CORRUPTION IN MALAYSIA

CORRUPTION IN MALAYSIA

Corruption and "money politics" are a fixture of Malaysian politics despite efforts and pronouncements by Mahathir and other prime ministers to combat it. Payments are made for licenses, contracts and deals. Many high ranking ruling party members drive around in expensive Mercedes. Pay offs are made in elections.

Many government officials are millionaires. One official from Selangor was charged at an Australian airport for not declaring more than $1 million in various currencies stashed in his suitcase. In Malaysia, There is no system of open, competitive tendering for government projects. Elections are tarnished by allegations of vote-rigging.

Datuk Zaid Ibrahim, a wealthy liberal Malay lawyer who had resigned his post as minister of legal affairs in the Prime Minister’s office on a matter of principle, told The New Yorker while driving past a vast stadium, a huge new airport, a gigantic new mosque, a convention centre, a university, and an “integrity institute” in Terengganu, “All around these grandiose testimonies to human greed (and generous kickbacks) were typical Third World shantytowns: wooden shacks with corrugated iron roofs. “There is no money to be made out of building proper sewage systems or water supplies.” [Source: Ian Buruma, The New Yorker, May 19, 2009 <>]

Jonathan Miller wrote on Channel4.com, Malaysia “ranked the world's worst offender in Transparency International's bribe payers' survey. Another survey by international corruption watchdog Global Financial Integrity ranked Malaysia as the world's third largest source of illicit financial flows - an estimated US$285 billion in capital flight in the decade up to 2010. [Source: Jonathan Miller, Channel4.com, May 4, 2013]

Corruption Under Mahathir

Although Mahathir championed himself as a corruption fighter and friend of the poor, the gap between rich and poor and cronyism rose under his watch. He awarded contacts for some of Malaysia’s biggest multibillion dollar projects to his friends and friends of his ministers. Still, these friends had to perform. If they didn’t they were purged.

In a typical case, a company owned Mahathir’s close friend Syed Mokhtar Albukhary, was awarded the contract to bought the a new $3.8 billion railroad across peninsular Malaysia. The contract was awarded without any competitive bidding and previous deals made with China and India were canceled.

Mahathir Mohamad claimed he was not corrupt. He took only a $4,000 a year salary and turned over gifts and cars given to him to the state museum on the island of Langkawi. He told Newsweek that when ever the topic of his children come up at meetings he excuses himself. “They’re not idiots, they are doing well in business,” he said. In 2001, Mahathir’s son Mokhzani told Newsweek that he was probably worth about $60 million. A good chunk if his money came from a hospital supply contract for the southern provinces o Malaysia.

Corruption by Cronies High-Level Party Members in Malaysia

Eric Chia Eng Hock, a crony of former Prime Minister Mahathir Mohamad, was charged with criminal breach of trust in connection with the near collapse of Perwaja Steel in the 1990s. He was charged with approving a $20 million loan by Perwaja to a bank account held by a bogus company.

In February 2004, on the eve of elections, the Malaysian Land and Cooperative Development Minister was arrested on corruption charges for his involvement in a shady share trading deal.

In March 2009, Associated Press reported: “Norza Zakaria, a member of the United Malays National Organisation party's policy-making Supreme Council, is the highest-ranking party official ever to face political graft charges. He is accused of bribing others to help him defend his post in party elections scheduled for later this month. The party posts are hugely coveted because they are considered a springboard to lucrative business contracts and for appointments in the Cabinet and government organisations. Norza, 43, pleaded innocent in a Magistrate's Court to two charges of giving bribes totaling 3,400 ringgit (Dh3,376) to two party members on January 20. It was not immediately clear whether Norza would still be able to contest the March 24-28 elections to choose dozens of top party office-bearers. [Source: AP, March 13, 2009]

