Corruption allegations against Sarawak CM Taib Mahmud and freedom of speech in Malaysia

Japanese NGO joint letter to PM Badawi & ACA

April 27th 2007

Dato' Seri Abdullah bin Haji Ahmad Badawi
Prime Minister of Malaysia

CC: Director, Anti-Corruption Agency (ACA)

Subject: Corruption allegations against Sarawak CM Taib Mahmud and freedom of speech in Malaysia

Your Excellency,

We, the undersigned Japanese non-governmental organizations and citizen's groups, wish to express our profound concern regarding threats by the Sarawak Chief Minister Tan Sri Pehin Taib Mahmud to lodge a defamation suit against the Malaysiakini news service and leaders of Party Keadilan Rakyat Sarawak for raising allegations of his involvement in a RM 32 million kickback scheme reported by the Japan Times and other Japanese newspapers.

We understand that the corruption allegations raised against CM Taib Mahmud originated from a report in the Japan Times on Mar 29,, 2007 that nine Japanese shipping companies which transport lumber from Sarawak failed to report some 1.1 billion yen (approximately RM 32 million) in income paid as remuneration to Regent Star, a Hong Kong-based agent with connections to CM Taib Mahmud and his family, during a period of seven years through last March. According to the report, the Tokyo Regional Taxation Bureau determined that these payments were rebates, not legitimate expenses, and is likely to impose well over 400 million in back taxes and penalties against the shipping companies.

The Yomiuri Shimbun (in Japanese) also reported the above facts in an article on March 28th. Furthermore, the Asahi Shimbun English edition reported on March 28th that the Tokyo Regional Taxation Bureau had ordered Kansai Line Co. to pay 50 million yen in back taxes and penalties for falsely including so-called intermediation fees totaling 130 million yen paid to Regent Star over a seven year period until December 2005, in its cost of loading logs in ports in Sarawak, in an effort to hide the payments.

The Asahi Shimbun Japanese edition further reported on March 27th that shipping companies affiliated with the Nanyozai Freight Agreement (NFA) cartel are suspected to have paid more than US $25 million (approx. 2.5 billion yen) in intermediation fees to Regent Star in the ten years up to 2005. An anonymous industry source is quoted as admitting that "there was an understanding that these were payments to the Chief Minister's family" and in essence, kickbacks.

According to the article, the NFA admitted that it had in 1981 entered into an agreement with Dewaniaga Sarawak (DNS) on log exports to Japan, and had been instructed by DNS to pay intermediation fees to Regent Star in Hong Kong. The payments, which are said to have continued for 26 years since 1981, are said to have started at a rate of approximately US $1.50 per cubic meter of logs shipped, and to have increased over the years to the current rate of US $3.28, while the log shipments declined from a peak of 3.8 million m3 in 1990 to about 410,000 m3 in 2005. The report estimates that an average of one to four million dollars per year, totaling US $25,250,000 was paid to Regent Star between 1996 and 2005 alone. The article also mentions that an industry source alleged that DNS director Dato' Onn Bin Mahmud, brother of CM Taib Mahmud, sometimes participated in person in negotiations of the intermediation fees between Regent Star and the NFA.

From the above, it should be crystal clear that the allegations lodged against CM Taib Mahmud by Malaysiakini and Party Keadilan Rakyat Sarawak are not based on rumor or hearsay, but on information reported in a consistent manner by several leading Japanese newspapers. As organizations working in the Malaysian public interest, Malaysiakini and Party Keadilan have merely been exercising their freedom of expression and fulfilling their duty to raise concerns to the public and competent authorities regarding highly disturbing information meriting further investigation. In fact, it would have been dereliction of their public duty not to have done so.

If whistleblowers immediately face threats of litigation for defamation, how can citizens play an active role in eliminating corruption? Should not CM Taib Mahmud present a clear explanation rather than resort to such intimidation? And if he disagrees with the allegations in the reports, should he not question their sources in Japan and the Japanese tax authorities, rather than Malaysian citizens who are merely bringing them to the public attention?

In light of your pledge to make anti-corruption a top policy priority with "zero tolerance for corruption," we urge you to live up to your reputation by instructing the Malaysian Anti-Corruption Agency (ACA) directly under your supervision to immediately commence a formal investigation into the allegations raised in these media reports, and to keep the public informed of developments thereof. Party Keadilan Rakyat Sarawak has already lodged two reports on this matter as of April 13th 2007, one with the Kuching Central Police Station and another with the Anti-Corruption Agency in Kuching, following your public statement advising that reports be lodged so that the ACA could take action. Japanese civil society will do its most to urge the Japanese tax authorities to cooperate with Malaysia in its investigation, so that the truth can be revealed and justice served.

Furthermore, we ask you to ensure that Malaysian citizens do not face undue pressure or malicious litigation in an attempt to suppress their freedom of speech when raising issues in the public interest. Certainly such transparency is crucial in upholding the honor and untarnished reputation of Malaysia in the international community.

Sincerely,

Sarawak Campaign Committee (SCC)
Friends of the Earth Japan (FOEJ)
Japan Tropical Forest Action Network (JATAN)
The Japan Citizens' Coalition for the UN International Decade of theWorld's Indigenous Peoples (INDEC)
Japan Network on Human Rights in Malaysia
Pacific Asia Resource Center (PARC)
Papua New Guinea and Solomon Islands Forest Protection Group in JapanY. Sakamoto, Global Environment Forum