This article first appeared in Forum, The Edge Malaysia Weekly on January 13, 2025 - January 19, 2025
Last Tuesday, the Johor Singapore Special Economic Zone (JS-SEZ) took another step towards becoming a reality. The prime ministers of Malaysia and Singapore unveiled the initial details of an agreement that primarily seeks to unlock the value of Johor’s proximity to Singapore, which lacks land and manpower.
The two governments have drawn up agreements for tax breaks and deregulation to enable the freer movement of people, goods and capital within the special area. The aim is to place Johor in an attractive light as both countries collaborate to compete for global investments.
The impact of the signing of the JS-SEZ was immediately felt in Singapore. The share prices of the top three Singaporean banks, namely Oversea-Chinese Banking Corporation Ltd, United Overseas Bank Ltd and DBS Bank Ltd, all hit record highs on the optimism about the JS-SEZ and its positive effect on the country’s economic growth.
However, the same cannot be said for Malaysia. Stock market sentiment took a turn for the worse. The buzz of optimism was hardly felt. Instead, the attention was on the fate of former prime minister Datuk Seri Najib Razak and his tenacious attempts to serve the rest of his jail term in the comfort of his home.
Najib, who was sentenced to 12 years’ jail and fined RM210 million in August 2022 for abuse of power, money laundering and criminal breach of trust in the SRC International trial, won an appeal to have the High Court hear an addendum pertaining to a Federal Territories Pardons Board decision on Jan 29, 2024.
The Pardons Board, which was presided over by the king at the time — the Sultan of Pahang — cut the sentence to six years and reduced the fine to RM50 million. In addition, the then king issued an addendum for Najib to serve the remaining sentence at home.
The addendum is an issue because there are questions about whether it was presented and discussed at the FT Pardons Board meeting on Jan 29, 2024.
Following the Court of Appeal’s decision, which was delivered on the eve of the signing of the JS-SEZ agreement, the matter will be deliberated before the High Court.
Najib’s crimes relating to 1Malaysia Development Bhd (1MDB) involve the biggest financial scandal that the country has seen. He participated in a well-orchestrated plan that created a fund using Malaysian government guarantees to raise money, part of which financed his political machinery and supported the luxurious lifestyle of those around him.
It left taxpayers with a bill of more than RM40 billion, although some of the money siphoned off is being recovered. Until today, taxpayers are still paying the bill for the plundering of 1MDB.
Since May 2018, although there have been four prime minister changes, the 1MDB saga has continued to dog the government and taunt the judiciary. For instance, Najib’s pardon in January 2024 is seen to undermine the judiciary because its terms are unprecedented.
It raises questions as to how his file moved ahead of those of hundreds of prisoners waiting for their cases to be deliberated by the Pardons Board. It speaks of how the well-connected political elite are accorded privileges.
The saving grace is that the Malaysian judiciary stood firm in its commitment to uphold the integrity of the justice system, sending Najib to jail in August 2022. The case went through three levels of judicial hearings and nine judges, showing that the judicial system worked well and allowed any accused to exhaust all means available under the system.
This is unlike the situation in some countries where the accused, especially political leaders, can be held without trial and justice is swiftly served.
A strong judiciary that inspires confidence is vital for any business environment to thrive. It is the vital element that may make or break investment decisions. Singapore is well known for its no-nonsense approach to white collar crimes.
No privileges are accorded to the rich or political elite and even the aged.
For instance, the 82-year-old founder of Hin Leong Trading Pte Ltd was jailed for 17½ years in November last year for cheating The Hongkong and Shanghai Banking Corporation Ltd (HSBC), a fraud that dented the country’s image as a global point for oil trading. In coming to the decision, the court disregarded the health and age of the wheelchair-bound Lim.
Another landmark case in Singapore last year was the jailing of the former transport minister, S Iswaran, for 12 months for obstructing justice and receiving more than S$300,000 (RM987,000) worth of gifts. What’s surprising is that the presiding judge handed down a longer sentence than the six to seven months sought by the prosecutor.
In delivering his judgment, Judge Vincent Hoong said the jail sentence sought by the prosecution was “manifestly inadequate” given the gravity of Iswaran’s offences and their impact on public trust.
“Trust and confidence in public institutions were the bedrock of effective governance, which could all too easily be undermined by the appearance that an individual public servant had fallen below the standards of integrity and accountability,” he said in sentencing Iswaran.
In Malaysia, there have been several cases of politicians and corporate figures committing financial crimes but the outcomes have been very different.
Apart from the 1MDB saga, the case of Serba Dinamik Holdings Bhd is also a stark reminder of how things can go very wrong if the judicial system is undermined and due process is avoided for reasons best known to the authorities.
After its accounts were red-flagged in May 2021, Serba Dinamik challenged the external auditors and even Bursa Malaysia. The Securities Commission (SC) charged the top brass in court for furnishing false information with regard to revenue of RM6 billion for the financial year ended December 2020.
However, after representation to the Attorney-General’s Chambers, the case against Serba Dinamik CEO Datuk Mohd Abdul Karim Abdullah and three others was dropped. Instead, they were fined a mere RM16 million, which they paid, and walked off free.
The then minister in the Prime Minister’s Department Datuk Seri Wan Junaidi Tuanku Jaafar, who is now the Governor of Sarawak, explained that the decision to drop charges against Karim, who is also Sarawakian, and the three others was made on the basis that punitive action could be taken immediately rather than have the case drag on indefinitely.
However, what’s glaring in the entire process is that the so-called “punitive action” is disproportionate to the gravity of the offence.
Banks that had furnished loans to Serba Dinamik, including HSBC, lost billions. And because the legal system did not live up to expectations, the banking system continues to shun the oil and gas industry.
The ghosts of 1MDB and cases such as Serba Dinamik will continue to haunt grand initiatives such as the JS-SEZ until they are exorcised.
Economic policies and tax incentives are the hardware for the success of JS-SEZ. They provide the framework for the investment decisions of international companies to take advantage of the “extended Singapore” zone that comes in the shape of southern Johor.
However, what matters is the software, such as a strong judiciary that instils confidence and a government that will not tolerate corruption. Without this software, the hardware will not be able to realise the full potential of the undertaking, no matter how many carrots are held out to investors.
We do not want to see the benefits that go to Singapore far outweigh the contributions to Malaysia’s economy because our judiciary is seen as easily undermined.
M Shanmugam ([email protected]) is a contributing editor at The Edge
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