AN ALTERNATIVE MALAYSIAN TRANSPARENCY INDEX: STRENGTHENING MEASUREMENT TO WEAKEN CORRUPTTION

J O N A T H A N H W A S O O N G Y I , H W A E N N I N G , H W A Y U E -Y I , K E L L Y L I M T E A M B U I LD I N G M A LA Y S I A P U B LI C P O LI CY C O M P E T I T I O N 2011

Hardly a week goes by without corruption featuring in Malaysias mainstream newspapers or new media sources. Corruption, defined as the abuse of entrusted power for private gain, plagues the public and private sectors alike. Whether it is policemen selling stolen watches at Lorong Kulit in Penang, 1 businessmen caught paying bribes to bypass licensing restrictions, or a chief minister ignoring both legal permits and fair business payments to build a mansion, corruption is a pervasive problem.

1. M EASURING CORRUPTION IN M ALAYSIA : A CRITIQUE OF THE C ORRUPTION P ERCEPTION I NDEX (CPI) Transparency Internationals annual Corruption Perceptions Index (CPI) is the most widely recognized measure of corruption. Combining data from ten independent institutions that

The Star, Four cops to face action over watch theft (21 August 2011).

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survey both business leaders and experts, the CPI provides both a country score (a score of 0 denotes the greatest perceived amount of corruption and 10 denotes the least) and an international ranking of perceived levels of corruption among politicians and civil servants.2 In Malaysia, the annual release of CPI results receives great media and government attention. Nevertheless, the CPI has significant limitations for policy application in Malaysia. Some of these limitations are methodologicalthese are meticulously explicated in the CPI documentation, though typically neglected by popular media reports and casual layperson interpretationswhile some of the limitations arise from the specificity of the Malaysian context. One key policy limitation of the CPI is that it is designed to be a snapshot of corruption perception at a given time3in other words, the focus is on cross-country rather than time-series comparison. Within this framework, a rise or fall in a countrys score may stem from an actual change in degree of corruption as perceived by analysts and businesspeople, but also from changes in the set of sources used or the sampling or survey design of any individual source (Malaysias drop in CPI rating from 5.1 in 2008 to 4.5 in 2009 coincides with a change in sources used to compute Malaysias CPI, data from Merchant International Group was dropped and data taken from Global Competitiveness Report of the World Economic Forum was increased to from one year to two years). Notably, between 2001 and 2010 the number of countries ranked has increased from 91 to 178. Malaysia was ranked 36th in the 2001 CPI, but 56th in the 2010 iteration. Although this may look like a drop in Malaysias international standing, it is actually a relative improvement, from the 60th percentile to the 69th. Despite this relative improvement, Malaysias individual CPI score saw a decline, from 5.0 in 2001 to 4.4 in 2010 (see Figure 1). In addition, each years CPI incorporates data from up to three previous years, where available. For example, the 2010 CPI used both the 2009 and 2010 World Economic Forum

Transparency International, Corruption Perceptions Index 2010: Long Methodological Brief (2010), retrieved from www.transparency.org (accessed on 21 August 2011). 3 Internet Center for Corruption Research, Corruption Perceptions Index 2005 Frequently Asked Questions (2005), http://www.icgg.org/corruption.cpi_2005_faq.html (accessed on 22 August 2011).
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Global Competitiveness Reports.4 The inclusion of longer-term data may dampen the impact of recent changes in policy or industry climate changes, which could be a drawback in policy assessment or election cycles, as the success of anticorruption measures may not be fully reflected.

Figure 1: Malaysias CPI ranking and score (2001-2010)

Source: http://malaysiapublicpolicycompetition.blogspot.com/2011/08/alternative-malaysian-transparency.html

Besides these time-related concerns, the international focus of the CPI also detracts from its utility in a domestic policy context. The pursuit of public accountability is not a global competition; it is a pressing need with nuances that vary with the culture, history, and socioeconomic exigencies of each country. If, for example, a continental war were to break out in the Americas, international corruption levels may spike due to a breakdown of the rule of law in the combatant states. This could improve Malaysias CPI ranking irrespective of any substantive internal changes.

