Malaysia and Corruption

UPDATED


1.0 Introduction

“Corruption” is an English word we often hear in conversations or read about in newspapers, in various online forums and blog sites, especially when the topics are of the sensational, political and related to people in authority.

The Oxford Advanced Learner’s Dictionary, 7th Edition (OALD) offers three definitions for the word “corruption”:

“1. dishonest or illegal behaviour, especially of people in authority;
2. the act or effect of making somebody change from moral to immoral standards of behaviour;
3. the form of a word or phrase that has become changed from its original form in some way: The word ‘holiday’ is a corruption of ‘holy day’.”

In the context of moral and ethics, the OALD’s third definition is certainly not applicable and surely, there is nothing holy about corruption!

So, what is corruption? We can define corruption as the abuse of one’s position for personal gain or for the benefit of an individual or group to who one owes allegiance. For e.g., a public official in charge of approving building safety plans may become corrupt by accepting monies to approve sub-standard building safety plans. A purchasing manager in an organisation may become corrupt by approving and buying stationeries at higher prices from a supplier due to commissions from the supplier.

Corruption occurs whenever a person in authority accepts, solicits or extorts a payment, or when a private agent offers a payment to circumvent an issue, a regulation or the law for personal or competitive advantage.

Corruption is a two-way process, usually involving members of both the public and private sectors or within the private sector, who engage in illegal, illegitimate and unethical actions or behaviour that eventually affects a country’s economic prospects and degrade its social and political institutions.

Corruption is a symptom of weakness in the political, legal, social and business or economic systems. Corruption is not new and is not limited to certain countries of the world. Today, corruption is a global phenomenon and its severity varies from country to country – usually more prevalent in less developed or developing countries (Alatas, 1990).

In the present era of increased international trade and globalisation, most progressive governments are advocating transparency i.e. activities should be carried out in an open, transparent and accountable manner.

1.1 Types of Corruption

There are several types of corruption. The major or common types are bribery, patronage, nepotism, electoral fraud and manipulation, theft of state assets, diversion of revenues, and evasion of taxes.

The most common form of bribery usually involves payments and/or family holiday packages given by individuals or companies to government officials in return for favours such as award of government contracts, licenses and permits. At one time or another, we may have been guilty of corruption ourselves when we bribe a police constable against issuing a traffic offence summons for exceeding the speed limit or running a red stop light.

Government officials using their position, power or influence to award contracts or obtain good jobs or unfair advantages for members of their own families practices a form of corruption known as nepotism. Corruption also includes vote buying and violation or manipulation of electoral laws on campaign financing. Theft of state assets by officials charged with their stewardship is also corruption.

1.2 Corruption in Malaysia

Malaysia is not without issues and challenges of corruption. The question is to what depth and width does corruption exists in Malaysia?

Towards the last few years of former prime minister, Tun Dr. Mahathir Mohammad’s premiership, he had strived to address corruption, money politics and nepotism in the United Malays National Organisation (UMNO), the ruling party (Fan, 2003). Similarly, different degrees of corruption exists within the hierarchies of the other Malaysian political parties. Some of these negative activities may be regarded as “petty” corruption, while others may be regarded as “grand” corruption, but their practitioners naturally strive to keep it hidden from public view, thus, the difficulties in proving the existence of corruption.

The Malaysian courts are also sending strong messages against corruption. In a 2006 corruption case, a former Kangar Municipal Council president was sentenced to a four-year jail term and fined Ringgit 405,000 by a Sessions Court that found him guilty on three counts of corruption committed in 1999 of soliciting bribes from a property developer, totaling Ringgit 385,000 and a charge of abusing his position as a public servant by accepting a golf set worth Ringgit 2,500. The jail sentence and fine represents one of the stiffest sentences for corruption (Former Kangar, 2006; RM405,000 fine, 2006).

In another case, “a land settlement officer, who was acquitted of corruption by a lower court last year, saw his hopes dashed when the High Court here yesterday set aside his acquittal and sentenced him to two years’ jail.” He was also fined Ringgit 460,000 on three charges of corruption involving Ringgit 92,000 (Officer’s graft, 2006).