Malaysian Minister in 'Cowgate' Scandal to Resign

In March 2012, a Malaysian minister embroiled in a scandal over government funds meant for a cattle project resigned, The BBC reported: “Shahrizat Abdul Jalil said she would step down as minister for women, family and community. Her family had been accused of misusing the 250 million Malaysian ringgit ($83 million) fund to pay for condominiums, vacations and a Mercedes. The minister said her resignation was not related to the cattle project run by her husband and three children. She was said she was stepping down as a "responsible member of the government" after her term as senator ends next month. She added that she would, however, continue to serve as chief of the women's wing of the ruling party, the United Malays National Organisation (UMNO) and governing coalition Barisan Nasional (BN). [Source: BBC, March 12, 2012]

Her decision came after months of pressure from the public and opposition over the allegations in the “cowgate scandal”. An annual report by the auditor-general said that the National Feedlot Centre run by the minister's family had not met its target of 40 percent self-sufficiency in beef production by 2010. Allegations then emerged that the soft government loans were being misused for personal means, including the purchase of luxury apartments in Malaysia and neighbouring Singapore.

The minister has denied any wrongdoing, and company officials have reportedly said that the property investments could generate income. "Although there is no proof so far that she had committed any offence in terms of law, because the (project) has drawn controversy and dispute, she was willing to withdraw from the government," he was quoted as saying by the national Bernama news agency.

Malaysia’s Timber Godfather

Niluksi Koswanage of Reuters wrote: “The Malaysian anti-corruption agency said it has been investigating Sarawak Chief Minister Abdul Taib Mahmud since 2011 in response to environmental activists' complaints about corruption in the forestry industry. The activist group Global Witness posted a video in March 2013 that went viral. It showed Taib's cousins and associates apparently offering thousands of hectares of forest land to the group's undercover investigators and formulating plans to book the land sales in Singapore to avoid Malaysian taxes. The cousins could not be reached for comment. Taib publicly denied the allegations raised as a result of the video. "I saw the so-called proof. It has nothing to do with me," he told local media. "Everything has to be done with government procedure." [Source: Niluksi Koswanage, Reuters, April 3, 2013 +++]

Jonathan Miller wrote on Channel4.com, “This scandal surrounds the godfather of the timber trade, who, for 32 years has plundered the forests of the country's biggest - but second-poorest - state, Sarawak, on the island of Borneo. His family and closest associates were the subject of a spectacular sting operation by environmental investigators from the London-based group Global Witness. The timber "godfather" just happens to be Sarawak's chief minister, Taib Mahmud. It has been widely reported in Malaysia that Taib serves as private banker to some of Malaysia's political elite and that his millions help bankroll the ruling party, UMNO. He seems to have has long considered himself untouchable. [Source: Jonathan Miller, Channel4.com, May 4, 2013 >>>]

“Barisan Nasional, UMNO's ruling coalition, has long had a stranglehold on state politics in Sarawak, and Taib's voters there have long-delivered one fifth of BN's seats in the federal parliament. That's just how it works. Even the Wikileaks cables included repeated references to him as "highly corrupt" and to his relatives as having cashed in on "most major commercial logging contracts". >>>

“Sarawak boasts just half of 1 percent of the world's tropical rainforest but in 2010 its tropical timber trade comprised a quarter of the world's total hardwood exports. Today just 5 percent of Sarawak's rainforest remains intact. Despite this, more deforestation still occurs there than anywhere else in the world, according to Global Witness. This wholesale looting has enriched a tiny elite surrounding chief minister Taib Mahmud. Since then, his relatives, known widely as "Sarawak's royal family", have apparently cashed in on an entire jungleful of tropical hardwood, despite of the fact that he also holds the posts of state finance minister and resource planning, land allocation and environment minister. >>>

“The video evidence from the Global Witness investigator posing as a foreign investor features Taib's close associates and family explaining exactly how it's been done. A representative of one of Sarawak's biggest timber tycoons said the chief minister would receive a multimillion dollar kickback from one deal. His relatives were caught red-handed trying to sell off land they'd been allocated for a 3,600 percent markup. They proposed illegal transactions designed to evade Malaysian tax. >>>

"The film showed for the first time what people in Malaysia have long suspected, that Chief Minister Taib and his family have grown spectacularly rich through their systematic abuse of his public office," Alex Helan, forests campaigner for Global Witness, told Channel 4 News. "It has had a profound impact because this kind of corruption is a massive concern for ordinary people in Sarawak and Malaysia more broadly.” >>>

