An interview with the Malaysian Anti-Corruption Commission
Economic opportunities in Malaysia
Located in Southeast Asia and bordering Singapore, Thailand, Indonesia and Brunei, multicultural Malaysia has a growing, diversified economy which is conducive to investment in several industries.
Malaysia has grown significantly over the last three decades, with its gross domestic profit blossoming at an average of 6.5 percent annually between 1957 and 2005. Since the 1980s, the industrial sector has led the country’s economic development.
Malaysia boasts some key strengths (including political stability, reliable infrastructure, affordable labour costs, and its geographical proximity to East and Southeast Asia), making it an attractive choice for foreign businesses.
Malaysia’s three prime industries – medical devices, electronics, and oil and gas – highlight the country’s economic diversity.
The Malaysian government has identified the medical-device industry as a priority area for development. The industry in Malaysia is dominated by small and medium enterprises manufacturing disposable medical products, such as gloves. There are also a few major foreign multinational corporations participating in this industry, mostly specialising in more complicated, high-end products such as orthopaedic products and surgical instruments. With an educated and skilled workforce and affordable labour costs, Malaysia’s medical-device industry is forecast to grow rapidly.
In 2013, electronics accounted for almost 43 percent of Malaysia’s exports, with semiconductors accounting for close to 40 percent of those exports. Indeed, Malaysia is one of the world leaders in semiconductor assembly. However, Malaysian companies have now moved beyond just semiconductor assembly, testing and packaging, and are taking on more advanced operations such as cutting and polishing silicon wafers and wafer fabrication. Malaysia also boasts strength in industrial electronics, producing equipment for companies in the medical, aerospace, and oil and gas industries. With the country’s rising standard of living there is also an increasing demand for consumer electronics, which is being filled by multinationals with strong brand names such as Apple.
Oil and gas
Malaysia continues to boast a strong oil and gas industry. This industry has traditionally accounted for close to one-fifth of the country’s gross domestic profit. Malaysia is currently the second largest oil and natural gas producer in Southeast Asia, and the second largest exporter of liquefied natural gas globally. Over US$6 billion was spent in exploration and production in 2011. Continued infrastructural developments are expected to lead to greater production, and new wells and fields have been located even as late as June 2013. Furthermore, Malaysian exploration and production activities have significantly increased overseas. With Malaysia’s strategic location and strong performance (especially over the last 30 years) in oil and gas, the country looks to remain strong in this industry over the coming years.
Risks and corruption
While Malaysia may not pose the same risks as areas traditionally associated with high levels of corruption, organisations and investors should proceed with caution before pooling money, resources and time into any country. A study conducted by the World Bank indicates that as recent as 2009, corruption cost the Malaysian government about RM10 million per year.
The exact types of risks affecting companies in the country are harder to pinpoint. A survey conducted across several businesses by KPMG (KPMG Malaysia Fraud, Bribery and Corruption Survey 2013) sheds some light, however, noting that some of the primary types of fraud encountered in Malaysia include thefts of assets and funds, and corruption (including kickbacks and vendor/supplier fraud). Respondents to the survey noted that the main causes for these activities were poor internal controls, lack of internal skill to detect or identify fraud, and poor utilisation of technology to identify red flags. The findings tend to indicate that any foreign organisation expanding operations into Malaysia will also likely face these common compliance challenges, and must adequately implement internal controls and train their employees and business partners on how to properly conduct themselves in line with organisational expectations, policies and relevant laws.
There are several reasons to explain the level of corruption and fraud in Malaysia. One such reason is the “revolving door” that exists between the public and private sectors, leading to interactions between individuals with past governmental experience and current government actors. Additionally, businesses in Malaysia have stated that a lack of on-going compliance training for employees is to blame for poor awareness of company policies and the relevant laws which prohibit corrupt behaviour.
Malaysia has taken steps to bolster its anti-corruption framework to combat this corruption. The MACC has spearheaded the movement to increase transparency in the country and foster the implementation of stronger controls and training in organisations, and they are also assisting with investigations into potentially-corrupt activities. We spoke to the MACC to learn about their efforts in Malaysia.
Interview with Ahmad Khusairi Yahaya of the Malaysian Anti-Corruption Commission
Can you describe the MACC’s work and objectives in battling corruption?
The government formed the MACC in 2009 (through passage of the Malaysia Anti-Corruption Commission (MACC) Act 2009) to serve as an independent body that effectively manages the nation’s anti-corruption efforts. From 1967 to 2008, anti-corruption matters were handled by the Anti-Corruption Agency Malaysia.
An increasing demand for more independence led to the formation of the independent MACC. In six years of operation, the MACC has grown to 2700 staff, and has increased from four divisions to 17.
The MACC is overseen by five independent bodies, through a “check and balance” mechanism to ensure that it is operating independently and that its functions and roles are implemented effectively.
The current objective of the MACC is twofold: to “advise” and educate the public on corruption, and to investigate potential offences.
How does the MACC work to advise persons and public bodies and educate the public on corruption?
The MACC has introduced more than 20 initiatives to advise organisations in Malaysia on corruption and on strengthening their internal controls and improving training and education programmes. Two initiatives offered to advise the public on compliance include:
- compliance experts, known as “integrity officers”, whom are seconded to organisations on a two-year term to improve compliance programmes (the integrity officers will usually assume the title of Chief Integrity Officer once they are seconded to an organisation)
- corporate integrity pledges, which corporations or individuals can take to institute compliance within their organisation (three hundred entities have taken this pledge since its inception in 2011).
How does the MACC conduct investigations?
The MACC has the authority to conduct investigations in the public and private spheres. However, the MACC Act gives the MACC power to investigate fraud and bribery cases only.
Many investigations start after a report is made through the MACC’s reporting avenues. These avenues include:
- a hotline number
- in-person communication
- written communication.
One example of a new and successful innovation is the MACC’s video-interviewing room, where the interviewee can be interviewed safely, away from the site of any potential wrongdoing, and without repercussion.
The MACC’s conviction rate through investigations has improved from 54 percent in 2009 to 89 percent in 2013.
What are the current challenges to building a corporate compliance programme in Malaysia?
Several challenges remain to building a corporate compliance programme in Malaysia, including:
- meeting people’s growing expectations that business must be conducted ethically and that corruption will be addressed by executive management and by government initiatives
- educating the younger generation on the specifics of compliance and on how to comply
- gaining support from politicians for pushing and keeping compliance at the top of the agenda.
(NOTE: All answers have been paraphrased.)
Malaysia stands as the third-largest of the ASEAN countries, and is a prime destination for foreign investment. With the assistance and guidance of the MACC, the country can continue to become a transparent environment where business can be conducted ethically. The responsibility to be compliant remains with organisations, which must proactively seek out resources such as the MACC, consultants and their own in-house experts to ensure success. With so many resources available, companies have no excuse to come to Malaysia unprepared. All prudent investments are made with safeguards; devoting time, resources and money into Malaysia should be no different.
Ahmad Khusairi Yahaya is the Director, Policy, Planning and Research Division of the Malaysian Anti-Corruption Commission.