A QUESTION OF BUSINESS | While it is true that both Bank Negara’s foreign exchange losses and 1MDB’s losses due to theft are of the same order of around RM30 billion, it is wrong to say that 1MDB’s losses are paper losses and will be recovered. And there are other important differences between the two.

Perhaps some of the stolen money, which the US Department of Justice (DOJ) estimates at US$4.5 billion (RM19.35 billion), can be recovered, but only if action by shareholders of 1MDB, the Minister of Finance Inc, effectively the government, does something now. But that is not forthcoming.

Press reports quoting the auditor-general’s report on 1MDB, which has been blatantly classified as a secret under the Official Secrets Act so that its contents cannot be publicly disclosed, say that US$7 billion (RM30.1 billion at an exchange rate of 4.3 ringgit to one US dollar) cannot be accounted for.

That is quite close to the RM31.5 billion forex losses incurred by Bank Negara between 1991 and 1994 as disclosed to the Royal Commission of Inquiry now investigating the forex losses. However, this does not take into account other real losses incurred such as bond overpricing, overpayment for assets, overpayment to advisors, etc, which easily will come to at least RM10 billion, taking the overall loss to over RM40 billion. Here is one estimate of how much 1MDB could have lost.

For a comparison of the two large losses – RM31.5 billion for forex and over RM40 billion for 1MDB, it is necessary to look first at the nature of the forex loss.

Let’s be clear about the forex loss – it was known for a long time that it came about because Bank Negara was engaged in speculative currency trading – not diversifying its currency holdings but taking positions. That means it effectively increased its exposure to certain currencies by much more than its actual holdings of the currency.

It lost its bets – it was effectively gambling, something central banks should not do – and when it closed off its positions, it incurred massive losses of RM31.5 billion over a period of three to four years. Some of the details, as revealed by Bank Negara’s counsel at the RCI hearings, were put under the OSA so that it could not be publicly revealed to hide the true extent of the losses. And yes, this was done during Dr Mahathir Mohamad’s time as prime minister.

So, it is correct to say that both Mahathir and Najib Razak used the OSA to hide severe losses incurred by government entities so as to stay in power. The RCI surfaces because Mahathir has moved from Umno to the opposition with his declared paramount aim of removing Najib as prime minister.

It is also reasonable to assume that Mahathir actually approved the forex trading/gambling by Bank Negara, especially in the light of his widely reported statements at that time supporting “active” foreign exchange intervention by the central bank as well as the fact that the two most responsible for it, then Bank Negara governor Jaffar Hussein and the adviser in charge of forex trading Nor Mohamed Yakcop, were not brought to account for their actions.

The forex losses arose out of a desire to make money for the country even if it were by highly irresponsible and irregular speculative activities bordering on gambling by a central bank. Never before or since has a central bank engaged in such activities and made such losses.

However, no individual or corporation associated to Mahathir or the government of the day made money from the losses that the central bank made. That is the important distinction when compared to 1MDB...