The Impact of Corruption to Good Governance in Malaysia

Urwah Saari

International Development Analyst

In this modern era, there are a number of empirical evidences that can be used to indicate that corruption has become among the biggest challenges in good governance practice in developing countries. Most developing countries are struggling, perhaps until now, in order to establish a significant level of good governance, with corruption becoming a common practice, both in the public and private sector. Corruption often result in a slow economic growth and inefficiency in the government institutions, which can be attributed to poor policy making. The implementation and reinforcement of the policy are proven to be of a great challenge, leading to an increased social inequality, and to a certain extent, triggering the spirit of reformation amongst the public who felt oppressed by the democracy which was only preached but not practised.

As part of the global agenda towards a good governance, leaders from a number of nations in the world, aided by international organizations have established national level initiative to oversee and take action against corruption in both the public and the private sector. Malaysia as a fast developing country is not left behind in this global effort and has been part of many international collaborations in combating corruption. The Malaysia’s economic liberation policies have been revised over the past two decades and regularized to minimise the gaps for possible corruption opportunities, increasing competition based on merit, and limiting discretion in the public sector decision making. Participation of civil society organisations have also increased, as a result of public engagement in order to create comprehensive allies in combating corruption. The re-enforcement role of Malaysia’s anti-corruption agency and the collaboration between the anti-corruption academy as the advocacy institution with international development organizations such as the Transparency International subsequently made a significant progress in Malaysia’s good governance reform though there are always rooms for improvements.

This essay analyses the impacts of corruption as one of the main factors that could be a challenge for a sustainable good governance in Malaysia. The key implications of corruption are examined in building the comparative arguments.  The essay begins with the introduction of governance in the modern world and the elaboration of the key elements of a good governance. This includes a brief literature review on good governance; its indicators and the measurement indices that are used to evaluate it, as well as some critiques on governance. The second part presents the intense debate by scholars on corruption and how it is measured theoretically and practically. Following that, the essay discusses on the failure in the fight against corruption as well as the immersed impacts that it has on the governance and nation building.’ The next part of the essay extracts the root of corruption in Malaysia through its historical context; provide insights on the initiatives that have been taken against corruption; as well as examines some examples of past and recent corruption affairs in the country before the essay concludes with the author’s suggestions towards a sustainable good governance.



‘Governance’ has become one of the institutionalised standards in international organisations and is increasingly demanded by the state’s stakeholders; foreign donors, legislature institutions and tax payers. In many developing countries, there is an increased awareness by the citizens on the concept of governance as a result of the international development assistance being shifted from infrastructure aid to programmes to promote better government and social participation. In deriving the definition for the term ‘governance’, there are a number of studies which have been conducted by development scholars and international development organisations. In a World Bank study, Kaufmann, Kraay and Mastruzzi (2010) define governance as “the traditions and institutions by which the authority in a country is exercised”. To further strengthen the notion, Dorussen (2005) puts forward that governance encompasses of three dimensions; which include the selection of government through democratic and legitimate process, the capacity of government institution, and the general respect for the rule of law. Good governance, therefore is described as any governing system which has the elements of; accountability, transparency, participation, effectiveness and efficiency, fairness and inclusiveness, and rule of law (World Bank, 1992). At this point, corruption as an opposite subject to transparency and accountability become a big obstacle to a good governance process within a state.

