Corruption issues take a back seat

By Lawrence Yong

Strangely, for all the talk about how corruption has badly affected the country, it seems to have garnered less than deserved attention by both party manifestos. In the fourth of our series comparing the manifestos KiniBiz takes a detailed look into how both Pakatan Rakyat and Barisan Nasional proposed to deal with this pressing issue.

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It’s all about unfinished business.

When Malaysian stock market investors want a clue on what the 13th General Election (GE) factor may do to their investments, they need look no further back than the last GE. The market caved in when news broke that opposition coalition Pakatan Rakyat had made unexpected headway by denying Barisan Nasional a two-thirds majority in Parliament and taking five states, the biggest election setback for the ruling party ever.

Why do investors fear a change of government if Malaysia’s economy is such a dynamic, private-sector driven runaway success as Prime Minister Najib Abdul Razak often boasts?

If Transparency International’s survey released last year on corruption is accurate, one in two businessman already know the answer. If you don’t pay a bribe in Malaysia, you lose business, they say. Its all about corruption – which some people say helps oil the wheels of business, even if it is at considerable cost.

“An overall anti-corruption strategy is urgently needed but it is missing in both manifestos,” Transparency International Malaysia (TI-M)’s secretary general Josie Fernandez said. “Corruption is endemic and its consequences to society and the country are immense and devastating.”

In fact, Fernandez said that whatever laundry list economics the manifestos promise would have limited impact if the next Malaysian government does not first seriously tackle corruption.

Pakatan’s manifesto promises to free the anti-corruption institutions. “Freeing up important institutions such as the judiciary, Attorney General (A-G)’s chambers, Malaysian Anti Corruption Commission (MACC) and Royal Malaysian Police Force (PDRM) from political control…. within the first six months,” its manifesto said.

BN’s manifesto promises only upgrades. BN promises to empower the MACC through the establishment of a Service Commission to recruit its own personnel. Additional courts will be set up and access to A-G reports sped up.

“Any government which is serious about corruption must do it all together as a comprehensive attack and not a piecemeal approach. Most importantly, they must show genuine powerful political will,” Ramon Navaratnam, a veteran civil servant and prominent economist said.

“I don’t think either have come out strongly enough on the mother of corruption – money politics,” he said.

Who is paying for the election show that Pakatan and BN are putting up? Flags everywhere, advertisements on TV every hour and free food, popstar entertainment : Are you ready for (Korea’s) Psy … anyone? Businessmen on the left and businessmen on the right. And logically, it’s a two-way process.

“If you just become a warlord, and you don’t give money, they are not interested in you. You want to amass funds illegally … to feed your followers,” Tengku Razaleigh Hamzah, UMNO’s treasurer from 1971-1984 was quoted telling TI-M in the book “Reforming Political Financing in Malaysia.”

TI-M’s Fernandez said that the manifestos show a marked absence of commitment from both Pakatan and BN leaders to submit themselves to scrutiny and to step down if any serious allegation and investigation of corruption emerges.

Sarawak Chief minister Taib Mahmud, for example, simply shrugged off reasonable doubts about his business dealings raised by a report by Global Witness this month. In response, Taib who has been Sarawak’s Chief Minister since 1981 said Malaysian Anti-Corruption Commission (MACC) attempts to investigate him were “naughty and dishonest.”

Navaratnam says that Malaysia needs to implement the Hong Kong standard, where corrupt businessmen fear the Independent Commission Against Corruption (ICAC) and were guilty until proven innocent. Hong Kong has been transformed from a graft-ridden city into one of the cleanest places in the world since.

Observers said corruption in Malaysia took deep roots during the rule of Mahathir Mohamad, the strong man of UMNO –  the period when  Malaysia’s most successful political party went aggressively into business.

Mahathir who, just days ago, flew to London to pay final respects to ex-British Prime Minister Margaret Thatcher, had copied one of Thatcher’s favourite policies – privatisation. From the early 1980s, Mahathir privatised many state enterprises such as banks, telecommunications, airlines, utilities, shipping and highway projects and most famously backed the national car project. But he did it in the absence of open tendering and gave businesses to Malays who supported UMNO, creating overnight tycoons, as well as to non-Malay businessmen who were close to the him and the ruling party.

To his credit, Mahathir himself tried to redress some of these problems, when he pointed out that money politics has become a major problem even within Umno. In 1998, Mahathir released lists containing information on individuals who benefitted from government privatisation contracts and awards, confirming that patron-client practise existed in government.

But successive governments have been stuck in the same rut since. “People pay money to who they think will win the elections and can award them all the fat contracts, ” Navaratnam, who was also a former TI-M president said.

Neither BN nor Pakatan’s manifesto has anything to say about declaring political party’s finances or the financial position of its leaders. The fact that BN’s component parties or sympathetic individuals have owned the mainstream media in Malaysia since the 1970s and other companies is now an open secret but what is yet unknown is the extent of recent UMNO involvement in privately-owned vehicles.

Most analysts said that cleaning up corruption in Malaysia therefore would involve extraordinary political will and this is not something they see in big supply in either BN or Pakatan.

“If Pakatan inherits a corrupt bureaucracy, that will make efforts for change difficult,” TI-M’s Fernandez said.

For BN, the only real recent effort to roll back corruption was seen in 2003 after Abdullah Badawi became Malaysia’s fifth prime minister. In 2004 Badawi won a landslide elections victory, giving BN one of its strongest majority in parliament ever with over 90 percent of seats and 64 percent of the popular vote with his promise of cutting corruption and working for the people.

