KUALA LUMPUR (Reuters) - Malaysian Prime Minister Najib Razak said on Wednesday (June 1) that investor confidence in Malaysia is high and blamed the rising "noise levels" for a negative perception of the country, where a state-owned fund is at the centre of graft probes across the world.
Malaysia's economy and markets have been rattled by a slowdown in China, slumping oil prices and a burgeoning financial scandal around 1Malaysia Development Berhad (1MDB), whose advisory board Datuk Seri Najib had chaired.
Companies and banks linked to 1MDB are being investigated for money-laundering in at least six countries, a big embarrassment for Mr Najib, who welcomed hundreds of business and political leaders to Kuala Lumpur on Wednesday for the World Economic Forum (WEF) on Asean 2016.
"The fact that foreign direct investment (FDI) has been going up in Malaysia by 22 percent per annum means that there is general confidence in Malaysia," Mr Najib told an audience at the WEF in Kuala Lumpur.
"The problem is of perception and the problem is of noise levels outside. The noise level is rather high, I admit it, but it belies the strong fundamentals and commitment of the Malaysian government," he said.
He did not directly refer to 1MDB or the financial scandal, which has deepened in recent weeks.
Last week, Singapore shut down BSI bank's unit in the city-state and the Swiss authorities began criminal proceedings against the Swiss bank in connection with money-laundering and corruption investigations into 1MDB in the two countries.
Mr Najib said some of the factors affecting the economy are beyond Malaysia's control, adding that a 1 per cent drop in growth in China leads to a 0.4 per cent slowdown in the Malaysian economy and a US$1 drop in price of oil leads to RM450 million in losses to Malaysia's revenue.
"I believe we should concentrate on strengthening the fundamentals first. We should not be over reactive to short term conditions because we believe there will be some correction in the market," he said.
Malaysian stocks have performed poorly this year in comparison to its neighbours in Southeast Asia.
The FTSE KLCI index has lost 4 per cent this year, versus a 10 percent gain in neighbouring Thailand, a 5 per cent gain in Indonesia, and a 4.3 per cent gain in the MSCI South East Asia index.
While Mr Najib has been buffeted by allegations of graft and mismanagement at 1MDB, he has cracked down on dissenters within his party and outside, using a colonial-era Sedition Act and other security laws.
Mr Salil Shetty, Amnesty International's Secretary-General, who is also a co-chair at WEF, told Reuters in an interview freedom rights in Malaysia have declined significantly over the last 18 months.
"The Prime Minister came to power here talking about pluralism and diversity and promised to get rid of the Sedition act," he said. "And now post-election, where they had a challenging outcome, and the 1MDB scandal, there's been a real constriction of freedom of expression and we are very concerned about that."
The 1MDB scandal and its impact will loom over the WEF meetings, he added.
"Certainly in terms of the impact it (1MDB scandal) has had in terms of them (government) crushing voices of dissent or any critical voices asking question on where is the money, etc, is a matter of concern," Mr Shetty said.
Mr Najib has denied reports that US$681 million that was transferred to his personal bank account came indirectly from 1MDB. His attorney-general said the money was a donation from the Saudi royal family and most of it was returned.
Last month, the government said it could impose a three-year travel ban on its citizens who discredit or ridicule the government.