Sabah’s Chief Minister, Corruption and Rain Forests

Niluksi Koswanage of Reuters wrote: “Sabah Chief Minister Musa Aman, who is also the state's top UMNO official, has been under scrutiny after whistleblower website Sarawak Report published documents from the Hong Kong and Malaysian anti-corruption agencies. The two agencies started investigating Musa in late 2008. The probe was based on a tip-off that the chief minister was extracting money from businessmen seeking timber concessions and funneling it to UBS bank accounts in Hong Kong and Singapore, sources close to the investigations said. They declined to say who gave the tip-off. [Source: Niluksi Koswanage, Reuters, April 3, 2013 +++]

“The Hong Kong anti-graft agency froze a UBS account managed by a lawyer on behalf of Musa, the sources said, and began a joint investigation with its Malaysian counterpart. The agencies closed the case three years later and unfroze the funds after the Malaysian government publicly said the money was donations for UMNO, not bribes. The Malaysian government has not explained why political donations had to be routed through Hong Kong and Singapore. +++

“Musa told Reuters in a statement that he has been cleared by both anti-graft agencies. However, an independent panel overseeing the Malaysian graft agency has recently requested the case be reviewed. "These are the same old stories, rehashed over and over again," Musa said. "It is just the usual silly season before the general election, when the opposition gets up to their usual monkey business." The opposition, which argues the fruit of Malaysia's brisk economic growth is largely concentrated in the hands of a well-connected elite, has vowed to keep pouring it on. "How Musa manages Sabah in favor of the government rather than the people will certainly be a prominent part of election rallies on the opposition side," said Lim Kit Siang, a leader in the opposition coalition headed by former deputy prime minister Anwar Ibrahim. +++

“The Hong Kong anti-graft agency told Reuters it investigated a number of Malaysian nationals, including a government official, for breaching the prevention of bribery ordinance in connection with the UBS accounts. It neither confirmed nor denied that Musa was the focus of the investigation. Malaysia's anti-corruption agency said it provided assistance to its Hong Kong counterparts but declined to give details. Malaysian anti-corruption officials, speaking on condition of anonymity, told Reuters the leaked documents obtained by Sarawak Report were genuine and Musa was, indeed, the focus of the investigation. +++

Illegal Logging Money from Sabah in a Suspicious Hong Kong Account

Niluksi Koswanage of Reuters wrote: “Sarawak Report said the Hong Kong and Malaysian anti-graft agency documents it acquired showed that $90 million in illegal logging proceeds from Sabah were channeled to the UBS accounts. That prompted Swiss prosecutors to open a criminal money laundering probe into UBS last August. The investigations into UBS and its relationship with Musa are continuing, a spokesman for the Office of the Attorney General of Switzerland said. UBS said it was fully cooperating with the authorities but declined to give more details. [Source: Niluksi Koswanage, Reuters, April 3, 2013 +++]

“As chief minister, Musa is in charge of the Sabah Foundation, which manages a state forest reserve covering 3,861 square miles, nearly half the size of New Jersey. The foundation allows timber companies to annually log a tiny fraction of that area. The logging proceeds are supposed to fund education and welfare projects in the state. As chief minister, Musa signs off on all the logging permits that its board of directors agree to award to timber firms, or at least in one case, to a family member. +++

“One of the Malaysian anti-corruption agency documents listed companies that won permits from the foundation. It shows the foundation awarded 2,000 hectares (7.7 sq miles) of primary forest to Musa's younger brother, Foreign Minister Anifah Aman, at a special board of directors' meeting on May 7, 2004. The same Malaysian anti-graft document shows Musa consistently signed off on concessions that exceeded, or even doubled, the allowable timber cut. While not illegal, it shows the state was exceeding its own guidelines on deforestation. +++

“Some of the companies on that list made payments into a UBS corporate account belonging to a former Musa associate, bank statements on the account obtained by Reuters shows. From the same account, withdrawals were made by the associate to fund Musa's sons who were studying in Australia, the statements show. +++

