1.

Introduction
Corruption is a crime or an offense where a person's liberty, contracts or
benefits from the authorities or of a company after giving money, gifts,
entertainment for parties. In particular, corruption is classified by
Transparency International is an activity that involves the abuse of entrusted
power for private gain. In dictionary Mozley and Whiteleys Law Dictionary,
John B. Saunders gave a definition of corruption by taking or giving money to
the performance or non-performance of their public duties. Additionally,
corruption also have a variety of calls used by individuals as 'kaw tim', 'duit
kopi', 'duit pelincir', 'tangkal pengeras', 'under counter payment' and many
others.

According to Khairul Azhar Andris (2005) Normally, corruption as one of the

short cuts to achieve a luxurious life or in other words to become rich in a
short time. Furthermore, corruption is the misuse of entrust authority for
extra positive gain (Petrou & Thanos, 2014). The terms of misuse often
implies for the occurrence of illegitimate action. Not all the corruption
consider as illegal some may merely behave dishonest or inappropriate.
Other than that, one of the most popular definition of corruption was given by Leslie
Palmier (1983, p.207). According to this definition corruption is seen as the use of public
office for private advantage.

The Eritrean Ministry of Information remarked: Corruption is a dangerous

cancer that will destroy a healthy culture, pollute the moral and accepted
values of the society, undermine the rule of law, decimate the social and
economic rights of the majority and retard the production capacity of the
people and government. It is the greatest threat to national security as well
as to the reconstruction efforts. The analogy is popular.

Corruption is not a new phenomenon in Malaysia. It coexists since the

existence of Malaysia. The existence of corruption began in the history of

1
human civilization which tainted by nature greedy. According to the
Transparency International (2015), Malaysia has achieved a Corruption
Perception Index (CPI) score of 52 over 100 and ranked at 50 among 175
countries and being recognized as the second least corrupted nation in South
East Asia. Compare to the previous year 2013, Malaysia has lifted up three
notches whereby it was ranked at 53 out of 175 countries. The improvement
of CPI ranking of Malaysia justifies the effectiveness of the efforts by the
Malaysian Government to fight corruption. The effectiveness in eliminating
corruption and improvement in corruption level is mostly depends on the
functions of legislation and government strategies.

In order to ensure the prevention of corruption, the Government, through

Parliament, passed the Prevention of Corruption Act, 1961 to replace the
Prevention of Corruption Ordinance 1950. In 1967, the Malaysian Anti-
Corruption Agency (MACC) (Malay: Suruhanjaya Pencegahan Rasuah
Malaysia, (SPRM)) (formerly Anti-Corruption Agency (ACA) or Badan Pencegah
Rasuah (BPR)). The MACC was modeled after top anti-corruption agencies,
such as the Hong Kong's Independent Commission Against Corruption and the
New South Wales Independent Commission Against Corruption, Australia. The
MACC is currently headed by Chief Commissioner Datuk Abu Kassim Bin
Mohamed. He was appointed in January 2010 to replace former Chief
Commissioner Datuk Seri Ahmad Said Bin Hamdan. Similarly, the agency is
currently under the Prime Ministrys Department.

The MACC was set up whose main purpose was to eliminate corruption, and
prevent the abuse of power and malpractices. After taking into consideration
the developments taking place in the country and elsewhere, this Act was
revised in 1971 and subsequently repealed and replaced with the Prevention
of Corruption Act 1997. Since its formation, the Anti-Corruption Agency has
played a significant role in combating corruption, investigates and prosecutes
corruption in the public and private sectors, maintaining the integrity of
government administration and promoting awareness among members of the
public of the dangers of corruption and abuse of power.

2
2. Significant Economic Corruption in Malaysia
Corruption is a debatable issue that happens worldwide regardless the
countries are rich or poor, dictatorships or democracies, socialist or
capitalists. Mauro (1995), Knack and Keefer (1995) and Brempong (2002)
found that corruption is negatively related to economic growth. Many
researchers argued that corruption hurts the economic growth because
corruption may create uncertainty environment thereby reduce investment,
government spends less on public project when lower tax revenue, and exert
of "informal cost" could cause other institution ineffective (Diaby & Sylwester,
2014).
David Ng (2006) support by saying, The World Bank assumes this corruption
as one of the biggest threats to economic and social development which may
lead to hinder the development of the country and also undermine the basic
institutions in economic development. According to Wei (1999), low growth of
economic is caused by high corruption level. The cost of corruption can be
separated into four major groups, which are economic, political, social, and
environmental. Moroever,corruption is one of the biggest obstacles to
economic and social development (Lauritzen & Sondergaard, 2012).