After he took over as prime minister when Mahathir stepped down at the end of October 2003, Badawi empowered anti-corruption agencies and provided more avenues for the public to expose corrupt practices. He also opened the floodgates for Internet media, allowing free debate online.

After his first 100 days in power, Badawi cuffed two very high-profile corruption arrests – former Perwaja Steel managing director Eric Chia and Land and Co-operative Development Minister, Kasitah Gaddam. The Anti-Corruption Agency (ACA) had then said that 18 more high profile cases were awaiting action. Both were acquitted years later, Chia in 2007 and Kasitah in 2009.

The two high-profile prosecutions ahead of the elections in March 2004 helped convince the public that the government was serious about curbing corruption and gave Badawi a strong mandate to rule.

But there was no follow through post elections, and Badawi was widely regarded as an ineffectual leader who let others associated with him dictate terms with their own brand of patronage, cronyism and corruption. He was punished in the 2008 polls and stepped down in the wake of dismal results, by previous standards.

In 2009, the MACC, which is financed and staffed by the prime minister’s department, replaced the ACA. There has not been a single high profile case tried since. In 2011, MACC brought 263 corruption cases to court, only one was a politician.

“Badawi was suppposed to go for the big fish but didn’t do it… can’t do it because many in the government will be caught,” Navaratnam said.

Are perceptions of corruption in Malaysia misleading?

In the first Transparency International Corruption Perception Index (CPI) ranking in 1995, Malaysia was placed No. 23 out of 41 countries. Sixteen years later, things appear worse. Malaysia ranked 60 out of 183 countries surveyed in 2011. In 2012, TI revamped its CPI calculation methods and Malaysia still ranked 54 out of 176 countries.

Analysts said that perhaps it would help if Malaysia’s economy went through a radical upheaval as Pakatan promises to do through its manifesto by abolishing monopolies. Badawi had pointed out that foreign investment, government contracts, and privatisation had generated Malaysia’s wealth in the past, not innovation and creativity.

BN’s manifesto rests squarely on Najib’s RM1.3 trillion Economic Transformation Program (ETP). Is it any different from what Badawi had fought against? And if not, how can we expect fighting corruption to be a more serious effort from the BN of tomorrow?

Under Najib’s ETP, the government is eager to approve as many projects to reach its target. Even more worrying, over half of all ETP projects announced to date, are in the oil and gas sector, the World Bank recently noted. And who else but Malaysia’s state oil company Petronas is the key driver. When Petronas does not act, as it slowed down job awards in 2012, ETP investments also grew at a slower pace. The World Bank and IMF have separately warned Malaysia of the “Dutch disease.”

What is that?

The term described what Netherlands went through in the 1960s. As new gas wealth flowed in, the rest of Dutch economy suffered. The national currency became overvalued and exports became more expensive and declined. Jobs were lost and businesses couldn’t survive.

The other big projects under ETP were for urban development – KL Mass Rapid Transit, broadband and telecommunications rollout and the 1Malaysia Development Bhd’s Tun Razak Exchange, the World Bank notes. Over the same period, investments in manufacturing and services – the key drivers of Malaysia’s economy – have  slowed.

“Pakatan needs to bring GLCs under the gun very quickly – this is an important area of reform. It is very vague in both manifestos about what they are going to do about GLCs. These reforms would include preventing GLCs from cutting into small businesses and creating monopolies,” Lim Teck Ghee of  CPI said.

“Some ETP projects are certainly important and worth supporting, we have to go through it with a fine toothcomb. Some projects needs to be dropped and rationalised, while others need revision,” Lim said.

Only Pakatan mentions ‘Petronas’ in its manifesto. Under the Petroleum Development Act of 1974, Petronas – the 68th biggest company in the world and 12th most profitable in 2012 – according to Fortune magazine, reports directly to the Malaysian Prime Minister. With contributions of 40 percent to government budget and picking up nearly RM20 billion a year gas subsidy bill, anything it chooses to do – even buying a chunk of Canada land – is mostly unquestionable. It was only revealed a year ago that Petronas had contributed RM529 billion to government’s coffers from 1974-2011.

Sadly, a scrutiny of both manifestos do not show any strong political will to fight corruption in Malaysia. Can Anwar Ibrahim who was very much a part of the UMNO gang just 15-20 years ago really be trusted to turn some of his old friends in for corruption if he becomes prime minister?

His nemesis Mahathir famously wrote in his blog – “Better the devil you know than the angel you don’t” in August, warning of the opposition’s fallibility.

BN’s Najib seems even less likely as a reform man, after 37 years toeing the party line and spending most of his productive years as Malaysia’s Defence Minister, handing out big arms contracts.

All things considered, most economists and academics still say Pakatan Rakyat is the best bet if Malaysians are serious about tackling corruption…simply because most of its members have yet to seriously hold any real power … but be warned… it’s definitely not going to help the stock market much.

For the record, the benchmark stock market index lost over half of its value in two big rounds of sell down in 2008 when BN’s power shrunk. The index went from 1,525 levels in January to a low of 801 in October. But that would have also been made worse by the looming financial crisis at the time.

“One day only millionaires will lead UMNO,” Mahathir was famously reported saying in 1984, decrying money politics in UMNO. Has it come to pass?

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Yesterday: Which makes better fiscal sense?