The role of the state bureaucracy in affirmative action and business expansion help account for the substantial corruption in Malaysia. As resources are often politically allocated rather than driven by the needs of the market, a nexus has emerged between government and business that has systematically bred conflicts of interest.

In 2003, Abdullah Badawi called for “people power” as a means to oppose corrupt practices.[22] After he became prime minister and preparations began for the general election in 2004, a number of sitting UMNO parliamentarians and state assemblymen suspected of corruption were denied renomination. A month later, Abdullah led a two-day ethics seminar for the government’s 198 MPs, then presented a new code of ethics that stressed professional norms and honesty. He also announced that henceforth, MPs would have to declare their assets in full.[23] The rigorously specified terms of disclosure required that MPs list their corporate interests, the types of business activities in which they were involved, and the value of their investments. These terms extended also to family members and any other persons who might function as trustees or proxies. A deadline of May 31, 2004 was imposed.

In extending his drive against corruption from UMNO to the bureaucracy, Abdullah formed the Malaysian Institute of Public Ethics, backed by a National Integrity Plan in 2004.[24] He ordered that spot checks be carried out in targeted government departments, namely immigration and customs, transport, land registration offices, and the police force.[25] Indeed, with the police “suffer[ing] an ‘image crisis,’ due to corruption, brutality, and poor service,”[26] Abdullah ordered a formal review of the police force. To this end, he set up the Special Commission to Enhance the Operations and Management of the Royal Malaysian Police. This commission was led by a former federal court chief justice, Mohamed Dzaiddin Abdullah, widely regarded as realistic but reformist. Among its members were several lawyers and NGO activists (including Tunku Abdul Aziz, then head of Malaysia’s Transparency International chapter) and a range of former high-level political, corporate, and police figures. Six months later the commission delivered an interim report whose findings were unexpectedly critical and, contrary to earlier government pronouncements, publicly disclosed. Final recommendations were to be made at the end of 2005; however, by the end of November, there was no indication that the police had begun to act seriously on the interim report.

The main body through which the government seeks to investigate corrupt practices is the Anti-Corruption Agency (ACA). The ACA appears to possess significant capacity for investigation, and it operates a website where informants can report instances of corruption anonymously. As mentioned above, prior to Abdullah’s gaining power, corruption was not rigorously prosecuted. Shortly after he became prime minister, however, several notables were committed to trial for corruption. The minister for land cooperative development, Kasitah Gaddam, was arrested in early 2004, allegedly for having been involved in an illegal sale of shares in a state-owned enterprise. Eric Chia, a former managing director of the state-owned steel company, was also arrested, allegedly for having approved an illicit payment to a Japanese partner. Shaharin Shaharudin, a former chief executive of a state investment company, Pernas (Perbadan Nasional), was charged with illicit dealings. Furthermore, in mid-2005, UMNO’s disciplinary board purged the party of some top officials against whom claims of having engaged in money politics (i.e., vote-buying) at the previous year’s general assembly were found to have been substantiated. Surprisingly, UMNO’s topmost vice-president, Isa Samad, was suspended, resulting in his removal as minister of federal territories.

However, after the government won a landslide in the March 2004 general election, its drive against corrupt practices began to wane. Although public attention focused intently on four allegedly corrupt ministers, Abdullah did little to shake up his cabinet, leaving two of these ministers in their posts, while the remaining pair was merely shifted to other portfolios.[27] Nazri Aziz was viewed as most vulnerable to dismissal; while minister of entrepreneur development, he had undergone much-publicized questioning by the ACA over his issuance of taxi licenses. However, after the election he was transferred to the Prime Minister’s Department, whose capacity Abdullah had expanded from four to six ministers. Indeed, the proportion of ministers, deputy ministers, and parliamentary secretaries swelled to nearly one-third of the government’s ranks of parliamentarians, thus procuring overall “a strong sense of continuity from a prime minister who had appeared bent on differentiating his administration from Mahathir’s.”[28] At the same time, in Malaysia’s universities, procedures for appointment, promotion, and removal grew highly politicized, leading to forced resignations and termination of contracts.

The code of ethics that Abdullah had earlier introduced for members of the governing coalition was only laxly administered, requiring that MPs make self-assessments, then electronically submit their “report cards” on a quarterly basis. Further, their asset declarations were not disclosed publicly, while the penalties for failing to make them at all were left unclear. The May deadline was thus roundly ignored, prompting Abdullah to offer an extension.[29] In addition, under Abdullah victims of corruption were given no additional mechanisms through which to seek redress.

Malaysia received a score of 5.0 in Transparency International’s 2004 Corruption Perceptions Index, in which 10 represents the least corrupt. This constituted an overall drop from the previous year’s score of 5.2.[30] Similarly, a World Bank study portrayed Malaysia as trending steadily downward in five areas of governance between 1998 and 2004, improving during the last two years only in terms of political stability.[31] Nonetheless, the Malaysian public seemed untroubled. A survey conducted by Merdeka Centre for Opinion Research in mid-2004 revealed the “overall concern for corruption in the public sector had subsided since the March general election.”[32]

In terms of institutional safeguards for transparency, Malaysia has an auditor-general’s office and a public complaints bureau. But like the ACA, these agencies are neither effective nor nonpartisan. A parliamentary public accounts committee also exists, and, under the chairmanship of an independent-minded government MP and his opposition deputy, it has succeeded lately in contributing meaningfully to public debate. The Malaysian Integrity Institute (IIM) has been tasked with assisting the ACA while implementing the National Integrity Plan. To this end, it has recently partnered with the United Nations Development Program. However, it is too soon to evaluate the IIM’s effectiveness in exposing bureaucratic corruption. A recently introduced system of parliamentary select committees remains rudimentary.