Firstly, corruption discourages domestic and foreign direct investment due to

reason of transaction cost. Corruption is additional cost of production in
conducting targeted project. Sarkar and Hassan (2001) stated that corruption
will lead to higher output price, demand for such output decrease and lead to
decrease in output capital ratio. Bardhan (1997) mentioned that entrepreneur
believe that speed money is need to start up their business in a country. If an
entrepreneur pay bribe to start their business, he or she will shut down or
force out from market if business profit is less than amount of bribe.
Consequently, corruption reduces the incentive to investment because higher
bribes decline profitability on productive investment as stated by Mauro
(1995). Investment with corruption brings uncertainty to local and foreign
investors because bribe payment is illegal.

Next, the weak governance in the country which due to the failure for both
government transformation program and economic transformation program is

3
one of the causes in corruption. In Malaysia, public perceived that corruption
level is high and the economic growth is slow down by corruption. According
to Caron, Ficici & Richter (2012) a strong relationship between corruption and
weak corporate governance is found. Mounts (2010) stated that weak
government hypothesis refers to government fragmentation leads to higher
public deficits and debt. As the government does not lead their follower
properly, it will incur a country debt. As country growth does not perform well
and thus the government servants unable to get high salary. Lower salary
earned by the public servants is unable to increase their standard of living.
Thus, they are intending to look for some extra money when they perform
their duties. Several cases of corruption involving elites can serve as an
example, Dato Seri Khir Toyo, the former Selangor Menteri Besar, Penang
Chief Minister YAB Lim Guan Eng and more.

Related to the above statement, low wages is very important in contributing

corruption. This fact is supported by Klitgaard (1998). According to Quah
(1995), salaries are the main factors that contribute to the existence of the
problem of corruption. low wages has become an encouragement to civil
servants to engage them with corruption. civil servants often assumed salary
provided by the government in the public sector is not enough. Moreover,
when they make a comparison with the salaries offered by the private sector.
Pay of civil servants is indeed a very important issue. In some countries including
Armenia pay is one of the major causes of corruption. The longer the pay remains
inadequate, the more bureaucratic corruption becomes entrenched. For example we have
the experience of Singapore which had dramatically reduced corruption by increasing
salaries. And Singapore is the only Asian country, which is in the 'top ten' least corrupt
countries by Transparency international's Index.

4
 Chart I

3. The Act of Bribery from the Legal Perspective

Corruption disrupts governance practices, destabilizes governance
institutions, reduces the provision of services by government, reduces respect
for the rule of law, and reduces public trust in government and its institutions.

Policy of a country is also identified as causes of corruption. Some countries

are less concerned with laws related to corruption. Moreover, some may only
provide legal but not commensurate with the offense. The poor drafting of
laws and regulations also creates many opportunities for corrupt acts. For
example, imprecise drafting and ill-defined terminology gives tax inspectors
and custom officers a large margin of discretion, which they use to extract
bribes.

Gupta et al. (1998) also found that corruption can lead to reduced social spending on
health and education. Countries with higher corruption tend to have lower levels of social
spending, regardless of level of development. Corruption lowers tax revenues, increases
government operating costs, increases government spending for wages and reduces

5
spending on operations and maintenance, and often biases government toward spending
on higher education and tertiary health care (rather than basic education and primary
health care).

Sequeira and Djankov (2010) use a similar methodology in Mozambique and

South Africa, shadowing clearing agents who process customs for cargo as it
passes through the ports. Specifically, they estimate the economic costs and
distortions associated to corruption acts at two ports in Mozambique and
South Africa by directly observing bribe payments to port and border post
officials for a random sample of 1,300 shipments. They find that, on average,
bribes represent 14 percent of the shipping costs for a standard container
passing through the port of Maputo, Mozambique, and 4 percent of shipping
costs for a standard container passing through Durban, South Africa.

According to Robert Thobabeen (1991, p.62) buying contracts can be called also
Kickbacks "when government officials may use their bargaining power with contractors
and their discretion in awarding contracts to obtain a fee or service charge for arraigning
the contract. A percentage, usually 5 percent, of the contracts is returned or kicked back
to the public officials by the contractor." According to World Bank report (1997 p.20)

In Malaysia, we have an act to prevent corruption. Which known as the Anti-

Corruption Act 1961, Act 57. (Malay:Akta Mencegah Rasuah 1961, Akta 57).
The penalties for convicted offenders is a fine not exceeding RM10,000 or
imprisonment not exceeding 5 years or both. (AMR 1961, Disemak 1971).
However, the punishment is increased to imprisonment of not less than 14
days and a maximum of 20 years imprisonment, and a fine of five times the
bribe received or RM10000 whichever is higher. (AMR 1997). For your
information, the Malaysian Anti-Corruption Agency (MACC) is the agency
responsible for curb and tackle corruption cases in this country.

