- Proposal for Eurofighter exports takes no account of 1MDB scandal where Malaysian government guarantees were used to embezzle loans
- 1MDB loans were given under UK law – critics of Malaysian government over the scandal have been persecuted
The UK government is willing to back $2 billion in loans to Malaysia in order for it to buy Eurofighter jets from BAE Systems. The UK government has a history of backing loans for arms sales to regimes across the world, including former dictatorships in Iraq, Egypt, Indonesia and Argentina.
The lack of scrutiny of Malaysian government debt deals has come to light recently through the 1MDB corruption scandal. 1MDB, a Malaysian Development Bank, borrowed money through sets of bonds issued by various global banks. It has been alleged that $4.5 billion of this money has been embezzled. In the words of Global Witness: “The case concerns an elaborate fraud, implicating senior 1MDB officials, the Malaysian Prime Minister Najib Razak and willing partners from a Saudi oil company and the Abu Dhabi sovereign wealth fund.”
1MDB’s debts were guaranteed at various points by the Malaysian government, but not all these guarantees were made public at the time. The guarantees were made under English law. Abu Dhabi also guaranteed some of the debts.
1MDB began defaulting on some of its debts in 2016. Following an arbitration panel in London, Malaysia’s Finance Ministry agreed to pay $1.2 billion to Abu Dhabi by the end of 2017, and to “take over all interest and principal payments on the two 2012 1MDB bonds, which charge interest rates of nearly 6 percent and are due for full repayment by 2022”.
1MDB remains the subject of investigations in Singapore, Switzerland and the United States. It is therefore extremely concerning that the UK government is willing to back more loans to the Malaysian government, even before considering that the loans would be for weapons.
Human Rights Watch report that “Malaysia’s human rights situation continued to deteriorate in 2016, with human rights defenders, activists, political opposition figures, and journalists facing harassment and politically motivated prosecution. Those criticizing the administration of Prime Minister Najib Razak or commenting on the government’s handling of the 1 Malaysia Development Berhad (1MDB) corruption scandal have been particular targets.”