“Two timber firms in Sabah transferred two payments totaling $4.04 million on August 16, 2006 into the corporate UBS account belonging to the former Musa associate. Six days later on August 22, the exact same amount was transferred into a personal UBS account belonging to Musa's lawyer. The Hong Kong anti-graft agency described that account as "held in trust" for Musa, according to the bank statements and investigation documents. That same day, the firms won a 32,000 hectare (124 sq miles) timber concession and a contract to maintain a road to a logging camp, according to the Malaysian anti-graft agency document. The owners of those two timber firms confirmed to Reuters that the $4.04 million transactions were "donations" to Musa and UMNO to secure the contracts. They requested their names and the names of their firms not be identified. Malaysia's government has said all the funds in that UBS account were ultimately sent to UMNO as political donations. +++

Less Logging Revenues in Sabah and the Push for Plantation Money

Niluksi Koswanage of Reuters wrote: “While there is no published data on how much forest has been cleared within the Sabah Foundation forest reserve, official data shows significant deforestation throughout the state. In 1992, the state's total forest cover stood at 17,000 square miles, about half the size of Ireland. By 2011, it had shrunk to 13,900 square miles, based on the latest available data from the forestry department. Primary or virgin forests have been particularly hard-hit, declining from 1,595 square miles in 1992 to just 348 square miles in 2011. With diminishing forests left to cut, logging revenues fell by half over five years to less than 250 million ringgit in 2011 ($80.6 million). [Source: Niluksi Koswanage, Reuters, April 3, 2013 +++]

“Musa has made a push for Sabah to diversify into agriculture and oil and gas, which helped state budget revenues hit a record 4.1 billion ringgit last year. But the state's unemployment rate remains at 5.4 percent, the highest of any state in Malaysia, where the national average is 3.0 percent. Musa's popularity ratings have declined as well, to 45 percent in 2012 from 60 percent in 2009, according to a survey by the Merdeka Centre, Malaysia's most respected pollster. +++

Corruption Charges Against Sabah’s Minister

Niluksi Koswanage of Reuters wrote: “Law Minister Mohamad Nazri Aziz told parliament last October the funds in the UBS bank account held on behalf of Musa were political donations, without giving details about the source of the money or explaining why such funds had to be routed through foreign countries. Based on evidence submitted by the Malaysian anti-graft agency, Malaysia's attorney-general found no indication of corruption or linkages with the Swiss government's investigation into UBS, Nazri said. [Source: Niluksi Koswanage, Reuters, April 3, 2013 +++]

But an independent panel overseeing the Malaysian anti-graft agency has since written to the attorney-general requesting a review of his decision to close the case on Musa, a high ranking anti-graft official said at a public forum held by the Bar Council. The official did not disclose why the review was requested and declined to respond to Reuters requests for comment.

Malaysian Trade Minister Involved in Row over Car Import Scheme

In October 2005, Malaysia's trade minister was accused of allowing select businesses to import cars at cheap prices. Associated Press reported: “Long-serving International Trade Minister Rafidah Aziz faced a barrage of questions from opposition and ruling party members in Parliament during a heated debate. At one point, Rafidah threatened to sue opposition leader Lim Kit Siang after he accused her of corruption. "I am not willing to be slandered by you!" she shouted. Rafidah's political career was thrown into turmoil after her mentor, former Prime Minister Mahathir Mohamad, questioned the implementation of a secretive car import permit scheme. [Source: AP, October 4, 2005]

Her ministry issued thousands of highly prized car import licenses, known as "approved permits" or APs, to a few businessmen, some of them said to be close to Rafidah. The decades-old AP policy is meant to help poor ethnic Malays break into the auto industry to catch up with the economically dominant Chinese minority. Several of the beneficiaries are also alleged to have under-declared the value of the imported cars to customs to pay lower duties, enabling them to charge lower prices. Critics, including Mahathir, have said cheaper foreign cars are threatening national car maker Proton.

Following the uproar and repeated criticism by Mahathir, the government recently made public the names of the AP recipients, which until now had never been disclosed. One list showed that four businessmen _ including two former senior officials who served under Rafidah received the bulk of permits issued in the past two years.

