Malaysia: Living with Perceptions - The
Importance of Transparency
by Tunku Abdul Aziz
Berlin, 21 October, 1998
In this article I will refer to a subject which is attracting a great
deal of international attention and argue that transparency and
accountability are the two most important elements in any integrity
system.
We live with perceptions that have an important bearing on our economic
well-being. Each year, Transparency International, the Organisation of
which I am the national co-ordinator for Malaysia, publishes its
Corruption Perception Index. The index is based on the perceptions of
the international business community about the levels of corruption in
the countries in which they operate.
For a country to be included in the TI Corruption Perception Index in
any given year, that country must have been the subject of at least 4 or
more separate surveys. Out of the 52 countries included in the 1997
TI-CPI, Malaysia was placed at number 32. What about our neighbours?
Singapore at number 9, South Korea 34, Thailand 39, the Philippines 40,
and Indonesia 46. While many may be quick to dismiss the index as being
of no real significance, it is interesting to note that the countries
which are facing the greatest economic turmoil today are among those
perceived by the international business community to be the most
corrupt- Indonesia, South Korea and Thailand are on the IMF life support
systems while the Philippines has been kept afloat by the IMF, and the
World Bank, on and off, for the last 35 years or so.
On the other hand, little Singapore, perceived to be among the least
corrupt in the world, has survived this crisis relatively unscathed. I
leave you to draw your own conclusions about our own country and the
relevance of the TI Corruption Perception Index to our discussion.
While we may not always like the way we are perceived, particularly by
the international business community, we have to agree that although
their perceptions may, indeed, have no basis in fact, they are,
nevertheless, real. Their effects on our regional economies have been
devastating, to say the least. These perceptions have come about largely
from their close observation of the way we, and our friends in the
region, have been managing our economies, and what they see has given
them neither the level of comfort nor the degree of confidence they
require for the protection of their investments in the long term.
The countries in this region, almost without exception, consign
transparency to the back seat of their policy-making mechanisms. For a
start, the lack of transparency in the disposal of public assets through
privatisation was causing concern and disquiet. Equally worrying has
been the practice of awarding mega contracts on the basis of closed door
negotiations, rather than the fairer, and more democratic, open bidding.
What about ready access to information in Malaysia? What about the
blanket use of the Official Secrets Act?
This, in a country that is promoting technology as an article of faith!
It is this blatant breach of "best practices" in both the privatisation
and public procurement procedures that has given rise to the expression
"crony capitalism " Long before Thatcherism and privatisation ever
became fashionable, another Tory leader, Edward Heath, described the
sort of behaviour we now speak of as the "unacceptable face of
capitalism ". Both these expressions share a common characteristic -
transparency and accountability - the two important pillars of good
governance, do not form any part of the policy equations of many of the
governments of Asean. Therein, I believe, lies the root of so many of
our current economic and financial problems.
If lack of confidence in the way we manage our economic affairs is what
is causing all the problems, the common sense thing to do is to reverse,
at once, the negative foreign, and, for that matter, Malaysian public,
perceptions about our national integrity. However, even with the best
intentions in the world, most governments find themselves falling just
short of the level of political will required to finish the job. And,
without the support of all sections of society, working as coalition
partners, to address the issue of confidence-building as part of a
long-term strategy to develop and strengthen a national integrity
system, would be an impossible task. The empowerment of civil society so
that it can play its part in rebuilding our shattered national
credibility is crucial to the success of this effort.
You and I, ordinary men and women, the corporate sector, and civil
society need to be directly involved in this damage control operation
because national integrity is too precious a part of our democratic
values to be left to the tender mercies of politicians. Society as a
whole must play an active "custodian " role if good governance is to
become a reality in this country. Without accountability to society,
without transparency in government, as well as in private sector
business transactions, and without integrity in national life,
sustainable human development (of the level and quality to which we
aspire) has little hope of finding its true expression. In our political
tradition of "Father Knows Best", these heretical thoughts will probably
not sit too well with some people in power. There is every prospect of
these sentiments attracting the retort, "Who elected you to speak for
the people?"
