ASEAN Insights: The Direction Of Transparency And Corrupt Practices In The Region.

Legal News & Analysis - Asia Pacific - ASEAN - Regulatory & Compliance

21 December, 2018

 

In most of the Association of Southeast Asian Nations (ASEAN) countries, corruption remains endemic and deep rooted, steeped in a tradition of political and business patronage.

 

Singapore and Malaysia are the only two ASEAN nations to score higher than 50 out of 100 (where 100 is very clean and 0 highly corrupt) in Transparency International’s Corruption Perceptions Index (CPI), coming in 6th and 62nd out of 180 countries in terms of transparency, respectively.

 

Not only is ASEAN’s record on corruption relatively poor, Transparency International’s annual CPI suggests it may be getting worse. A number of anti-corruption initiatives are underway but most are underfunded, limited in scope and generally insufficient to tackle the problem. Among the main ASEAN economies, only Singapore has achieved any improvement in its CPI corruption scorecard since 2015.

 

ASEAN’s slow but steady progress toward regional economic integration could work to increase transparency and reduce corruption. In theory, economic openness should promote a level playing field that drives bribery and corruption out of the system.

 

New anti-corruption legislation and gradual efforts to improve enforcement in an environment of rampant bribery and corruption will increase the risks facing multinationals operating in ASEAN.

 

Although Malaysia enjoys a relatively clean reputation in the ASEAN context, the 1Malaysia Development Bhd (1MDB) sovereign wealth fund scandal has dramatically elevated the issue of bribery, corruption and transparency. Political interference in the 1MDB investigation tarnished the image of Malaysia’s key regulatory bodies, including the primary anti-corruption enforcement agency, the Malaysian Anti-Corruption Commission (MACC).

 

1MBD contributed significantly to the fall of the ruling coalition and resulted in numerous charges against the former Malaysian prime minister, Najib Razak and other senior politicians. The scandal continues to generate intense media scrutiny and drew in investigative and recovery efforts by several foreign regulators, including those from the US, UK, Singapore, Switzerland, Hong Kong and Australia.

 

In order to help ensure organisations across all industries employ fundamental measures to minimising the risk of corruption, Malaysia's Prime Minister Mahathir Mohamad recently launched guidelines under the Adequate Procedures Pursuant to Sub-section (5) of Section 17A of the Malaysian Anti-Corruption Commission (MACC) Act 2009. The guidelines have been drafted to assist organisations understand what the "adequate procedures" are to prevent the occurrence of corrupt practices. The enforcement of Section 17A will begin from 1 June 2020.

 

In addition, following the country's implementation of the ISO 370001Anti-Bribery Management System, companies and organisations have been encouraged to run a Corruption Risk Management exercise. Other anti-corruption initiatives are also in the pipeline, such as the National Anti-Corruption Plan, which is scheduled to be launched in January 2019. The five-year plan aims to clearly set out practical targets and initiatives to tackle corruption domestically from 2019 to 2023.

 

In neighbouring Indonesia corruption remains endemic, reflected in the country’s low CPI ranking. Bribery, especially prevalent in the extractive and infrastructure sectors, is perhaps the most egregious aspect of the business culture in Indonesia, at least in terms of the number of cases brought by the Komisi Pemberantasan Korupsi (KPK) or Corruption Eradication Commission. Public procurement is also plagued by corruption, causing a haemorrhaging of public funds.

 

Meanwhile, Vietnam is implementing new laws to strengthen its anti-corruption enforcement framework to bring the country’s regime more in line with international law. A wide-ranging New Penal Code came into force in Vietnam on 1 January 2018. The new code substantially expands the scope of offences, including bribery in the private sector and corporate criminal liability for tax evasion and money laundering. Like some other ASEAN jurisdictions such as Indonesia and the Philippines, Vietnam did not historically prohibit the bribery of foreign public officials. This has now changed.

 

Despite limited resources, there have been genuine efforts to improve anti-corruption enforcement. Execution by lethal injection following a conviction for corruption remains the ultimate deterrent.

 

To find out more about transparency developments and trends in ASEAN please see 'ASEAN Insights – a report for business on the regional policy and regulatory environment'. 

 

Clyde & Co

 

For further information, please contact:

 

Ik Wei Chong, Partner, Clyde & Co

ikwei.chong@clydeco.com