It is important to have in place an effective legal framework that is not only effective, but
also responsive to contemporary challenges. In addition, an independent judiciary that
ensures justice is dispensed speedily and fairly, without fear or favor, is also highly

6
critical in instilling confidence among the people.

4. The Act of Bribery from the Ethics and Values Perspective

Generally speaking, ethics is considered as the science of conduct and
manners of behavior (Johnson, 1984). In terms of terminology, ethics mean
moral principles (moral) or the moral values that uphold an individual or
group of individuals in a society.

Organizations or government agencies are constantly faced with various

forms of threat, whether from inside or outside environment and this threat
can affect the performance, productivity and future of the organization.
Nowadays, the average threat to the organization stems from individuals
within the organization itself and so involves other members of the
government that destroys the identity of the organization. Typically, these
threats have close connection with ethical issues. Abandonment of the two
principles can open up opportunities for fraud, corruption and others.Through
the study of Nik Azmi Awang & Azmi (2012) states that public officials'
performance in Malaysia was still on stage performing. At the international
level, one of the evidence is from the International Corruption Perception
Index (CPI) of Malaysia since 1995 to 2010 has maintained the highest levels
of corruption among countries that ranked No. 22 (1995) to 37 (2003) and the
next steps to 56 for 2010 (International Transparency 1995-2010).

Public agencies established with the main objective to meet the needs of the
people and the country. To achieve these objectives, public service delivery
system that is ethically required that government policies will be
implemented effectively. The importance of civil servants ethics is to create
administrative and civil service that is efficient and disciplined through the
application of values that can overcome the problems and weaknesses in
numerous aspects of governance such as financial management, handling
cases of disciplinary, corruption, abuse of power and malpractices prohibited
by regulation, law and religion (Jamiah et al., 2004).

7
Corruption ruins the public trust in government institution and damage the
social capital as well as human capital. Social capital refers to the public trust
on government where the human capital refers to labor productivity. The
effect of social capital decline extensively on low income group and bring less
incentive for the poor to participate in productive activity. The social capital of
Malaysia is ruined and lowers the level of confidence of foreign investors
towards Malaysia.

5. The Issue and challenge of Corruption in Malaysia

Corruption, said to be the Cancer by the experts and nation leaders face
many challenges in fact. As for your information, our own social and cultural.
Malaysia has been practicing a tradition of giving gifts in the form of money
and goods, in conjunction with the multiracial festivals, birthday parties,
weddings and so on. Therefore, it will gives an individual the opportunity to
corrupt and bribe unnoticed or intentionally.

Secondly, the Malaysian government has tried to improve the public service
delivery system, various policies have been implemented by the government
such as the Fundamental Values and Ethics in the Public Service, which has
been practiced in various programs at the enterprise level such as the
drafting of a code of conduct on business, meet customers and the
establishment of the monitoring team (Ab. Rahman, 2005 & Mazilan et al.,
2005). However, the challenge of establishing and maintaining good service
is hard to bear given the size of public organizations and a large number of
employees.

Last but not least, Modernization. When social and economic development is
not equally balanced with the spiritual development in oneself, therefore it
will facilitate the occurrence of corruption. When more project in development
are decided, it means more cash will be required. Nevertheless, for those who
involves may take this opportunity to earn as much profit as the can. Many
contractors are seen to struggle in order to possess tenders which worth
millions or billions and willing to offer high bribes in bidding process of large
development project.

8
6. Conclusion
We have seen that high levels of corruption have very harmful effects on economic and
political development as in other countries as well as in Malaysia. Among the
implications that can be done is to reform the arena political to reduce
political corruption and eliminate the opportunity to do any corrupt activities.
Then, it is also necessary to strengthen the law enforcement institutions
especially the MACC, judiciary and police. Their enforcement should be
established outright to ensure public confidence in these institutions. In
addition, enforcing the rule of law without fear or favor particular cases
serious. And it is not supposed to have fallen prosecution arbitrarily.