There has been a growing debate between the value and goals of a good governance. Though proven to be important, there is still vagueness associated to it when it comes to the meaning. Some critique emphasised that a good governance is not valued in its own right but can be seen as a means to an end. Fukuyama (2014) in his reconceptualization of good governance critically defines governance as a government’s ability to “make and enforce rules”, and deliver services to the people regardless good or inefficient, beyond the distinction of democratic or undemocratic confinement. This challenges the current orthodoxy in development discourse that democracy and good governance are “mutually supportive”. Therefore, this brings us into another perspective in which corruption is not totally perceived as an incorrect way of good governance, however it can be used to “make and enforce rules” and deliver services as suggested by Fukuyama. This will significantly challenge the Western’s classification of some autocratic, undemocratic and corrupted governments, as instead of failing to play their roles, those governments can still deliver to the people and provide services even though the structural systems were built on corruption. On the other hand, Grindle (2007) emphasises that it is important to remain consistent with the conservative values rather than the means to and end of a government due to the fact that they are initially built on questions about the characteristics of a good governance such as rule of law, transparency or accountability. For some developing countries, good governance implementation is often seen as a reinstatement of the Western normative values such as rights, democracy, and poverty reduction. The Western policymakers, who mainly live in the Organisation of Economic Cooperation and Development (OECD) states see the world from the perspective of a ‘developed’ country, aspiring to institute governance reforms that would emulate the success story of those of an OECD state (Unsworth, 2010). The governance reforms could be too complex, with unrealistic requirements that are difficult to be achieved and relatively too expensive for a poor country with so many other priorities. Perhaps the Grindle’s ‘good enough governance’ is a better working paradigm to start with, that is, a certain minimum acceptable government performance that “does not significantly hinder economic and political development and that permits poverty reduction initiatives to go forward” (Grindle, 2004). Instead of putting so much efforts on formal institutions reform, Unsworth proposes a different approach to governance; an ‘upside down view’ which focuses at the “structures, relationship, interests and incentives that underpin them”. Informal institutions may not only be part of the problem, it can also be part of the solution (Unsworth, 2010).


Corruption obstruct the main principles of a good governance system that often demoralised “rules, plans, processes and actions”, and might not be able to answer completely the questions of “why, how, what, and how much” in good governance practice (Transparency International, 2016). Corruption is a problem that often hinders development progress, limits the true potential and strength of the citizens; obstructs the best outcome in the public service and is considered as being quite common in every developing country. Corruption becomes a more complicated problem in a country with conflicts, often resulting in long-term destruction to any undemocratic government governed by the arbitrary rule (Billon, 2010). There are many definitions for corruption in the public sector, depending on its implications and factors. A simple and straightforward definition is based on the Transparency International; in which corruption is simply defined as “the abuse of entrusted power for private gain”. This includes political corruption which hampers democratization in many developing countries. In relation to this, William and Doig (2000) have elaborated the objective of ‘abuse of entrusted power’, which in this case, by the public sector officials; either for personal gain or for the benefit of “a group to which they owe allegiance”.

Corruption occurs when “agents have a monopoly power over clients, when agents have a great discretion, and when the accountability of the agents to the principal is weak” (Klitgaard, 1988). A common connotation, perhaps wider understanding to corruption is bribery. Rose-Ackerman (1978) distinguishes two kinds of bribery; first, as a deviation from the “application of existing rules or law” and second, the circumvention of an existing rule or the creation of new rules or laws. However, not all of the acts of corruption result in the payment of bribes, as proposes by Tanzi (1998). Tanzi emphasizes that it is important to distinguish between bribery and gifts, in which gifts are often camouflaged bribes. Despite the fact that corruption has become difficult to define recently, Rothstein (2014) argues what should be regarded as the “opposite of corruption also remains widely disputed”. Corruption has become more complex with “the contemporaneous rise of mass democracy, the modern publicly traded corporation, and the state bureaucracies”, particularly in the United States in what he described as the ‘newly restricted meaning’ of corruption (White, 2014). Corruption is not entirely accepted as a universal value, thereby it is drawing into attention that it also “forms part of the fabric of social and political relationships”, in large patrimonial society like the African countries (Billon, 2010). Billon argues that the practice of corruption particularly in a country divided by conflicts is able to stabilize political system through economic distribution and political settlements, even if it is seemed immoral from the international perspective.


