Malaysia brings about positive changes towards business integrity in the ASEAN region  

UNODC supports ASEAN jurisdictions to implement regulations against corruption involving the private sector

Posted on 23 November 2018.



'Corruption is now a thing of the past' said Prime Minister Mahathir Mohamad in a TV interview in October 2018, a few weeks before Malaysia conducted the mid-term review of the 11th Malaysia Plan 2015-20.

Malaysia is the 3rd richest economy within ASEAN after Singapore and Brunei, and stands out as one of the economic success stories in the region, from a plantation economy to a diversified, open economy (OECD, 2018). In the past, state owned enterprises at federal and state level have been associated with several corruption scandals, negatively affecting the business environment in the country. In the wake of the major 1MDB corruption scandal, and with the new government elected in May 2018, Malaysia is entering a period that offers an opportunity to undertake structural reforms that will confront corruption by strengthening public institutions, good governance and citizen engagement. These reforms are critical to support and sustain Malaysia's development path (World Bank June 2018, Navigating change).

Attracting responsible investments is at the heart of the revised development strategy. Major construction projects with China were suspended this year, including three projects worth $22 billion, notably the East Cost Rail Link, probing whether part of a loan from a Chinese state-owned bank was used in a transaction that benefited 1MDB.

Most importantly, the country's anti-corruption agency, the Malaysia Anti-Corruption Commission (MACC), has solved a number of major corruption cases, and is making a positive impact as an effective watchdog, with an increased budget for 2019 by 18.5% from 2018 announced in November 2018. MACC could bring positive developments against corruption in the private sector, perhaps not only in the immediate archipelago, but also throughout the entire ASEAN region.

On 30 October 2018, Transparency International Malaysia organised an Anti-Corruption Summit in Kuala Lumpur on the theme 'Good governance and integrity for sustainable business growth', with more than 500 participants and a keynote addressed by Prime Minister Mahathir Mohamad: 'Citizens reporting corruption will be protected from retaliation'. Dr. Muhuammad Mohan, Secretary-general of Transparency International Malaysia, also noted that 'procurement has been identified among the most vulnerable areas linked to corruption in Malaysia'. The MACC Act was recently amended and came into operation on 1st October 2018. It introduces corporate liability for corruption offences, with a two-year period for effective implementation, allowing businesses to prepare themselves and develop the necessary programmes to prevent corruption.

Speaking at the event, Mr. Francesco Checchi, UNODC Regional Advisor on Anti-Corruption, added that 'this new provision is a cultural change: not only individuals can be held liable for corruption offenses, but also companies. Similar legislation on liability of legal persons for corruption offences have been progressively introduced since the 1st review of the UNCAC cycle, notably in Indonesia and Thailand, and other ASEAN countries are likely to follow this positive trend'. The Summit sent a strong message that having anti-corruption and anti-bribery programmes in place are no longer optional, but a necessity towards sustainable business growth.

On 8 November 2018 UNODC supported a national Seminar in Kuala Lumpur on Business Ethics and Integrity, co-organized by the Federation of Malaysian Manufacturers, the Malaysia International Chamber of Commerce, and the ASEAN CSR Network. This was the opportunity for the government to share the new provisions with an audience of 200 businesses, including both the largest corporations in Malaysia and small-medium enterprises.  At the event, businesses were given the opportunity to share best practices for effective anti-corruption compliance programmes in the country, such as codes of conducts, whistle-blowers' hotlines, trainings for new recruit and corruption risks assessments. Guidelines on adequate procedures will be issued by mid-2019. UNODC supported the development of similar guidelines in Indonesia and Thailand.

Malaysia is a major outward investor in the ASEAN region and beyond. Seen as a widely accepted unofficial practice for a long time, bribery of foreign public officials is now criminalized under section 22 of the MACC Act, and the MACC is legally able to apply extra-territoriality and purse Malaysian businesses for corruption offences abroad, although it remains to be seen how these provisions will be implemented. China has had these provisions since 2011 but not any Chinese company or official has ever been prosecuted for foreign bribery in China, although the country is the first country in the world where bribes were paid in FCPA filed cases between 2008 and 2017. This has proven to be a very challenging task: in comparison, in OECD countries, only half of the 42 signatories of the OECD Anti-Bribery Convention have yet prosecuted a foreign bribery case since the Convention entered into force in 1999.

A revised Government Procurement Act was also announced to be prepared next year in Malaysia with a view to mitigate corruption risks. UNODC supports public procurement risk assessments in the ASEAN region to identify corruption risks and appropriate mitigation measures.