Economic Crime is Draining Malaysia!

In the latest Corruption Perception Index released by Transparency International, Malaysia’s score remained unchanged at 50 out of 100 (100 is defined as very clean and 0 highly corrupt).

The United Nations and World Economic Forum estimate the global cost of corruption at five per cent of the world's gross domestic product (GDP). With a 2024 GDP of US$115 trillion, this equates to US$6 trillion per annum of global stolen funds. This figure is higher than the annual GDP of Japan, the world's third-largest economy. 

The Malaysian Anti-Corruption Commission (MACC) said that between 2018 and 2023, Malaysia lost RM277 billion to corruption. This translates to about RM55 billion per year, or RM1,608 for every Malaysian. 

In the latest Corruption Perception Index released by Transparency International, Malaysia's score remained unchanged at 50 out of 100 (100 is defined as very clean and 0 highly corrupt). Malaysia ranked 57th out of 180 countries surveyed in the 2024 results. 

Source: www.transparency.org

 

Apart from corruption, another contributor to economic crime in Malaysia is the shadow economy. Also known as the underground economy, it is a significant cause of tax losses, which are estimated to be as high as 30.2 per cent of GDP. Examples of shadow economy activities include smuggling of weapons, tobacco and drugs; prostitution; tax evasion; illegal and online gambling; passport fraud; and human trafficking. The shadow economy also encompasses unregistered formal sectors and unreported income from the production of legal goods and services, such as unlicensed businesses, freelancers, part-time workers and the cash economy. This includes the substantial income from informal work that is generated by those who have permanent employment. 

In some cases, this informal income can be larger than their permanent income. The United Nations Office on Drugs and Crime estimates that between two and five per cent of global GDP, or about US$800 billion to US$2 trillion, is laundered each year. 

Based on these figures, we can estimate that Malaysia's economic cost of money laundering is about RM55 billion per year. Moneychangers are the ideal conduit for money laundering as they deal in cash. Businesses with minimal activities, such as restaurants, launderette, hair salons and car wash, act as front companies for these illegal operations. Bukit Aman's Commercial Crime Investigation Department said there were 41,701 commercial crime cases last year involving more than RM3 billion in losses. 

How is Malaysia faring in terms of tackling economic crimes and reining in corruption? If we look at the illegal tobacco trade, Malaysia has been losing RM5 billion in tax revenue every year. In 2024, firm action helped Customs collect RM61.35 billion in revenue, RM5.35 billion more than what was projected — RM56 billion. 

Meanwhile, in the case of 1Malaysia Development Bhd, criminal trials are ongoing. Efforts to recover stolen assets have resulted in RM29.75 billion being returned to the government, as reported by MACC. However, are these actions and results sufficient? Can we afford to lose so much money to these illegal activities? How is this impacting Malaysia's economic and social development? 

A cursory check of the ministries' budgets shows that RM1 billion could build four district hospitals or four-lane roads stretching 50km or 5,000km of kampung roads. The Madani Government must ensure enforcement agencies are well led; ensure transparency and accountability; and stand firm in sanctioning offenders. Or do like China - execute those corrupt? (I am only joking!) 

Reference:

Economic crime is draining Malaysia of billions, Dr Akhbar Satar, New Straits Times, 23 March 2025