As nearly all mainstream newspapers and television stations are either owned by the government or aligned with it, they undertake little independent investigation. Whistle-blowers, anticorruption activists, and investigators who seek to present government documents as evidence of corruption risk severe penalties under the OSA. Attempts by opposition politicians to meet with top officers in such agencies as the ACA are usually rebuffed. Most of the government’s many websites offer little substantive information, and there is no freedom of information act.

Nonetheless, Abdullah has tried intermittently to increase the transparency of some government decision making, even if institutions remain weak. First, seeking to reduce the deal-making between government and business, he cancelled several large infrastructure projects, most famously an electrified double-track railway that was to have run the length of peninsular Malaysia’s west coast. He also scaled back plans for a new customs facility and elevated bridge link between Malaysia’s southern state of Johor and Singapore, the folly of which had been ensured by Singapore’s withdrawal from the project. On the other hand, although Abdullah ordered a review of the massive Bakun Dam hydroelectric project in Sarawak, the project continues unabated.[33] And while he has advised that any additional government contracts will be awarded not through opaque and personal dealings but instead through open-tender bidding, there was little indication of improvement by November 2005.[34]

In another positive step, many of the Malay entrepreneurs whose interests had been favored by the government during boom times, only to be brought low by the currency crisis, were finally forced to relinquish their holdings. Their assets were mostly acquired by the government’s investment vehicle, Khazanah Nasional. Although analysts typically dismiss increases in state ownership as worsening distortions, in the Malaysian context of highly politicized privatization these transfers promised to raise transparency and share prices.[35] Efficiencies also accrued when other vehicles such as Ministry of Finance Inc. sold the equity stakes that they held either to Khazanah, to the state-owned petroleum company (Petronas), or to the national superannuation scheme (the Employees’ Provident Fund).[36] At the same time, in order further to bolster Khazanah and key government-linked corporations such as Telekoms Malaysia and Tenaga Nasional, the national power utility, new cohorts of professionally trained Malays and even foreign executives were recruited as corporate leaders.[37]

Most dramatically, a furor erupted over the distribution by the ministry of international trade and industry of import licenses for automobiles. Known locally as “approved permits” (APs), these licenses were initially introduced in 1970 as a way for Malay businesspeople to get a footing in the automobile industry, which was dominated locally by Chinese. However, after Mahathir, upon his retirement as prime minister, was appointed as an advisor to the national car company, Proton, he denounced the AP system as undercutting the company’s competitiveness. Opposition leaders took up the cry, demanding that the system be made transparent. The government responded by reversing its long-standing policy of not revealing the names of recipients, publishing lists of persons who together had been awarded more than 67,000 APs.

The government’s commitment to effective macroeconomic management remains strong, with the budget-making process taken seriously. The budgets proposed during Abdullah’s tenure have been widely assessed as prudent, targeting the deficits that had mounted during Mahathir’s last years in office.[38] To this end, Abdullah also bolstered the state’s extractive capacity, with Inland Revenue raiding 10 of the country’s largest construction firms over tax evasion during his first year in office.

Just as the government’s fight against corruption fluctuated during this period, so did its commitments to transparency. The budget’s great length and complexity are beyond the capacity of an under-resourced opposition to oversee properly. In addition, significant amounts of government revenue and expenditure remain off-budget. For example, Petronas, the national petroleum company, is housed within the Prime Minister’s Department, leaving it almost entirely unaccountable to parliament. The government thus remains quite silent on many of its expenditures, while disclosing many others in an impenetrable aggregate form.

After the 2004 general election, some of the state contracts that had been placed under review were quietly restored, with Abdullah insisting that the government was bound by the letters of intent that his predecessor had signed.[39] Indeed, some of Abdullah’s own family members appear to have benefited from these contracts. Attention focused on the dealings of his brother, Ibrahim Badawi, whose company, Gubahan Saujana, won deals with a catering subsidiary of Malaysia Airlines. Through an opaque privatization process, Gubahan Saujana secured a revenue guarantee of 80 percent over a nine-year period.[40]

Analysts also observed the meteoric rise of a newly listed oil and gas company, Scomi Group, in which Abdullah’s son Kamaluddin held a majority interest. When the government announced plans to develop smaller oil fields, expectations mounted that Scomi would be the chief beneficiary of state contracts, driving up the firm’s share price by an incredible 588 percent over its listing price four months earlier.[41] A company subsidiary, Scomi Precision Engineering, was also cleared hastily in early 2004 by the Foreign Ministry and police after becoming embroiled in a scandal for exporting centrifuge parts to Libya, allegedly through a black market in nuclear equipment.[42] In the view of Wan Azizah Wan Hamzah, wife of Anwar Ibrahim and president of Keadilan, such “abus[e] [of] diplomatic machinery and resources to defend a private company owned by the son of the prime minister is clear poof of how cronyism and nepotism [have] been shamefully institutionalized … in Malaysia.”[43]