Political Legitimacy and Global Capital Markets: Malaysia's 1MDB (A)

In May 2018, Malaysia’s 14th General Election saw a change of power that many thought they would never witness in their lifetimes. The political party that had ruled Malaysia for 60 year was kicked out of office by a 92 year-old challenger, Mahathir Mohamed, who had also been its leader and longest serving prime minister. These surprising events seemed to involve a financial scandal of historic proportions. The ousted Prime Minister, known as Najib, was associated with a sovereign wealth fund, 1 Malaysia Development Berhad (1MDB), that had, with the aid of Goldman Sachs, borrowed 7 billion USD in global capital markets, all of which was squandered and some in remarkable fashion. An unknown young Malaysian of Chinese descent, Jho Low, had siphoned billions into his personal accounts, throwing parties for celebrities from Bangkok to LA. Was the Malaysian experience an idiosyncratic event in the trajectory of global capital markets or were its lessons more generalizable? The case explores illiberal actors in global financial markets and the dynamics of accountability in sovereign borrowing.