The introduction of governance in Malaysia began with the succession of the British administration Westminster system during the period of colonialism in the 19th century. As an introduction, Malaysia is a country situated in the Southeast Asia with an area of 330,396 Km square, gained its independence from British in 1957 and has been a member of the Commonwealth organisation as well as a member of the Association of Southeast Asian Nations (ASEAN). In the early days, Malaysian public servants were directly trained by British officers, and were known for having a high standard of governance practice. In its journey to become a high income state by the year 2020, there are a number of regulations and standards that need to be complied by the government. These include some public sector reforms in the judiciary, the civil service standard operating procedure, as well as in many other aspects. The introduction of the Malaysian Anti Corruption Commission Act in 2009 is part of the government’s initiative to improve the good governance system through its efforts in combating corruption in Malaysia. Prior to that, the Malaysian Institute of Corporate Governance was formed in response to the growing concern over the importance of private governance practice to be part of the good governance reforms in the government. However, amidst the fast moving economy, Malaysia’s good governance practice is faced with some challenges and issues, particularly in relation to its public governance. Corruption has been identified as Malaysia’s biggest challenge towards good governance practice. The evolution of corruption is unique and has its own capability to morph into various appearances and models.

  • Reckless spending

Recurring reckless spending in government’s expenditure, has brought into the public’s attention the existence of negligence in the government’s procurement. For the past few years, the National Audit Report highlights similar trends of poor standard of supplies of goods and services, extravagance as well as misconduct in procurement deals (Audit Report, 2012).

  • Political intervene

Political intervention is another form of corruption which is proven to disrupt good governance. There are many cases involving high ranking political figures who used their positions to close any allegation of power abuse and misconduct in government’s procurements.

  • Conflict of interest

The Audit Report in 2011 have exposed the misconduct by the National Feedlot Consortium (NFC), which is one of the government’s linked investment involving a huge amount of investment. It was found that one of the office bearers of the company that was awarded the project is a close relative to a minister, and this finding was made public. Delivery failures and frauds were two common things that were associated to the NFC project. This case shows that the conflict of interests create opportunities and potential for bias judgment.

  • Growing political extremism

The recent increase in political extremism in Malaysia due to lack of enforcement of laws is worrying. Political disagreements often provide wide opportunities for political extremist groups to emerge and take action against others with different political ideologies using the aggression, violent conducts, threats and physical abuse. Response from the authorities are often late and selective. This can be seen in the clash between BERSIH, a free and fair movement, and the Red Shirt movement, a group linked to the government. More often than not, political extremism leads to the inability to reach a consensus between different parties in problem solving and decision making as all those involved did not make room for negotiation due to their belief that the only right ideologies are of their own parties.


In order to understand the impacts of corruption on a country, it is only logical for one to familiarize himself with the country’s social, economic and political background. Therefore, delving a little into Malaysia’s recent history, was an approach used by the researcher, in order to gain a clearer idea of the causes of corruption in Malaysia and the evolution of the problem. The New Economic Policy (NEP) which was introduced as an aftermath of the racial tension in 1969, was aimed to eradicate poverty and inequality; reorganise the social economic structure; and eliminate the ethnic identification with economic function (Doraisami, 2012). The NEP was to be implemented over a 30 year period, although the Western liberals perceived it as a modern form of discrimination against a section of the population. The motive was wholly transparent and was in the interest of national unity as argued by Aziz (2000). While the NEP has generally succeeded in meeting its entire social and economic objectives, the generations of the many bureaucratic systems produced unexpected results; both the grand and the petty corruptions. Bureaucracy provides opportunities for civil servants to exploit the discretion given to them, for example the license approval that is often made complicated and time consuming. Corruption has also became irresistible, backed by the NEP policy to increase Malay ethnic’s equity in the economic acquisition therefore forcing every business enterprise with the wish to be involved in the government supply chain to include a certain percentage of Malay shareholder (Aziz, 2000). In anticipation of the unlimited opportunities for corruption through the implementation of the NEP, the government have simultaneously established the Anti Corruption Agency (ACA).

