The Malaysian government is setting up a formal inquiry to look into massive foreign exchange losses incurred in the 1990s, when Tun Dr Mahathir Mohamad was prime minister, in what is seen as a fresh blow to the country's already divided opposition.
Yesterday's announcement of the setting up of a Royal Commission of Inquiry (RCI) came after Prime Minister Najib Razak was hit by a third civil lawsuit by the United States Department of Justice (DOJ) last week to seize US$540 million (S$751 million) in assets allegedly stolen from 1Malaysia Development Berhad (1MDB). The DOJ alleges more than US$4.5 billion was stolen from 1MDB, a sovereign fund set up by Mr Najib in 2009.
The formation of the RCI is also seen as a pushback by the government after Dr Mahathir looked increasingly likely to lead the opposition into the next general election, which must be called by mid-2018. This came after jailed opposition leader Anwar Ibrahim said last week that he would not be a candidate for the prime minister's post.
The government began looking into the alleged losses of US$10 billion in reserves at Bank Negara Malaysia (BNM) in February after former assistant governor Abdul Murad Khalid made the revelation in an interview with the New Straits Times. The scandal led BNM governor Jaafar Hussein to resign.
A statement from the Prime Minister's Office yesterday said the Cabinet has agreed to form the RCI after a special task force, set up in February to probe the forex scandal, found there was sufficient evidence to warrant further investigation.
"Its establishment is in line with public interest as it will be able to determine the BNM losses, which involved national reserves," it said. It added that the task force's initial findings established that the losses suffered were greater than what had been presented to the Cabinet and Parliament.
The RCI will be led by the former chief secretary to the government, Mr Mohd Sidek Hassan, and will include senior officials from the Finance Ministry, Malaysian Anti-Corruption Commission, the police's Commercial Crimes Department and the Securities Commission.
Dr Mahathir has said he is willing to be investigated for the forex losses, but has also suggested that Datuk Seri Najib set up a similar probe into the 1MDB scandal.
With a nationwide election looming, Dr Mahathir and his supporters have been pushing for him to lead the opposition Pakatan Harapan alliance to attract more Malay voters.
While the formation of the RCI is intended to show that Dr Mahathir, too, had lost billions of dollars when he was prime minister, it could leave the opposition without a clear leader as it heads into the next general election.