FEBRUARY 3 — Corruption in Malaysia, a systemic and complex issue, has far-reaching consequences that extend beyond mere financial misappropriation. This misuse of power for private gain is not only a social blight but also a significant economic drain.

Reports by Global Financial Integrity estimate Malaysia’s annual losses due to corruption at around US$6–7 billion (RM28.37–33.10 billion) between 2005 and 2014. The multifaceted nature of corruption in Malaysia necessitates a thorough exploration of its impact on both the social fabric and economic vitality of the nation.

Malaysia’s history with corruption is marked by several high-profile scandals that have had a lasting impact on its global reputation and internal governance.

The 1MDB scandal, involving the misappropriation of billions of ringgit, is a particularly egregious example. Categorised by Transparency International as “one of the world’s biggest corruption schemes,” it highlights deep-seated issues within the Malaysian system.

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The US Department of Justice reported that around US$4.5 billion (RM21.28 billion) was misappropriated from the fund. These scandals do more than damage Malaysia’s standing on the global stage; they erode the public’s confidence in their government and institutions, leading to a pervasive sense of distrust and scepticism.

The social impact of corruption in Malaysia is profound. The 2022 Corruption Perceptions Index by Transparency International (TI) ranked Malaysia 61st out of 180 countries, indicating a moderate to high level of perceived public sector corruption.

A survey by TI also revealed that 71 per cent of Malaysians consider government corruption a significant issue. In other words, seven out of every 10 Malaysians believe that corruption is a significant issue.

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The pervasive lack of trust in governance hampers civic engagement and worsens social inequalities.

In a study titled “The Impact of Perceived Government Corruption on Depressive Symptoms, Moderated by Social Status”, published in the prestigious journal Scientific Reports, which ranked as the 5th most-cited journal globally in 2022, a significant positive correlation was discovered between perceived government corruption and depressive symptoms.

In simpler terms, this finding suggests that when individuals believe their government is corrupt, they are more prone to experiencing symptoms of depression. To put it even more straightforwardly, the more someone perceives their government as corrupt, the greater their likelihood of feeling depressed.

When funds are diverted through corrupt practices, vital social services like healthcare and education are compromised. The United Nations Development Program (UNDP) notes that corruption leads to a diversion of resources away from essential public services, disproportionately harming the poor and widening socio-economic gaps.

The Malaysian Anti-Corruption Commission (MACC) reports that corruption can inflate the cost of public projects by up to 30 per cent, resulting in inefficient infrastructure and services.

In simpler terms, if a road, school, or hospital was supposed to cost RM100,000 to build, corruption could increase this cost to RM130,000. This extra RM30,000 does not go into making the project better but is typically lost to corrupt practices.

As a result, not only does the project cost more, but more often than not, the quality or efficiency of the infrastructure or service is not as good as it should be for the price paid. This means the public does not get the full benefit of the money spent. This misallocation and inefficiency in resource usage hinder Malaysia’s economic progress and competitiveness.

The staggering scale of funds misappropriated in the 1MDB scandal, amounting to US$4.5 billion (RM21.28 billion), starkly highlights the lost opportunities for Malaysia’s national development.

To put this into perspective, Malaysia’s education budget in 2024 stood at approximately RM58.7 billion. In simple terms, the financial impact of the 1MDB scandal represents nearly one-third of the country’s entire education budget for that year.

Consider the transformative potential if even a portion of these lost funds were redirected to enhance Malaysia’s infrastructure and resources.

For instance, the 2023 Budget allocated RM430 million for the construction of eight new secondary schools, averaging about RM53.75 million per school. Utilising the misappropriated 1MDB funds, Malaysia could have constructed approximately 256 new secondary schools, equating to roughly 18 schools in each Malaysian state — a significant boost to the nation’s educational landscape.

In the realm of healthcare, with a 2024 Budget of RM41.2 billion, these redirected funds could have substantially upgraded medical facilities, expanded rural health services, and broadly enhanced public health, positively impacting the lives of millions.

To illustrate, the construction of the Hospital Pasir Gudang, featuring 14 specialist clinics and 304 beds, is currently underway with a budget of RM376.32 million.

If the entirety of the 1MDB funds were allocated to healthcare infrastructure, Malaysia could have seen the construction of around 56 new hospitals, translating to about four state-of-the-art hospitals per state — a significant enhancement to the country’s healthcare system.

The Malaysian Anti-Corruption Commission reports that corruption can inflate the cost of public projects by up to 30 per cent, resulting in inefficient infrastructure and services. ― Bernama pic
The Malaysian Anti-Corruption Commission reports that corruption can inflate the cost of public projects by up to 30 per cent, resulting in inefficient infrastructure and services. ― Bernama pic

Effectively addressing corruption in Malaysia requires a comprehensive strategy. Strengthening legal frameworks, enhancing law enforcement capabilities, and fostering government transparency are crucial. The National Anti-Corruption Plan (NACP) 2019-2023 by the Malaysian government is a proactive measure in this direction.

Notwithstanding, the key to Malaysia’s success in combatting corruption lies not only in legal and institutional reforms but also in cultivating a societal ethos that vehemently opposes corruption.

Rwanda, which transformed post-genocide into one of Africa’s least corrupt nations offers a worthy model. Rwanda’s approach has been characterised by strong political will and leadership in fighting corruption.

In Malaysia, the fight against corruption must be a collective effort that starts from the grassroots level and works its way up. Emphasising the role of community leadership in this endeavour is crucial. Drawing inspiration from Rwanda’s innovative “Imihigo” system, Malaysia could implement a similar framework.

In this system, local leaders set annual performance targets that are not only realistic and achievable but also deeply rooted in the community’s specific needs and aspirations. This approach ensures that targets are not just top-down directives but are organically integrated into local contexts.

To effectively adopt this model, Malaysia could initiate a program where local leaders and community representatives collaboratively identify and prioritise their specific anti-corruption goals.

These goals could range from improving public service delivery to enhancing transparency in local projects. Regular public forums and community feedback mechanisms can be established to monitor progress and ensure that these targets genuinely reflect the community’s needs.

Furthermore, incorporating a system of rewards and recognition for communities and leaders who achieve their anti-corruption targets could foster a positive and proactive approach to tackling corruption. This system could be supplemented by nationwide awareness campaigns, highlighting success stories, and encouraging a culture of integrity and accountability across all levels of government.

By empowering local leadership and communities to set and achieve realistic, context-specific anti-corruption goals, Malaysia can create a robust, bottom-up approach to eradicating corruption. This strategy not only makes economic sense but also fosters a sense of ownership and responsibility among the rakyat in our fight against corruption.

* The author is a Senior Lecturer at the Department of Finance, Faculty of Business and Economics, Universiti Malaya. This article is part of a research collaboration between UM and Bahagian Perancangan Governans Nasional, Suruhanjaya Pencegahan Rasuah Malaysia.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.