Malaysia Anti-Graft Chief Urges Transparency in Political Cash

Photographer: Goh Seng Chong/Bloomberg

Paul Low, Malaysia's minister in the Prime Minister's Department overseeing graft and human rights. Close

Paul Low, Malaysia's minister in the Prime Minister's Department overseeing graft and human rights.

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Photographer: Goh Seng Chong/Bloomberg

Paul Low, Malaysia's minister in the Prime Minister's Department overseeing graft and human rights.

Malaysia’s anti-corruption minister said his nation needs greater clarity in political financing and government-procurement practices, while defending the handling of its missing airliner as transparent.

“The apex of any fight against corruption has to do with the political integrity first,” Paul Low, a minister in the Prime Minister’s Department, said in an interview in Singapore yesterday. Procurement should use more open bidding and fewer direct negotiations, and the nation could follow countries such as Germany and South Korea in devising methods for state financing of political parties rather than have too much money come directly from individuals and companies, he said.

Malaysia, ruled by one coalition for more than half a century, has been faulted for its management of the search for the Beijing-bound jet that fell off radar screens March 8 after contradictions in official statements. There is “nothing to hide” on the matter, Low said after accusations by some of the Chinese passengers’ families that the Malaysian government and military were to blame for any loss of life.

The Southeast Asian nation has drawn criticism, both internationally and from its own political opposition, in recent years for lack of transparency in how it awards public contracts. Prime Minister Najib Razak has moved to show his commitment to fighting corruption, appointing Low to his cabinet to lead the war on graft after his government was returned to power last year with the smallest share of parliamentary seats in decades.

‘Little to Show’

“So far there’s been very little to show” in the anti-graft effort, said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. “There’s still concerns about rent seeking and patronage, so that may still weigh on growth and investment.”

Weak governance is probably one reason why Malaysia’s growth is running below potential, Chua said. The way in which public tenders are awarded is still “subject to a lot of discretion,” he said.

Malaysia ranks 53rd out of 177 countries in Transparency International’s latest annual Corruption Perceptions Index. Bribe-taking was found to be the most rampant in Malaysia among 30 countries surveyed in 2012 by Transparency International.

Opposition leader Anwar Ibrahim made corruption and government procurement two of his main campaign issues in the 2013 election, and members of his coalition have questioned the award of contracts including one related to the expansion of a Kuala Lumpur rail line.

State Contracts

Malaysia’s reluctance to open up government procurement to greater competition has been a point of contention in trade talks. The country gives indigenous and ethnic-Malay companies preference in many state contracts. In 2007, the former head of the European Commission’s delegation to Malaysia said the European Union wanted greater transparency in the area.

Areas in procurement where direct negotiations are a problem include the defense and security sector and contracts for some information-technology systems, Low said. Government contracts are “a big area of change” being sought, he said.

“We are making some transformation there, to make it more accountable, more transparent, and to make sure that there are no direct negotiation and open tender is there,” he said. Other priorities include cleaning up the foreign-worker recruitment system, improving enforcement agencies and town councils, he said.

Political financing will be one of the biggest challenges for the minister, he said.

‘Money Politics’

“The issue of money politics, the issue of financing of political parties, how to make sure that these things are accountable and transparent,” he said. “Our financing is very much coming from individuals or companies. There is no law against it, it’s just that it can be open for abuse.”

A formula can be devised to channel political financing through the state, Low said. Funds can be given directly to parties rather than individuals, he said. “It should make it more transparent, especially the connection between business and politicians.”

Police and political parties are perceived as Malaysia’s most corrupt institutions, according to a survey by Transparency International between September 2012 and March 2013. Donations from corporations and individuals to political parties and candidates in Malaysia are not limited and parties aren’t required to report what funds are spent during election campaigns, the organization said on its website.

‘No Rules’

“There are no rules, there are a lot of loopholes as well,” said Joseph Liow, associate dean of the S. Rajaratnam School of International Studies in Singapore. Introducing state financing of political parties would be difficult because the opposition would object to the government being bestowed power to manage campaign funding, he said.

A perceived lack of openness has also dogged the country in its hunt for Malaysia Airlines Flight 370, which disappeared with 239 people on board. Family members of the more than 150 Chinese nationals on MH370 protested last month outside the Malaysian embassy in Beijing, having accused Malaysian Airline System Bhd. (MAS) and the country’s leaders of a cover-up, after Malaysian officials concluded the Boeing 777-200ER disappeared into the southern Indian Ocean, leaving no hope of survivors.

“We have nothing to hide,” Low said, calling it an unusual situation. “Why would we want to cover up and have an international inquiry at the same time?”

To contact the reporter on this story: Sharon Chen in Singapore at schen462@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net; Stephanie Phang at sphang@bloomberg.net Jake Lloyd-Smith

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