I am not about to dispute the mandate and legitimacy of an elected
government. Unfortunately, experience elsewhere shows all too
disappointingly that even enlightened governments tend to forget that
the legitimacy they enjoy, and proclaim ever so noisily at the slightest
hint of a dissenting view, is derived from an unspoken social contract
with the people. In return, a government agrees to honour and defend the
constitution. And, by reason of this contract, an elected government
must be prepared to subject its official behaviour to public scrutiny
and be held totally accountable to its constituents.
By implication, the mandate given must be applied to achieving one
object only - to put the interests of the many over those of the few. It
is under a moral obligation, no less, that in carrying out its
functions, it should adopt universally recognised and accepted "best
practices", consistent with the economic, social and moral needs of an
ethical and caring society. In other words, good governance is a price
that a responsible government will be expected to pay, and pay
willingly, for the sacred privilege and trust it enjoys. It goes without
saying that the principle of trusteeship is central to the whole concept
of stewardship, both in the governance of the nation, as well as, in the
case of the private sector, the management of public companies.
I turn now to the role of the private sector, specifically, in promoting
corporate transparency. In his paper "Civil society in the Fight Against
corruption" presented at the 8h International Anti-Corruption Conference
in September, 1997 in Peru, Dr. Peter Eigen, President of Transparency
International, after arguing that it is governments that have a formal
responsibility to reform national and international integrity systems,
goes on to say, and I quote, "The private sector has a unique input to
make. It is the dominant engine of the economy and an effective
anti-corruption campaign can hardly be sustained against the opposition
of the corporate community."
Let no one underestimate the power for good that the private sector can
wield, if it so chooses. It is, therefore, encouraging to see that the
private sector in our country is beginning to be concerned about the
colossal damage done to our national economy and prestige by corruption,
a word defined by Transparency International as the "abuse of entrusted
power for private profit." This definition includes also corrupt
practices within the private sector community itself. This conference on
Corporate Transparency reinforces that concern in a practical way. It is
absolutely right that the desire to reform and bring about transparency
and accountability in the way we do business has come, in this case,
from within the corporate community.
The range of topics covered by the conference is truly impressive,
giving equal emphasis to all of the important areas coming within the
broad scope of good corporate governance, such as the desirability of
developing a corporate disclosure policy, the importance of adopting
best practices in corporate financial reporting, and the need to ensure
that there is a clear understanding of what international institutional
investors expect and want from the companies in which they invest. These
are only some of the examples of hard-nosed, practical approach that the
Malaysian corporate sector is apparently capable of bringing to bear, as
part of its own reform initiatives, on the economic and financial
problems afflicting our country today.
Two questions that crossed my mind were, one, "Should we not, perhaps,
have bolted the financial stable doors before the international
investors had time to make a dash for greener pastures?" and, two, "Are
we not doing too little, too late, to stem the tide?" Perhaps, but the
important thing is that this conference on Corporate Governance confirms
a long-held suspicion that we were not entirely happy with things as
they were, and that we wanted to change our business culture in a way
that foreign, as well as local, investors, might reasonably expect that
the playing field on which they would be invited to play the "money game
" would not only be level, but also guaranteed to be free of hidden
traps, and that the goal posts would not be shifted while the game was
in progress.
The current crisis is, in many ways, a blessing in disguise. A simple
enough statement but try suggesting this to friends in SIME DARBY,
RENONG, BANK BUMI and others, now adrift in some leaky boat with a
broken rudder, and you will lucky to leave their timber-panelled
executive suites a walking wounded. It is more than likely, if you are
so rash as to question their competence, that you will leave on a
stretcher. Seriously, though, this period of economic downturn has given
us, both the government and the private sector, an excellent opportunity
to look inwards.
This should be a time for introspection, a time to search our collective
soul, a time to ask all the right, but difficult questions, to challenge
operating systems, policies and procedures hitherto accepted without a
murmur irrespective of their merit or virtue, to ferret out the real,
and not just the politically convenient, reasons for our current
economic condition and, dare I say, -stop blaming Mr. Soros for our
sorrows (no pun intended) because, for the most part, the problems are
of our own making. It is a time to ask ourselves the question of the
century, "How, and why, did things go so horribly wrong when our
fundamentals were so strong?"