Small Scale Corruption

Red tape and graft have been firmly entrenched in the bureaucracy for a long time.100 Malaysian ringgit is the going price to settle the matter of a speeding offense with police.

Victor Mallet wrote in the Financial Times, On the roadside between the airport and the capital, a gang of policemen, in broad daylight, was extorting sums of 20 ringgit - about $5 - from passing taxi drivers, including ours, on pain of prosecution for trumped-up traffic offences. Petty bribe-taking is just the visible part of a scourge that includes dubious land deals and multimillion-dollar pay-offs for government construction contracts. [Source: Victor Mallet, Financial Times, April 11 2005]

Syariah High Court Judge Charged with Taking Bribes

In November 2007, Associated Press reported: “A judge has become the first senior member of Malaysia's Islamic law system to face a corruption trial. He was charged with accepting bribes, a court official said. The authorities insisted it was an isolated incident that should not mar the reputation of Malaysia's Islamic law or Syariah Courts, which function separately from the secular legal system and handle family, personal and religious cases for the country's majority-Muslim population. [Source: AP, November 22, 2007]

Hassan Basri Markum, a Syariah High Court judge in the northern state of Perak, pleaded innocent on Tuesday in a civil court in Ipoh - which is under the secular judicial system - to five charges of soliciting or receiving about RM5,200 (S$2,200) in bribes, said his lawyer, Mr S. Theivanthiran. The government's Anti-Corruption Agency accused Hassan of demanding bribes between August and September this year in various syariah cases, including helping two couples marry without fulfilling Syariah requirements, Mr Theivanthiran said. If convicted, Hassan faces up to 20 years in prison.

Hassan, 53, has been working in the Syariah judicial system for more than 20 years. He is the first Syariah Court judge to face corruption charges, said his lawyer and a spokesman for the Syariah Judicial Department. Syariah Chief Judge Sheikh Ghazali Abdul Rahman told Malaysian media on Tuesday that any case of alleged misconduct involving Syariah judges is an isolated incident caused by an individual's personal weaknesses. 'We have an ethics code and directives for Syariah judges, lawyers and other officers,' Datuk Sheikh Ghazali said in the New Straits Times. 'Those who are proven guilty by the court of law will be punished accordingly.' The Syariah Judicial Department's spokesman confirmed Datuk Sheikh Ghazali's comments.

Combating Corruption in Malaysia

Liau Y-Sing of Reuters wrote: High profile prosecutions of civil servants for corruption have been rare. Former lands minister Kasitah Gaddam, the most senior official prosecuted for graft so far, was charged in 2004, and his case is still wending its way through the courts. Analysts say the Anti-Corruption Agency's discretion to prosecute is fettered as it reports to the Prime Minister, unlike countries such as Hong Kong where the equivalent body reports to Parliament.[Source: Liau Y-Sing, Reuters, December 25, 2007 >>>]

Jonathan Miller wrote on Channel4.com, “Over the past few years, Malaysians have also seen their corrupt officials exposed, one after another. Some scandals have been about little brown envelopes or vote-buying. Others have been pretty exotic. One even embroiled the man who is now Malaysia's prime minister in a murky saga involving the mysterious murder of a Mongolian model and alleged kickbacks on French submarines. "At one point it was a scandal a week," Ambiga Sreenevasan, former president of the Malaysian bar council, told Channel 4 News. "People are truly sick and tired of it, and the sheer amount of money bleeding from the system." [Source: Jonathan Miller, Channel4.com, May 4, 2013]

The Malaysian anti-corruption commission - which was already investigating Taib - has said it will act on the evidence, as part of its formal investigation into Taib for corruption. It has raided the offices of one of the lawyers featured in the Global Witness film, who represents some of Taib's family companies. Taib himself has dismissed the MACC as "naughty" and accused it of "victimising" him. He's said he won't cooperate with its investigationand says that he never demands or accepts bribes for the grant of leases or licences and that he has not issued any 'directive' illegally to benefit his cousins.

Corruption convictions in Malaysia typically carry a prison sentence of up to 20 years.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Malaysia Tourism Promotion Board, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated June 2015

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