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Corruption in Malaysia laid bare as investigation catches Sarawak's ruling elite on camera


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By: Global Witness

March 19, 2013 - A new investigation by Global Witness today reveals the systemic corruption and illegality at the heart of government in Sarawak, Malaysia's largest state. A film, shot undercover during the investigation, reveals for the first time the instruments used by members of the ruling Taib family and its local lawyers to skirt Malaysia's laws and taxes, creaming off huge profits at the expense of indigenous people and hiding their dirty money in Singapore.

Sarawak still exports more tropical logs than South America and Africa combined, despite having just five per cent of its forests left intact after decades of industrial logging and plantation development. Sarawak's Chief Minister Abdul Taib Mahmud has ruled the state for over three decades and controls all land allocation and forestry licensing. He is widely understood to abuse this power to enrich his family and associates.

"This film proves for the first time what has long been suspected – that the small elite around Chief Minister Taib are systematically abusing the region's people and natural resources to line their own pockets," said Tom Picken, Forest Team Leader at Global Witness. "It shows exactly how they do it and it shows the utter contempt they hold for Malaysia's laws, people and environment."

Global Witness posed as foreign investors looking to buy land for oil palm plantations. The investigator approached the Regional Corridor Development Authority (RECODA), the government body charged with receiving foreign investment. An official at RECODA during a meeting in March 2012 directed our investigator to certain members of Taib's family looking to sell their company licensed to log and clear land for plantations.

Out of four land leases offered to Global Witness during 2012, members of the Chief Minister's family were direct shareholders or beneficial owners of three of these deals. The fourth deal was proposed by an intermediary on the understanding that Taib would receive a multimillion dollar kickback from the selling party. The key findings of this investigation are:

KICKBACKS: A representative of one of Sarawak's biggest tycoons indicated that Taib would be likely to receive a multimillion dollar kickback for a plantation licence;

CORRUPT LAND DEALS: Some members of Taib's family are allocated land through directives from the Ministry of Resource Planning and Environment, headed by Taib, for a tiny fraction of its real commercial value, enabling these individuals to 'flip' these assets for multimillion dollar profits;

EVASION OF MALAYSIAN TAX: One company, jointly owned by Taib's first cousins, a Malaysian MP for Taib's party and a sister-in-law of the Malaysian Prime Minister, was offered for sale through an illegal transaction in Singapore designed to evade Malaysian tax;

THE SERVICE ECONOMY OF CORRUPTION: A well-established service economy of local lawyers routinely facilitates illegal transactions in violation of Malaysian and Sarawak law.

Additionally, Global Witness was told by senior government officials and a timber company executive, that it is standard practice in Sarawak for companies to pay a personal kickback to Taib in return for obtaining timber and plantation licences, typically amounting to 10 per cent of the commercial value of the licence.

The findings also reveal that the small elite around Taib have a deep seated contempt for Sarawak's indigenous population, whose rights to their ancestral land are enshrined in Sarawak's law and protected under the Malaysian constitution. Two of Taib's first cousins repeatedly referred to indigenous communities as ‘naughty' people who "try to make money" through "squatting" on land that has been licensed to private companies for logging and plantations.

"The Taib family and their friends have treated Sarawak's natural resources like a personal piggy bank for decades," said Picken. "This investigation shows how they are willing to stash this dirty cash in jurisdictions like Singapore, which one lawyer in the film describes as "the new Switzerland". Until Singapore and other financial service centres stop allowing corrupt politicians and criminals to shield themselves and their loot from justice back home, the likes of Taib will continue to get away with stealing from their own people."

Global Witness is calling on Malaysia's federal authorities to hold a Royal Commission of Inquiry to investigate the extent of corruption in Sarawak's executive and government institutions, explore institutional reforms to improve systems of transparency and accountability, and to ensure prosecutions swiftly follow against those found to have been engaged in corruption. Key to these reforms will be granting Malaysia's Anti-Corruption Commission independent powers to prosecute.

Global Witness put our allegations to the individuals concerned. The law firm in London representing Chief Minister Taib – Mishcon de Reya – told Global Witness:

"The Government of Sarawak issues licences for land in very controlled circumstances… This is an administrative exercise, not political patronage."

"Our client never demands or accepts bribes for the grant of licences and leases."

"He has not issued any 'directive'... illegally to benefit his cousins."

A summary of the responses received from other parties is included at the end of the film, which is available here.

www.globalwitness.org

 

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