This coming to terms with reality will, I am sure, help strengthen our
resolve and determination to address, in a business-like fashion, the
many issues and apparent distortions in our economic management that
have brought about all those negative perceptions in the first place.
The challenge before us is real, and so is the world of which Malaysia
is part. That challenge (which will, without doubt, test the true
measure of our wisdom and maturity) must be taken up if we are not to be
remembered merely as a footnote when the history of this century comes
to be written. We need to develop smart partnerships with the
Government, civil society, religious groups, and the private sector if
we are to claim a proper place for ourselves in any future history of
the world.
The globalisation of our economy means only one thing- the rules are no
longer ours to lay down and manipulate. We either play by the new global
rules, which demand much greater transparency and accountability than we
were used to in the past, or remain, at best, mere spectators on the
sidelines. There is no halfway house. We are either in or out of the
game. As there is really no viable alternative, it makes enormous sense
to put our house in order, get our act together, and conform to globally
recognised "best practices."
We have in the last ten months or so been continually bombarded with the
plaintive refrain - "Our economic fundamentals are strong." Accepting
that they are indeed as strong as the Government says they are, the
question to ask is, why was it that we were so savagely, and
mercilessly, attacked, leaving us in such a frightful economic and
financial mess? Forget the conspiracy theory ; give it a rest. Nineteen
out of 20 foreigners do not even know where in the world Malaysia is.
The one who knows does not really care whether our economy is growing or
stagnating! The truth of the matter is that investors had lost
confidence in the way we managed our economic and financial affairs.
They saw too many instances of intimate, and cosy, relationships between
the Government and certain select groups within the private sector,
going under the rather grand name of Malaysia, Inc., which, in the minds
of many people, is nothing more than a convenient formula for unfettered
cronyism and abuse of public power for private gain.
All of these might have been perfectly harmless and innocent, but for
the fact that so many of the deals have been struck under circumstances
perceived to be less than innocent. In the absence of transparency, and
given the scarcity of authoritative, accurate and timely information, is
it any wonder that the good old-fashioned Malaysian grapevine is winning
the battle for information hands down.
We, you will recall, were upset that foreign investors failed to
recognise our special financial and economic position, and that they had
the cheek to lump us, somewhat unceremoniously, together with the likes
of Thailand, Indonesia and the Philippines. And we wondered aloud about
those ill-informed, fickle-minded, and somewhat naive
investors/speculators, (the words were used interchangeably) who, having
eyes, and yet see not the inherently strong fundamentals underpinning
our political and economic system.
Our fundamentals, notwithstanding, they perceived, rightly or wrongly,
similar unhealthy trends in all of the countries of East Asia. The
countries of ASEAN, home to some of the world's greatest proponents of
the Asian Values, are seen in reality to share a morally indefensible
and decadent heritage : complete and utter disdain for transparency and
accountability in the management of those matters that have "public
interest" implications.
Recognising the important role of the private sector in national
economic development, it is entirely proper that you, who are members of
the business community, should also, as part of your quest for corporate
transparency, consider seriously the urgent need to develop a national
code of business ethics to regulate our business transactions, both
within our own country and with the outside world. Such a code of ethics
has to have a clear set of objectives, and must, among other things,
include measures to combat extortion and bribery in business
transactions. After all, the whole purpose of transparency is reduce
opportunities for corrupt practices in society as a whole.
The ICC (The International Chamber of Commerce), the Paris-based world
business Organisation, issued an important and far reaching policy
paper, Document No. 193/15 in 1996 setting out actions that needed to be
taken by " international organisations, governments and by enterprises,
nationally and internationally, to meet the challenging role of greater
transparency in international trade. "You have a major contribution to
make to the process of building and strengthening confidence in the
totality of our national integrity system.
