Anti-corruption improving across SE Asia, despite graft at higher levels

25th February 2017

THE anti-corruption landscape throughout Southeast Asia is improving slowly but steadily, but often in spite of those in power, a report from Hogan Lovells has found.

The report from the global law firm, entitled Global bribery and corruption review 2016, found that despite improvements across the region, corruption is still prevalent at high levels in a number of the countries looked at.

Malaysia, Thailand and Indonesia are among the countries that, while having made progress to tackle corruption, have actually been held back in reputation or progress due to vested interests and actions by public officials and law enforcement.

This, however, is also showing signs of improvement with “increasing regulatory, commercial and political pressures” slowly bringing about increasingly effective anti-corruption legislation and enforcement.

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Malaysia is still suffering the fallout from the 1 Malaysia Development Berhad (1MDB) scandal that saw the country’s reputation with investors suffer significantly.

The allegations surrounding Prime Minister Najib Razak accusing him of siphoning millions from the state investment fund, and the ensuing inadequate investigations that followed, have brought about a dramatic change in perception of the country’s ability to combat graft.

“It has made investors doubt whether there is any transparency in the country (at any level of government),” Hogan Lovells reports.

The impression of Malaysia on the world stage is that of a country “engulfed in corruption at the highest political level” and this is having a knock on effect on the economy and foreign investment.

Vietnam, was highlighted as one of the main problem areas in the region, ranking only 113th place (out of 176) in Transparency International’s Corruption Perception Index (CPI). Corruption is still a major issue according to Hogan Lovells, from “daily, low-level facilitation payments to high-level corruption scandals” with little domestic enforcement action being taken against government officials or the offending companies.

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But Hogan Lovells feels that it is only a matter of time before this changes and the Vietnam anti-corruption authorities “wake up to the significant credibility and revenue deficit they face” as a result of not imposing strict punishments and sanctions for corrupt practices.

Indonesia on the whole is becoming more transparent, the report found, which is reflected in their dramatic rise in the CPI from 118th to 88th over a four year period. This was powered by efforts to create a “safe and sophisticated commercial environment” that is being managed by a more open central and regional government.

While there have been drastic improvements in transparency within government; present and former government officials are still involved in big business deals making public sector corruption an enduring challenge.

President Joko Widodo has made public sector corruption a focus of his term since being elected in 2014 on an anti-graft campaign, and inroads have been made according to Hogan Lovells.

Indonesian President Joko Widodo has made public sector corruption a focus of his term since being elected in 2014 on an anti-graft campaign. Pic: AP.

“He (Widodo) has cut bureaucracy and with it the scope for corrupt interactions with government officials,” the report said. “That in turn has improved perceptions about how safe your investment in Indonesia will be.”

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Thailand’s economy has seen significant growth in recent years due to the assistance of foreign direct investment, and this is likely to continue, but Hogan Lovells fear that the “country’s anti-corruption legal framework is struggling to keep pace.”

The rarity of corruption cases being brought shows that “actual enforcement (of the legislative changes) needs some improvement,” the report says.

Despite progress in developing its legislative framework, local enforcement that has been found lacking in the fight against corruption with some cases seemingly being pursued for purely “political motivations.”

Cases such as that of former prime minister Yingluck Shinawatra, who faces charges of corruption for her management of a rice subsidy scheme, hint at continuing tensions between the ruling military junta and the former Shinawatra political dynasty and the danger that corruption charges are being used to silence critics of ruling party.

There has long been a well-founded impression that corruption is a significant problem in Southeast Asia and often a major hurdle to doing business in the region. But as Hogan Lovells has found, 2016 saw some genuine and effective steps in the right direction that are “good news” for the region and business alike.