Inside Malaysia's Shadow State

Or watch at: http://www.youtube.com/watch?v=_1RRNggnM6A

WHAT IS THIS FILM ABOUT?

This investigation provides undercover footage of the corruption and illegality at the heart of governance in Sarawak, Malaysia’s largest state, on the island of Borneo.

Global Witness 

For over thirty years, Sarawak has been governed by Chief Minister Abdul Taib Mahmud, who controls all land classification, forestry and plantation licenses in the state. Under his tenure, Sarawak has experienced some of the most intense rates of logging seen anywhere in the world. The state now has less than 5 per cent of its forests left in a pristine condition, unaffected by logging or plantations and continues to export more tropical logs than South America and Africa combined.

The film reveals for the first time the instruments used by the ruling Taib family and their 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. Taib and the local lawyers we approached denied Global Witness’s allegations of corruption. A summary of their responses are included at the end of the film.

HOW DOES CORRUPTION AFFECT SARAWAK’S PEOPLE?

Corruption is destroying the fabric of Sarawak’s society and squandering the state’s natural resources. The region’s indigenous people have born the brunt of this. Ancestral land to which they have claims has been routinely licensed for logging and plantations, badly damaging their livelihoods and violating their rights under Sarawak and Malaysian law. This has trapped many communities in a cycle of poverty and dependency.

Moreover, corruption affects the future well-being of all Malaysian citizens. This investigation demonstrates how money that should be driving development is being lost to corruption and hidden in secrecy jurisdictions overseas. Malaysia is thought to be the world’s third largest source of such illicit financial flows, losing the country an estimated US$285 billion (RM863 billion), or over US$43,000 (RM130,000) perhousehold between 2001 and 2010. This is money that could have been spent on improving key services and quality of life for ordinary Malaysians.

IS THIS A WIDER PROBLEM THAN SARAWAK?

The timber rush which occurred during Taib’s three decades in office has spawned some of the world’s largest logging companies. These companies have had a catastrophic effect on forests and indigenous communities in almost every major tropical forested region in the world, and are regularly implicated in major illegal logging scandals.

Global Witness’ analysis shows that Sarawak’s logging companies are currently logging or converting forests to plantations in at least 12 countries. Their operations cover an area of 18 million hectares worldwide, an area roughly three times the landmass of Norway.

Watch the film at: http://www.globalwitness.org/insideshadowstate/ 

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

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, shows for the first time the instruments used by the ruling Taib family and its lawyers to skirt Malaysia’s laws and taxes. It shows how they cream off huge profits at the expense of indigenous people, and hide 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. We 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. 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.

/ENDS

Contact: In London: Oliver Courtney +44 (0)7912 517147 ocourtney@globalwitness.org

Tom Picken +44 (0)7810 558247  tpicken@globalwitness.org

Editor’s notes:

• A 15 minute film by Global Witness documenting some of the covert footage obtained is available at: http://bit.ly/16ESEVU
• Sarawak's Chief Minister Abdul Taib Mahmud has governed Sarawak for 31 years. One of his many ministerial roles includes heading up the Ministry of Resource Planning and Environment which controls all land classification, timber and plantation licensing in the state.
• Leaked Sarawak land registry documents suggest members of Taib’s family have interests in companies holding land leases totalling nearly 200,000 hectares (source here), conservatively valued at over half a billion US dollars.
• Much of Sarawak’s environmental destruction has occurred on the ancestral land of Sarawak's indigenous population, who depend upon access to farmland and healthy forests for their livelihood and whose rights are protected under Malaysian law. These rights have been systematically ignored by the Sarawak Government, resulting in widespread environmental degradation, social disenfranchisement and economic deprivation.