1MDB: Capacity Building & Good Governance in Addressing Corruption
Prepared by:
Cornelius Anak Eustance (101228670)
Kaushalya a/p Rajan (101211052)
Kenny Kueh Chow Wei (101228683)
Michelle Kok Bao Xia (100087634)
Sarah Binti Supahan (101214284)
Malaysia’s trojan horse, 1MDB, deployed political power for reins, proclaiming the pursuit of Malaysia’s title as a “high-income economy” to elude the world (Malaysia 2019, p.8). Najib Razak (NR) impressed that 1MDB would foster healthy international relations through foreign direct investments (FDIs), but presented the world with the biggest financial scandal fueled by corruption’s hearth (Ho & Raghu 2020).
Table 1: Corruption Forms 1MDB Used
Why is There a Growing Recognition That Shareholder and Societal Value are Intrinsically Linked?
Diagram 1: Shareholder vs. Societal Value
Corruption hinders the sound development of sustainable economies, politics and societies (Caroline 2018, p.3). 1MDB worsened Malaysia’s condition, as perpetrators stripped citizens of their rightful wealth by swindling capital for self-gain. Additionally, further state funds were directed towards muzzling news outlets that were dedicated to reporting the truth (Ramesh 2016). These served as an exploitation of financial and informational rights, spearheading global investigations to restore justice to cozened Malaysians (Ho & Raghu 2020).
Paradoxically, 1MDB elevated socie-economic disparities. While more Malaysians couldn't afford financially-independent higher education, “$700 million” was transferred into NR’s personal account; while families descended into poverty overnight, politicians splurged on “diamonds” and hand-woven bags; and when innocent civilians suffered from increased crime rates because that was what some could afford, funds were invested in an ironic blockbuster reenactment of this scandal (Chen, Ponniah & Lin 2019). The resultant unfair distribution of wealth was a ‘tragedy of commons’ that requires long-term reforms (Lee 2019).
All that was needed was for one shareholder to question moral grounds, forego temporary expensive solitary gains, and say something. Therefore, the growing recognition that shareholder and societal values intertwine stem from long term effects that corruption has had on the sustainability of economies, politics and societies in terms of justice and fairness.
Building Capacity Considerations of Home Country or Host Country
Capacity Building is the process of developing the abilities of a nation in problem solving, creating and achieving goals in a sustainable manner (UNDP 2009). Four approaches of country’s capacity building focus on standards of practices, knowledge base, leadership and grassroots support, and funding and supporting policy (Whittle et. al 2012).
First, human capital development is essential for countries as education facilitates country growth in economic, social, and ecological (Sokuraobo et. al 2016). For instance, it decreases poverty and unemployment rate while increasing the labour force participation of nation. Next, technology capacity building researched by Bubou (2009) proven technology involvement increases the innovation and facilitates the management of R&D and ease the infrastructure building process in the country.
Besides, knowledge sharing among countries will assist capacity building of both nations. Skills and information shared will help both countries in learning the best practice and establish better plans while building strong relationships among countries (Alisjahbana 2014). Furthermore, strong national policy secures the country’s growth and capacity building as Biggs & Polomska (2013) mentioned policy defined as a guideline on how a country works in terms of financial, society, and national security. Strong policies will stabilize the politics and attract FDIs for country growth efficiency.
In Whose Interest Should Capacity Be Built?
Based on the case study, the capacity should be built upon the interests of government, business and community. The government needs to provide capabilities and capacities that aims to mitigate the risk of corruption across Malaysia effectively. In that sense, the government acts as the rule-setters while businesses and the community are the rule-takers.
For example, Malaysia had developed an e-government national strategy in 2016 which is led by Malaysian Administrative Modernisation and Management Planning Unit (MAMPU). This strategy aims to develop e-government services that allow the sharing of government data, resources and provide cashless government digital services to the public (MAMPU n.d.). This may reduce corruption risks as individuals can make most transactions without meeting government officials in-person (Siddiquee 2010). As a result, it ensures transparency and ICT governance within the government public sector in society.
Besides, Malaysian Anti-Corruption Commission (MACC) was established in 2009 as an independent body in Malaysia to create laws and deal with corruption cases involving bribery and abuse of power. Information regarding the offender’s details and their offences are broadcasted in their website to ensure transparency, justice, and fairness in society. Additionally, MACC has the capacity and capabilities to provide training academy to combat corruption in Malaysia and to other Asia-Pacific countries (Malaysian Anti-Corruption Commission 2012).
Distribution justice and its Linkage of Capacity Building
According to Lamont (2017), the morality evaluation of the allocation of economic goods and services is known as distributive justice. As wealth and resources are scarce amongst many societies, the question of how these goods or services ought to be distributed generally arises. The definition of fair allocation usually considers the pattern and procedure of the goods to be distributed. Principles such as equality, equity and necessity come on top of the distribution criteria. Since these criteria are often at odds with one another, one is usually known as the primary distribution criterion (Maiese 2013). An economic structure characterised by equity, competition, or social security safety nets will emerge depending on which theory is adopted. In the context of this case study, distributive justice is linked to capacity building in the sense that it is an institutional mandate to empower societies (Centre for Social Justice 2016).
Additionally, the outcome can lead to the subjugation of marginalised communities. Government capacity building also entails providing resources to assist governments in carrying out their duties to the best of their abilities. Building a government's ability to budget, raise money, develop and enforce legislation, encourage public participation, be transparent and accountable, and combat corruption are among these goals (The Chartered Institute of Logistics and Transport Malaysia 2013). Therefore, distributive justice and capacity building go hand in hand for a society or organisation to function effectively and efficiently.
Does Corruption Took Place Due to Poor Governance and How Can This Be Addressed?
Corruption does take place because of poor governance. Corruption and good governance are linked in a two-way causal relationship and feed off one another in a vicious circle. Corruption is more likely to occur if good governance principles and structures are not in place (UNODC n.d.).
A way to address this problem is to change poor governance into a good one. As mentioned in the case study, one of the approaches to have a good governance is to focus on the aspects of good governance that are most closely linked to the monitoring of macroeconomic policies such as the transparency of accounts, public capital management effectiveness, and the stability and transparency of the economic regulatory environment for the operations of private sector, and this approach was stated by the Managing Director of IMF, Michel Camdessus (1997). Corruption poses one of the greatest challenges to good governance. As a result, foreign organizations fight corruption by enacting policies that promote good governance. These organizations promote accountability because it is the most effective way to protect a country from corruption (Transparency International n.d.). Moreover, as corruption and money laundering can negatively impact a country's stability, what countries can do is to boost accountability by enacting more transparency policies to aim for just and fair society and prevent corruption and unethical business practices (IMF 2021).
In summary, shareholder and societal value are intrinsically linked in 1MDB as the corrupt individuals misused the money for self-gain instead of developing the country and its citizens. Besides, the considerations to build capacity in the country are human capital development, information sharing, technology development and strong policy. In addition, the capacity should be built around the interest of government, business and community to mitigate the risk of corruption. Moreover, distributive justice acts as an institutional mandate that can empower societies and subjugate marginalised communities. Furthermore, corruption occurs due to poor governance and it can be overcome by changing, focusing and promoting good governance in the country.
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