While it is true that both Bank Negara’s foreign exchange losses and 1MDB’s losses due to theft are of the same order of around RM30 billion, it is wrong to say that 1MDB’s losses are paper losses and will be recovered. And there are important other differences between the two.

Perhaps some of the stolen money, which the US Department of Justice (DOJ) estimates at US$4.5 billion (RM19.35 billion), can be recovered, but only if action by shareholders of 1MDB, the Minister of Finance Inc, effectively the government, does something now. But that is not forthcoming.

Press reports quoting the auditor-general’s report on 1MDB, which has been blatantly classified as a secret under the Official Secrets Act so that its contents cannot be publicly disclosed, say that US$7 billion (RM30.1 billion at an exchange rate of 4.3 ringgit to one US dollar) cannot be accounted for.

That is quite close to the RM31.5 billion forex losses incurred by Bank Negara between 1991 and 1994 as disclosed to the Royal Commission of Inquiry now investigating the forex losses. However, this does not take into account other real losses incurred such as bond overpricing, overpayment for assets, overpayment to advisors, etc, which easily will come to at least RM10 billion, taking the overall loss to over RM40 billion. Here is one estimate of how much 1MDB could have lost.

For a comparison of the two large losses – RM31.5 billion for forex and over RM40 billion for 1MDB, it is necessary to look first at the nature of the forex loss.

Let’s be clear about the forex loss – it was known for a long time that it came about because Bank Negara was engaged in speculative currency trading – not diversifying its currency holdings but taking positions. That means it effectively increased its exposure to certain currencies by much more than its actual holdings of the currency.

It lost its bets – it was effectively gambling, something central banks should not do – and when it closed off its positions, it incurred massive losses of RM31.5 billion over a period of three to four years. Some of the details, as revealed by Bank Negara’s counsel at the RCI hearings, were put under the OSA so that it could not be publicly revealed to hide the true extent of the losses. And yes, this was done during Dr Mahathir Mohamad’s time as prime minister.

So, it is correct to say that both Mahathir and Najib Abdul Razak used the OSA to hide severe losses incurred by government entities so as to stay in power. The RCI surfaces because Mahathir has moved from Umno to the opposition with his declared paramount aim of removing Najib as prime minister.

It is also reasonable to assume that Mahathir actually approved the forex trading/gambling by Bank Negara, especially in the light of his widely reported statements at that time supporting “active” foreign exchange intervention by the central bank as well as the fact that the two most responsible for it, then Bank Negara governor Jaffar Hussein and the adviser in charge of forex trading Nor Mohamed Yakcop, were not brought to account for their actions.

The forex losses arose out of a desire to make money for the country even if it were by highly irresponsible and irregular speculative activities bordering on gambling by a central bank. Never before or since has a central bank engaged in such activities and made such losses.

However, no individual or corporation associated to Mahathir or the government of the day made money from the losses that the central bank made. That is the important distinction when compared to 1MDB.

Stolen money

We now know from press reports that US$7 billion is unaccounted for in 1MDB and that the DOJ maintains that RM4.5 billion has been stolen from 1MDB and the money moved through various accounts controlled by Jho Low, a person who is well-known to Najib’s stepson Riza Aziz and even to Najib himself and his wife, Rosmah Mansor. Indeed, the DOJ says that US$680 million came directly into Najib’s bank account while US$238 million went to Riza’s account.

Jho Low could not have moved such amounts of money into his account without the connivance and collaboration of 1MDB officials but there has been no investigation to determine wrongdoing with Najib, the government, the attorney-general, and all senior Umno officials still maintaining that no wrong has been done despite overwhelming evidence to the contrary.

The forex losses have been made and occurred 23 to 26 years ago. They represent a huge error of judgement and improper conduct by a central bank. But the 1MDB money stolen is still in the world banking system and the money is still being moved around into various assets as the DOJ investigations show.

1MDB does not require an RCI now but immediate attempts to recover all stolen money and bring to account everyone responsible for this horrendous crime, representing kleptocracy by the state which has allowed fingers to dip in and take out nearly all of the bond borrowings of 1MDB. The scale of this and the necessary connivance is unprecedented too.

1MDB represents a new chapter in the annals of corruption and mismanagement by the government led by Umno. The RCI will eventually get to the bottom and make official what many people in Malaysia knew all the time – forex trading was a harebrained gamble to make money for the country gone horribly wrong.

But if 1MDB is to be righted now instead of having the truth revealed a quarter of a century down the line through another RCI, it needs a change of government, for the government controls all the supposedly independent bodies that should be investigating 1MDB now. We all know who was responsible for that.

Mahathir was a highly questionable prime minister who not only suppressed human rights but clung to power by destroying the independent judiciary and other institutions and causing more than a hundred billion ringgit eventually in losses to the public through forex trading and other ill-considered schemes such as Proton, the privatisation of Malaysia Airlines, independent power producers and others, cornering the London tin market, using the Employees Provident Fund to bail out government companies, etc, etc.

And this is the man that the opposition has gone to bed with to unseat the current government! What irony, wonders never cease. Make no mistake about it, the RCI will be damaging to Mahathir and the credibility of the opposition.

They need to think seriously about how to counter that.

P GUNASEGARAM believes somewhat in that old saying “What goes around comes around”. E-mail:

– M’kini