A technician paid a high price for accepting a Ringgit 500 bribe from a project manager in order to speed up the approval plans for a residence and shop premises when the Sessions Court sentenced him to three months’ jail and a fine of Ringgit 10,000 (Technician pays, 2006).

The Malaysian Anti-Corruption Commission (MACC) http://www.sprm.gov.my/, formerly known as the Anti-Corruption Agency (ACA; established October 1967) was established in January 2009, dedicated to the task of keeping corruption in check – investigating complaints and cases, and charging those found guilty for further legal action.

However, despite the Malaysian government’s initiatives to fight and control corruption, Malaysia continues to slip in the international corruption rankings. Back in 2006, in the Transparency International 2006 Corruption Perceptions Index report, Malaysia had fallen five places to 44th place among 163 countries and, “Among 25 countries in the Asia Pacific region, Malaysia ranks 10th where the least corrupt are Singapore, Hong Kong and Japan in that order, with Myanmar as the worst. However, Malaysia scores better than China, India, Indonesia, Thailand and Pakistan.” (Corruption ranking, 2006; Malaysia slips, 2006).

In the latest Transparency International Corruption Perception Index 2009, Malaysia ranked #56, down by nine places from 2008’s #47 (Malaysia’s corruption, 2009; Disturbing spiral, 2009; CPI 2009 Table, 2009).

Transparency International CPI – Malaysia

• 2009: Ranked #56
• 2008: Ranked #47
• 2007: Ranked #43
• 2006: Ranked #44
• 2005: Ranked #39
• 2004: Ranked #39
• 2003: Ranked #37
• 2002: Ranked #33
• 2001: Ranked #36
• 2000: Ranked #36

While there is the Malaysia Anti-Corruption Comission Act 2009 and the MACC to combat and control corruption, much is not publicized for the benefit of the public, and the MACC itself is sometimes subject to criticism about a lack of transparency. Following the 2006 UMNO general assembly, the then prime minister, Tun Abdullah Ahmad Badawi, addressed several key criticisms against his administration and premiership style – one being that the authorities appear to only go after the “small fish”.

Generally, the public is aware that Malaysia, similarly like many other developing countries, experiences possible corruption in the following areas:

• Political corruption
• Political finance
• Vote buying
• Cronyism
• Awarding of government contracts
• Corporate finance
• General procurement, for e.g. military procurement, medical and healthcare (hospitals, pharmaceuticals), educational
• Property development (planning and approvals)
• Licensing and permits
• Imports and exports
• Intellectual property and copyright regulation and enforcement
• Timber industry and illegal logging

While corruption is very difficult to completely eradicate, the key objective for Malaysia is to be able to effectively regulate and keep corruption in-check. The continued and additional efforts of the government to promote and maintain transparency in government activities and also in corporate governance will certainly enhance efforts in combating corruption.

Investor trust and confidence must be maintained and further cultivated to continue to attract foreign direct investments (FDIs) in a continuously increasing competitive regional and international trade environment accelerated by globalisation (Transparency International, 2001; 2003; 2004; 2005; 2006).

2.0 Causes of Corruption

What causes corruption? Research have shown that generally where a country’s institutions of governance are weak, where government’s policies provide room for it, and where government institutions have become corrupt themselves, corruption tends to be more prevalent. While few countries set out to encourage or promote corruption, the causes or sources of corruption are highly contextual – rooted in a country’s political and legal development, social history, bureaucratic traditions, economic conditions and policies.

Certain characteristics of the developing, the less developed or transitional countries tend to unconsciously promote corruption. These countries may be suffering from political unrest or power struggles for the country’s institutions of governance. They may also possess a system of governance that has traditionally been dominated by the military, underdeveloped judicial system and non-existent tradition of the rule of law.

The following are some major factors that may facilitate the growth of corruption.

2.1 Political Factors

Levels of corruption are related to the strength of civil independence, such as the level of press freedom, the freedom of individuals to form non-governmental organisations (NGOs), and the presence of active and structured political competition.

