In 2015, allegations of mismanagement of funds in the state investment fund 1Malaysia Development Berhad (1MDB) surfaced. The scandal has triggered a national and international ‘crisis of confidence’ undermining trust in the current political regime to allow an impartial and transparent investigation into this matter.

Criticisms, including from the former Prime Minister Mahathir Mohamad, have added to the chorus of mounting pressure on then Prime Minister, Najib Razak, amid reports of a paper trail tracing millions of dollars into his personal bank account.

This chapter analyses the relationship between politics, economics and law which, albeit to varying degrees, has been a cornerstone of Malaysia's government for decades, using the latest 1MDB scandal as a case study. The chapter will focus on the national dimensions of the scandal, in particular how the government-critical media unearthed and reported on the scandal; followed by how national agencies reacted and started to investigate those allegations and how politicians, parties and society reacted to the scandal. While de facto national investigations have come to a standstill, the international investigations into the 1MDB scandal are in full swing. However, it remains to be seen whether those investigations will have any impact in Malaysia.

Politics, Economics and Corruption in Malaysia

The link between politics and economics – in particular, corruption – in Malaysia has been observed and commented on for decades, but nothing appears to change to sever those linkages. There is strong evidence that corruption has been, and will continue to be, a challenge in Malaysia. In 2013, Transparency International conducted a global study on corruption – Global Corruption Barometer 2013 – which showed that Malaysia indeed has a problem: based on public perception, political parties in Malaysia received a score of 3.8 out of 5, on a Likert scale, where 5 means extremely corrupt; the business/ private sector received a similar score of 3.2; the public sector, 3.3 (Transparency International, 2013: 36). In another survey conducted by KPMG, one of the four largest accounting firms in Malaysia, 90 per cent of those surveyed considered fraud ‘an inevitable cost of doing business’, while 71 per cent echoed a similar sentiment about bribery and corruption (Wong, 2014). In the Ernst & Young Asia Pacific Fraud Survey Report Series 2013. Malaysia – with China – was perceived as one of the most corrupt countries (Ibid.; Ernst & Young, 2013: 16, 18).