1MDB fund probe may trigger mass protests in Malaysia

Subject

The political and economic consequences of the 1Malaysia Development Berhad fund controversy.

Significance

Police raided 1Malaysia Development Berhad (1MDB)'s offices yesterday under a wider investigation into allegations of mismanagement of the state-owned investment fund. Meanwhile, today the auditor general submitted a provisional report on the fund to the Public Accounts Committee.The 1MDB case is dominating Malaysian political and economic life, and undermining Prime Minister Najib Razak's political position. Further allegations against 1MDB, or popular perceptions that the government is insufficiently investigating criticisms of the fund, could trigger mass protests.

Impacts

• Snap elections are unlikely.
• The 1MDB controversy will continue to erode investors' confidence in Malaysia.
• A future 1MDB default is possible without further credit support, posing risks for financial institutions linked to the fund.