In order to keep corruption in-check, there must be adequate transparency. Thus, the citizens of a country must have the ability or access to know about their government’s activities.

The way in which a country implements its political and electoral processes and practices can become a key source of corruption. Political parties based primarily on patron – client relationships and the distribution of patronage may become major sources of corruption. Such political structure or climate is usually accompanied by weak campaign finance legislation and a low level of disclosure required of campaign contributors and political candidates (Transparency International, 2004).

2.2 Legal Factors

The existence of anti-corruption legislation in a country’s legal system affects the level of corruption. However, for laws to be effective, the ability and credibility of the police and judiciary to act against corrupt practices is important.

2.3 Bureaucratic Factors

Several factors exist as a result of bureaucracy. In countries with high regulatory and state-bureaucracy processes, possibility of corruption tends to be higher. This means that where a government imposes many rules and regulations, public officials have a greater opportunity to exploit them, especially where public officials have unaccountable control over the provision of public services, application of the regulations and fee collections.

Also, public servants may be more tempted to engage in corrupt practices where their wages are low or there exists a large disparity between public and private sector wages. Thus, there is a need for effective auditing and monitoring systems within a government. Corruption is more likely to occur when the likelihood of its detection, and its expected detection cost, are relatively low.

2.4 Economic Factors

Corruption is more likely to grow rapidly in countries where governments create monopolistic economic settings. Economic factors are closely linked to bureaucratic factors because if a government’s economic policies are implemented and monitored in a non-participative, non-transparent and non-accountable manner, abuse sets in (Eberlei & Fuhrmann, 2004).

2.5 Transnational Factors

Corruption has strong transnational dimensions. Countries that are perceived today to be very corrupt had systemic corruption introduced during their colonial periods. For e.g. corruption emerged in the former communist states of Eastern Europe and the Soviet Union as the result of the institutions of communist rule. With the collapse of the communist regimes, the power vacuum created was filled in some cases, by old power structures practicing rampant corruption. Despite independence, many countries in transition are found to be suffering from a new colonialism of corruption, fostered by transnational forces.

3.0 Consequences of Corruption

Corruption has severe long-term negative consequences for the quality of governance and efforts to attain sustainable development, resulting in “crony capitalism”.

Corruption is a form of public theft. The funds are diverted from the national treasury, and usually siphoned overseas into private accounts, denying the rightful opportunity to apply them to productive public use, in progressing citizen welfare, education and living standards.

3.1 Political Consequences

Corruption is subtle, eroding the quality of governance and national stability by undermining the legitimacy of the political process. Ordinary citizens are marginalized because corruption is essentially a form of extortion, fostering contempt for the public service and leads to political cynicism.

Corruption distorts decision-making, resulting in the wrong projects, prices and contractors, substandard delivery, and the promotion of corruption at lower levels. It shifts the provision of services away from those who need them.

Once a pattern of successful payoffs is institutionalized, corrupt officials become more audacious raise the asking prices and search for better and more ways to obtain payments. Thus, corruption becomes entrenched, proving resistant to efforts to control it. Also, corruption feeds on itself, creating a widening sphere of illegal payoffs until state structures are completely undermined and years of development are reversed.

3.2 Economic Consequences

A visible consequence of corruption is the impact on a country’s economic development. Corruption compromises the achievement of sustainable development. Bribing results in additional business costs, a burden to small entrepreneurs, and the misallocation of a country’s human capital and talent. Competition becomes focused on the highest bribe, thereby denying the public the advantages of a competitive yet fair marketplace.

The manipulation of government priorities associated with corruption distorts spending on services such as healthcare and education, with serious impacts on the country’s well being, and usually the poor bear the heaviest burden.

3.3 Social Consequences

Corruption violates public trust and erodes social capital. It undermines laws and regulations meant to serve productive social objectives. Eventually, corruption erodes political legitimacy to the point where citizens see little point in following the rules.

This results in the demoralization of the country’s population, leading to a lack of confidence in the state and its institutions, and, in extreme situations, the collapse of the state itself. In such potentially unstable situations, the well educated and qualified people may leave for other countries i.e. the brain drain problem (Sidhu, 2010; Kok & Tee, 2010; Fong, 2010; Move to plug, 2010).