One thing that placed Malaysia in the international highlight, for certain, is the fact that the country has been ruled by the same political coalition since its independence for nearly 60 years. The National Front (Barisan Nasional, BN), a coalition of 13 political parties previously known as the Alliance Party (Parti Perikatan) has been in power since 1956. The United Malay National Organisation (UMNO), one of the members in the BN is undoubtedly considered as a dominant party in the coalition, having 6 prime ministers from the party since the country’s independence. The BN, or to be precise, the UMNO has enjoyed strong two third majorities in the Parliament therefore limits any check and balance voice from the opposition, thriving every general election comfortably until the General Election in 2008 when the ruling regime lost 5 states to the coalition of the opposition parties. The result of the election also marked a great change in the Malaysian federal system practice although the concept of federalism has existed since 1895, long before the independence (Musa, Nawi & Nizamuddin, 2014). The concept has long being tainted with corrupted bureaucratic implementation which will be discussed later, as a result of corrupt political thinking that has been evolving for a long time and the belief that only one political party should rule at the federal level and at the state level. Although one of the states in the east coast, Kelantan has been ruled by the opposition since 1990, nevertheless, it has never gained much attention, as the federal government and the other 12 states were still under the same political coalition.

The fact that it has been the only ruling party for more than half a century has made the government system being dictated by the BN’s autocracy. The overall perception of the people, particularly from the perspective of the public service is that the government belongs to the ruling coalition parties, therefore there is a confusion for the public servant to distinguish the segregation between politics and government (Musa etc 2014). In general, it is difficult for the people to segregate between the government and the ruling parties. For example, the government’s benefits given to the people are equally perceived as the BN benefits, and in return, people should be grateful. The ruling parties interferes in decision making processes by the higher officers, while providing opportunities for career advancement and create incentives for public servants to remain loyal. Levitsky and Way (2013) distinguish that authoritarian ruling parties generally evolved from too strong ruling parties and shared a similar powerful as well as cohesive attributes. Having said these, corruption that can be seen as being the greatest obstruction to the good governance and state building of Malaysia can be categorised into three types: political, bureaucratic and election. Further section analyses the impacts of the three types of corruption in the good governance and state building process in Malaysia.



Political corruption in Malaysia emerges as a result of the dominance control of ruling parties. Too strong ruling parties are significantly weakening the original functions of the executive body and reducing the check and balance capability. The political leaders from the ruling parties normally hold influential and strategic posts in the government, prominently at the ministerial level. The highly significant ministries in Malaysia are the Ministry of Finance, Ministry of Defence and the Ministry of Internal Affairs. For the last two decades, highest ranking leaders from UMNO, often regarded as political elites that subsequently become the prime minister, have dominated these ministries. Therefore, it is difficult to exercise any check and balance system towards these ministries because it involves the well-protected and invincible political elites who get to hold the posts in a rotation system. These rotations ensure the encapsulation of any strategic planning or even to the extent the concealing of any allegation of wrongdoings in the ministries. Looking back, it all started during the reign of Mahathir Mohamed, the then prime minister in his move to take control of the political turbulence after the dismissal of his deputy Anwar Ibrahim in 1998.

Members of the public are increasingly getting more and more concerned, as well as getting more frustrated by the grand corruption at the highest political level in Malaysia. It is becoming more devastating as no one has the authority in the whole state system to exercise check and balance to the executive power, particularly to the highest hierarchy of the government, which is the prime minister. The Prime Minister as political elect individual has become a powerful entity in Malaysian political system, with no other institution capable of exercising the check and balance, even the parliament itself. The establishment of the MACC under the Prime Minister’s Department has raised great concerns amongst the civil societies even to the parliament. Though claimed to be independent and transparent, it is difficult for the agency to exercise their authority especially when the corruption allegations involve the Prime Minister itself.

