by expressing pointedly that kleptocracy is a government of thieves, by thieves and for the thieves.
The kleptocracy mode of governance only expands the oligarchs and ethnocrats on their personal wealth and political power by stealing from the state’s coffer.
Kleptocracy maintains its political power by dividing our beloved population along tribal, racial or religious lines through the ethnocratic culture of domination (Balasubramanian, R., “The Culture of Domination” and “Ethnocracy and the Culture of Domination” in juristmalaya.com, 2013); see also Hazis, F.S., “Domination and Contestation: Muslim Bumiputera Politics in Sarawak”, Institute of Southeast Asia, Singapore, 2011).
“The finality of the Shah of Iran’s regime was not portrayed by the photo of the Shah fleeing Iran but by a photo of six dead, naked generals of the SAVAK lying on the damp concrete floor of a morgue in Teheran.”
REFERENCES:
Biagioli, A., “Financial crime as a threat to the wealth of nations. A cost-effectiveness approach.” Journal of Money Laundering Control, 2008. 11(1): p.88-95.
Bruno Manser Fonds (2012), The Taib Timber Mafia – Facts and Figures on Politically Exposed Persons (PEPs) from Sarawak, Malaysia
Habibullah,M.S., Dayang-Affizzah and Puah, C.H., “Regional income disparities in Malaysia: A stochastic convergence”, Malaysia Journal of Society and Space 8 issue 5, pp 100-111, 2012.
Gomez, E.T., Political Business in East Asia (ed.), London: Routledge, 2002.
Gomez, E.T., The Political Economy of Resource Extraction: Indigenous Peoples, Multinational Corporations and the State, (with Suzana Sawyer) (eds), Basingstoke: Palgrave-Macmillan, 2012.
Jomo, K.S., “Mahathir’s Economic Legacy”, Aliran Monthly, Vol: 28, No: 8.
Nesadurai, E.S., “Accommodating Global Markets: Malaysia’s Response to Economic Crisis”, Centre for the Study of Globalization and Regionalization, University of Warwick, 1998.
Simpson, R.A., “Government Intervention in the Malaysian Economy, 1970-1990: Lessons for South Africa”, MPA research report, Faculty of Economic and Management Sciences, University of the Western Cape, 2005.
Study Team on Rakyat² Malaysia (STORM), “Oligarchy and Ethnocracy in Malaysia”, October 4th. 2013;
first published in
STORM, 8/10/2013 with recent materials, including graphs, incorporated during August 2022
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