Last month I visited Thailand and Indonesia on a special Transparency
International mission to assess the impact of corruption on the state of
the economy in those countries. It was refreshing to hear the views of a
large cross-section of business, professional, academic and media
leaders who, without exception, all agreed that the absence of an
integrity system both in government and the private had contributed
enormously to the current problems. Refreshing, because of the candour
with which they discussed and analysed the role of corruption in
bringing about the collapse of their economic base.
More important was a willingness, especially on the part of the Thais,
to find a solution and take the bitter pill, if that was what was
required, in order to put the country back on its feet. I am pleased to
note that international perceptions about Thailand are improving each
day. Thailand, a proud country, is not too proud to admit where it had
gone wrong.
In Bangkok we were privileged to be invited to attend the first annual
lecture organised by the Asia-Europe Foundation. In what turned out to
be a world class address by Khun Anand Panyarachun on Good Economic
Management and Governance, Asia's best known democrat and a man of the
highest personal integrity, observed that it had to take a financial
crash to drive home the point that many of the Thai institutions were
ill-equipped to operate effectively in the global economy.
He said that in the case of his own country, Thailand, the integration
into the world economy was far from smooth. For example, while the Thais
adopted readily enough Western-style capitalism, this had created an
internal contradiction because they continued to retain their
traditional system of patronage networks, a system built on personal
connections to allocate values and resources. While maintaining that
personal connections could be innocent, he warned that when they became
a factor in public affairs, they could be deadly because patronage was
not based on merit and tended to breed inefficiency and corruption.
This man who is Chairman of the Saba Union Group, one of Thailand’s
great business houses, was twice asked by the King of Thailand to become
prime minister and to clean up the mess created by a long line of
corrupt military, and civilian, rulers. He was called again to the
service of his country, recently, as Chairman of the Constitutional
Drafting Committee which gave Thailand her first truly democratic,
anti-corruption, constitution which puts transparency and accountability
as the most important components of good governance.
Khun Anand recognised that good governance would not bring about some
idyllic utopia. In fact, it could be rather messy, the chattering masses
could be difficult to satisfy, but he thought this was preferable to the
government taking public policy decisions in secret or by a small group
of ministers or officials, which in the end would compromise and harm
the public interest. He went on to say, and I quote, "To avoid such
occurrences, the decision process must be transparent and open to
scrutiny. The people must be given free access to all information
pertaining to public policies and projects." Khun Anand, as you might
have gathered, does not subscribe to the "Father Knows Best' culture.
Our visit to Indonesia enabled us to see at close quarters a government
in deep credibility crisis. What a contrast to the positive attitude of
the Thais who were obviously keen to reform their economic and political
systems at the earliest possible opportunity. There were, we discovered,
some encouraging signs amidst the confusion. For example:
We were delighted to visit the Lembaga Studi dan Pengembatigan Elika
Usaha Indonesia or, in English, the Institute for the Study and
Advancement of Business Ethics, a creation of KADIN, the Indonesian
Chamber of Commerce and Industry, and to learn a little about the
impressive work that their small secretariat was doing. Here, as far as
I am concerned, is 'an example of a great moral awakening by
businessmen, like yourselves, to the fact that capitalism does, indeed,
have an acceptable face, one that recognises and accepts the social,
moral and cultural dimensions inherent in every form of human
enterprise.
The much maligned Indonesian business community has taken up a most
difficult challenge. Can we, in Malaysia, do the same and prove with
deeds, and not mere words, that we are equal to the task of bringing
about a new climate of confidence, a climate in which profits can be
made in an honest and transparent way?
I should like to end on a happy note. As I was going over the final
draft of this article, my attention was diverted to my TV screen and I
watched with great pleasure and satisfaction, our Deputy Prime Minister
gave firm and clear assurances in Parliament, that the measures he was
putting in place to strengthen the banking system would include full
disclosures of all relevant information so that the public could make
informed judgements and decisions about those matters that affected
their ringgit.
Dare we hope that this access to information would translate into
greater freedom of information right across the national spectrum. I see
in this a victory for transparency and accountability. More to the
point, it is a victory for good governance and responsible leadership.