Government should undertake only what it can do well within its resource
constraints. Besides, government should develop well functioning budget
processes, allocate resources strategically, and enable programs and projects
to be implemented efficiently and effectively. Meantime, good financial
management system is also a powerful instrument for preventing,
discovering, or facilitating the punishment of fraud and corruption. In my
point of view, audit and control are viewed as a valuable instrument for
improving government fiscal management and for increasing the efficiency in
the allocation of public financial resources. The introduction or reinforcement
of auditing would be particularly important because it intervenes before
resources are committed. Tax and customs departments as we have seen are
the locus of major fraud and corruption and thus are candidates for inclusion
in national strategies to control corruption. Tax system must be reformed to
reduce the tax burden and state should launch anticorruption campaigns.
Such campaigns can have a legitimizing effect, in that they usually suggest
that the state is serious about fighting corruption.

The movement to enhance integrity has increasingly captured the imagination of various
levels of the Malaysian society. This movement is turning into a social force for the
effective management of the country's success and overcoming of its weaknesses. The
launching of the National Integrity Plan (NIP) and the establishment of the Integrity

9
Institute of Malaysia (11M) have become the most important catalyst towards realizing
the objectives of enhancing integrity. All these will enable Malaysia to steadily move
forward in her efforts to become a developed nation in its own mold, and emerge as a
nation of excellence, glory and distinction.

2798 words
References

Brempong, K. G. (2002). Corruption, economic growth, and income inequality in Africa.

Economics of Governance, 3(3), 183209.

Caron, M. I., Fiici, A., & Richter, C. L. (2012). The influence of corruption on corporate
governance standards: Shared characteristics of rapidly developing economies.
Emerging Markets Journal, 2, 20-37.

Diaby, A., & Sylwester, K. (2014). Bureaucratic competition and public corruption:
Evidence from transition countries. European Journal of Political Economy, 35,
7587.

"Government Directory: Prime Minister's Department". Office of the Prime

10
Minister of Malaysia. 8 July 2011. Retrieved 28 July 2011.

Gupta, S., Mello, L. D., & Sharan, R. (2001). Corruption and military spending.
European Journal of Political Economy, 17(4), 749-777.

Klitgaard, R. (1988) Controlling Corruption. Brekely: University of California Press

Knack, S., & Keefer, P. (1995). Institutions and economic performance: Crosscountry
tests using alternative institutional measures. Economics and Politics, 7(3), 207227.

Lauritzen, E. G., & Sondergaard, M. (2012). The effect of corruption on growth.

Retrieved February 21, 2015, from
https://attachment.fbsbx.com/file_download.php?id=244988669024735&e
id=AStAligHFZ113z7aBdxgWQUPiD1oBzGO6NDnXGgNF8oypBNiYQ
KFyzuShBWIontjaoQ&inline=1&ext=1403707163&hash=ASs6zu0qs5M TsSdM

Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110(3),

681-712.

Mauro, P. (1998). Corruption and the composition of government expenditure. Journal of

Public Economics, 69(2), 263-279.

Mazilan Musa, Izal Arif Zahrudin, Suzanna Che Moin (eds)(2005) Etika dan Intergriti di
Malaysia:Isu dan Cabaran. Institusi Integriti Malaysia (IIM), Kuala Lumpur.

Mounts, M. E. (2010). Economic growth and the Asian paradox: A study on the
differential effect of corruption in India. Unpublished doctoral dissertation,
University of North Carolina Wilmington.

Ng. David. (2006). The impact of corruption on financial markets.

11
 www.emeraldinsight.com/0307- 4358.htm. 30(10): 822-836.

Petrou, A. P., & Thanos,(2014) I. C. The grabbing hand or the helping hand view of
corruption: Evidence from bank foreign market entries. Journal of World Business,
49(3), 444-454.

Quah, J. S.T. (1995). Controlling corruption in city-states: A comparative study of Hong

Kong and Singapore. Journal of Crime, law &Social Change, 22(4), 391-414.

Sarkar, H., & Hassan, A. (2001). Impact of corruption on efficiency on investment:

Evidence from a cross-country analysis. Asia-Pacific Development Journal, 8(2),
111-116.

Sequeira, S. & Djankov, S. (2010). "An Empirical Study of Corruption in Ports." MPRA
Paper 21791, University Library of Munich, Germany.

Thobaben G. Robert; Denna M. Schlagheck and Charles Funderburk (1991) Issues in

American Political Life. Money, Violence, and Biology. New Jersey: Prentice-Hall,
Inc.

Wei, S. H. (1999). Corruption in economic development: beneficial grease, minor

annoyance, or major obstacle?. Paper presented at the Workshop on Integrity,
Bangkok, Thailand.

World Bank. (1997) World Development Report: State In a Changing World: New York:
Oxford University Press

http://www.tradingeconomics.com/malaysia/corruption-rank

http://www.jkrbentong.gov.my/

12