The highest level of political corruption increasing as seen in 2014, while the Transparency International (TI) was assessing Malaysia for its latest Corruption Perception Index (CPI), Sarawak Report has made public a shocking allegations of corruptions in the 1MDB, Malaysia’s strategic investment fund. Most Malaysians then presumed that these allegations were made without strong evidences, despite the presence of leaked documents linking Prime Minister Najib Razak, with a fund transfer of US$ 700 millions from the 1MDB into his personal bank accounts. Amid all concerns, the prime minister initially denied all accusations; although much later, an Auditor General’s investigation into the matter found certain allegations of mismanagement to be valid. Despite initially assigning a few agencies to a taskforce to investigate the allegations, the government almost immediately reigned in all agencies and organs of state, crippling those agencies such as the Malaysian Anti-Corruption Commission (MACC) as well as the Attorney General’s Chamber (AGC), and preventing them from performing their investigation independently (WSJ, 2016). Some of the related documents were classified under the Official Secrets Act (OSA), effectively sealing it and keeping the public in the dark. The Transparency International in various statements expressed concerns that Malaysia is being seen as “moving rapidly towards autocracy and disregarding its international commitments to fight corruption” and this clearly indicates that political corruption are degrading the governance level in Malaysia.


Bureaucratic corruption in Malaysia has expanded beyond ordinary maleficent, as a result of an extreme political division and discriminative bureaucratic administration based on political affiliation. Kelantan, a state in the east coast of Peninsula Malaysia for example has long been discriminated by the federal government due to political differences (Jomo, 2007). During the time when the state was under the opposition rule from 1958 until 1979, and for the second time since 1990 until now, the federal government has shown discriminatory treatment towards it. The discrimination by the federal government is in the form of oppression in terms of the development allocations for the state. The federal government public services have separate operating conducts towards the Kelantan public services (Musa etc 2014). Aids for development from the federal government was delayed and at certain point refused, for example the per capita entitlement for religious schools in Kelantan, which should be received by every state. These acts of discrimination become more obvious to the extent separate federal government agencies were formed, such as the Kelantan Federal Development Department (JPP) in 1991 to takeover and govern any federally funded development projects. The state development agency became extinct and federal development projects were no longer in the purview of the state (Musa etc 2014). This has certainly violated the principles of federalism, disrespected the spirit of democracy and diminished the values of state building.


After the BN won 11 consecutive general elections in 2004, the integrity of Malaysia’s election has been questioned. The citizen’s awareness and interest in Malaysia’s political system are increasing, a scenario which can be attributed to the information technology that allows for accessibility of information to all. Allegations of election fraud, votes rigging, bribery, and the abuse of government’s institution for political campaign, as well as the neutrality of the election commission (EC) have been under scrutiny by the Malaysian well-informed society. The Coalition for Clean and Fair Election (Bersih), a coalition of the Non Governmental Organisations (NGOs) and social movements have present themselves in the national arena seeking for election reforms and realignments of the democracy system. The Bersih’s demands can be summarised in 8 points; clean the electoral roll, reform postal ballot, use of indelible ink, 21 days of minimum campaign period, free and fair access to media, strengthen public institution, stop corruption and stop immoral politics (Bersih, 2016). Social trust is in jeopardy as long as the election system remains to be corrupted and this will result in a public perception that the elected government is incapable of delivering social justice.


Governance means much more than just government. Governance requires accountability, transparency, participation, independency and freedom. The implementation of good governance is a collective efforts between the government and the private sector, the civil society and requires strong social awareness. Corruption normally determines the level of governance within a country and is capable of evolving into any dynamic form, which makes it sometimes difficult to distinguish.

Malaysia is a developing country that has many potential to move forward in the globalization era. This can be achieved if the biggest hindrance to the development, which is corruption can be eliminated, although it may be impossible to remove it entirely. Due to the fact that political corruption, bureaucratic corruption and election corruptions have become the corrosive elements in the government, there is a pressing need for a holistic and comprehensive reform in Malaysia political system. The revival of the original concept of good governance is essential to bring back Malaysia into a progressive nation. This can be done through social advocacy beginning at the primary education; by having a clear separation between the executive, the legislative and the judiciary scope of authority; and most importantly, is the non-selective enforcement of laws. Amid all the challenges to bring reform into Malaysia’s political and social system, it is clear that corruption come with great impacts on the good governance in all sectors and all these are the critical prerequisite for Malaysia to achieve a sustainable social and economic development.



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