4.0 Controlling Corruption

The effort to control and combat corruption is a complex, long-term process. It must be continual, involving a constant maintenance of the institutions and systems of good governance nationally, regionally and internationally.

4.1 An Integrated Approach

Such an approach that considers the above view may include:

• Undertaking a comprehensive analysis of the incidences, causes and consequences of corruption at the national level
• Instituting reforms in the country’s political, legal, administrative and economic systems. The opportunities for corruption may be reduced through efforts to improve the country’s system of governance and strengthen the institutions of good governance
• Engaging civil society, including non-governmental organisations (NGOs) and the media, in raising public awareness about corruption and monitoring progress in controlling corruption

The primary emphasis is on changing and enhancing existing systems of governance, rather than on blaming individuals. This approach recognizes that without building institutional capacity, even well intended and well-designed policies can lead to poor outcomes.

Since each country faces its own historical, political and social context, thus the specific strategies employed by countries will vary. However, in general, policy responses to corruption typically involves one or more of the following areas:

• Political will and reforms – political will involves the recognition that a healthy system of governance is essential to national welfare. The concept also implies that key leaders recognize the need to work together constructively. Political reform refers to establishing a system of checks and balances to prevent the arbitrary exercise of power
• Administrative reforms – corruption in the public service must be faced from the onset and dealt with as an integral part of the reform process
• Watchdog agencies and other measures of deterrence, e.g. anti-corruption commissions, ombudsman, watchdog units, whistleblower statutes
• The Judiciary – essential to any country hoping to achieve long-term, sustainable success in controlling corruption is an effective, independent, and accountable judicial and law enforcement system
• Media – effective anti-corruption efforts require a genuinely free press able to play its role as a public watchdog
• Civil Society – citizen groups are an essential check on the arbitrary use of government power
• Private sector and international business – the private sector has a crucial role to play in controlling corruption given that corruption commonly occurs at the intersection of the state and marketplace

4.2 The Global Dimension

Just as an integrated effort at the national level of the country are essential to combating corruption, a coordinated approach at the regional or international level must also be used to combat globalised corruption, such as:

• Developing an international code of conduct for political officials, financial institutions, the private sector and others
• Creating and strengthening inter-parliamentary unions
• Improving coordination between policy makers and investigators, particularly in establishing systems or conventions that provide information on offshore accounts held by elected officials under investigation
• Ensuring conformity of anti-corruption laws and regulations to other countries in the region
• Drafting regional cooperative conventions on anti-corruption

5.0 Conclusions

From the discussions in the previous sections, we can summarise the nature and consequences of corruption as follows:

• Corruption is the abuse of public position for personal gain or for the gain of an individual or group to whom one owes allegiance
• Corruption is a two-way process, usually involving the public and private sectors
• Corruption tends to flourish particularly where the quality of governance is weak, and where the institutions of accountability are marginalized
• Corruption undermines good governance, distorting policy, leading to poorer public services and infrastructure, reduced spending on healthcare and education, and serious budgetary problems
• Corruption furthers the social and economic marginalization of the poor. Thus, poverty eradication remains but a dream

And in controlling corruption:

• Controlling corruption is a long-term labour that requires a comprehensive approach at a national level. Reforms should strengthen the institutions and mechanisms of governance to reduce the opportunities for corruption and implement measures to reduce the attraction to engage in corruption
• Political will is essential to the success of anti-corruption initiatives
• Political reforms should include measures to strengthen the rule of law, the role of civil society, build the capacity of parliament, and establish an open, transparent, competitive electoral process
• Administrative reforms should reduce the opportunities and incentives for corrupt behaviour within the public service. There is a need to balance between strengthening rules and regulations, and improving the quality of public service
• Economic reforms to reduce the opportunities for corruption must be carried out in a way that takes into account the political and social context
• Deterrence and enforcement measures are valuable tools to fight corruption. The existence of anti-corruption legislation and the ability to enforce and execute such legislation is necessary for success

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