Addressing corruption has become increasingly urgent.
Corruption undermines a country’s ability to deliver inclusive growth (i.e.
growth that benefits a wide cross-section of society). And what is corruption? “The abuse of public
office for private gain” as explained by the International Monetary Fund
(“IMF”).
The costs of corruption are substantial. IMF estimates
suggest bribery alone is about USD1.5 trillion to USD2 trillion (about 2% of
global GDP). Malaysia loses about RM10 billion annually to corruption or
between 1-2% of its gross domestic product.
Corruption has significant negative effects on key channels
that affect growth (Figure 1).
Figure 1: Corruption-Growth Nexus
Depending on its pervasiveness, corruption affects all
drivers of inclusive growth. Low rates of inclusive growth can also lead to
increased incidence of corruption; creating a negative feedback loop that is
self-fulfilling and long lasting. It weakens the state’s capacity to tax,
leading to lower revenue collection. It discentivizes the taxpayer to pay
taxes; undermines spending programs;
hinders sound monetary policy; weakens financial oversight; undermines recovery
of debt; increases cost of public investment; reduces private investment;
restricts access to capital markets; and, stifles productivity.
Mitigating strategies to reign in corruption include: a
holistic approach that transcends culture, social strata and income levels;
creating greater transparency including developing best practices; enhancing
the rule of law; economic reform – including removing excessive regulation;
and, building institutions. In the immediate for Malaysia, is to have a Corrupt
Practices and Resolution Commission that provides “amnesty” for individuals and
corporates to voluntarily report all previous corrupt practices and pay a
penalty/compensation determined by the Commission. Its a kind of confession,
reconciliation and penance of the Catholic Church. We may collect more than Tabung
Harapan and provide an avenue to start afresh!
Reference:
- Corruption: Costs and Mitigating Strategies, Staff Discussion Notes, International Monetary Fund.
- Rm10 billion Cost to corruption every year, by Adrian David, New Straits Times, January 30, 2018
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