Transparency International, Corruption Perceptions Index 2010 Table (2010), retrieved from www.transparency.org (accessed on 21 August 2011).
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Furthermore, the degree of perceived corruption as ranked in the CPI has several limitations in the Malaysian context. First, it is a measure of perception rather than incidence. As perception is influenced by a host of factors apart from the actual incidence of corruption, relying solely on such a measure could prove misleading. Second, biases in the definitions of corruption in the international questionnaires also detract from the CPIs effectiveness. For example, one question posed to country experts in Freedom Houses Nations in Transit 2010 survey was: Is the countrys economy free of excessive state involvement?5 Despite Freedom Houses admirable work, this question reflects a bias towards the free-market capitalism that is inappropriate for many emerging economies but strongly favoured by the United States government, which funds over 80 percent of Freedom Houses expenses. 6 Besides this, Singapore consistently receives CPI scores of greater than 9 out of 10 for its law-abiding bureaucracy, yet it betrays an unsettling nepotism in its selection of Prime Ministers and, currently, the executive director of powerful sovereign wealth fund Temasek Holdings. Such internal biases in defining corruption could affect how responsive the CPI is to Malaysian values and priorities in policy. Given these statistical and methodological complexities, the CPI is an inadequate data source for monitoring policy efficacy. While offering an approximate gauge for whether a corruption-averse investor is more likely to invest in one country or another in a particular year, evaluating and formulating national policy demands rigorous statistics showing trends over time, which the CPI does not provide.

Transparency International, Corruption Perceptions Index 2010: Long Methodological Brief (2010), retrieved from www.transparency.org (accessed on 21 August 2011). 6 Fredom House, Freedom House 2007 Annual Report: Financial Statements, Donors, Board of Trustees (2007), http://www.freedomhouse.org/uploads/special_report/72.pdf (accessed on 23 August 2011).
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2. T HE A LTERNATIVE M ALAYSIAN T RANSPARENCY I NDEX (MTI) To bridge the gaps in corruption tracking in Malaysia, we propose the establishment of an alternative Malaysian Transparency Index (MTI). Published quarterly to maximise the tradeoff between the need to consistently monitor corruption and the resource burden of preparing such data, the MTI will be administered by a non-governmental organization (NGO). With its extensive expertise and network, Transparency International Malaysia would be the ideal choice for the MTI. Alternatively, the MTI could be overseen by a non-governmental organization with access to local expertise and a strong commitment to independence and accountabilityfor example, its funding should come from a variety of sources, and financial records should be audited and published regularly. It is crucial that the MTI and all its survey instruments be designed by a team with strong local expertise, as the social, political and legal situation in Malaysia is unique. As noted above, local situations alter the definition of corruption in small but meaningful ways. For example, affirmative action in Malaysia includes ethnic criteria in the award of certain government construction contracts. While such criteria may be construed as corrupt in countries without Malaysias demography and history, certain practices that are acceptable in other countriessuch as political lobbying by interest groups in Washington, D.C.would certainly be viewed as corruption by many Malaysians if it were to happen on a similarly large scale here. Consequently, it is vital that the MTI be attuned to the local context. As this new index will aim to capture the drives and sources of corruption in Malaysia, it needs to reflect the fact that corruption is a complex phenomenon. One well-recognised framework for understanding corrupt actions is the Fraud Triangle, formulated in the 1950s by criminologist Donald Cressey. The Fraud Triangle contends that every fraud situation sees the presence of three factions: motive (the need or incentive to commit fraud), rationalisation (the perpetrators personal justification, e.g. everybody else does it), and opportunity (weak

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systemic controls that permit fraud to occur). 7 In line with this, we believe that effective anticorruption measures and measurements need to account for the multifaceted nature of this blight. As such, the MTI will chart corruption as a set of metrics, rather than a single score for each time period. The first component of the composite MTI will be a measure of anticorruption action across the country. This metric will pool information on incidences of petty and grand corruption from the databases of local authorities, most importantly the Royal Malaysian Police (PDRM) and the Malaysian Anti-Corruption Commission (MACC). As both of these institutions have computerised records, drawing on their databases avoids the inefficiency of replicating this investigative and documentary work. This measure of anticorruption action will also draw on court records of cases of grand corruption. The volume of corruption casesboth the number of cases and the total financial value of corrupt transactionsin a given quarter will then be reported as a score on a 10-point scale. The second component of the MTI will track public perceptions of corruption, as with the CPI. Also like the CPI, it will focus on businesses and local experts in advocacy and academia. However, this component of the MTI will have the advantages of frequencysurveys will be conducted every quarterand superior samplingrespondents will be randomly selected from a database of eligible businesspeople and local experts each quarter. This database will be maintained and consistently updated by the team at the supervisory NGO. The survey will be conducted through secure online questionnaires, which will save considerable amounts of resources, whether financial (no postage or printing costs), environmental (through paperless operations), or administrative (survey data will automatically populate a spreadsheet). In addition, the online questionnaires can be conducted through a third-party server that will guarantee confidentiality. Such confidentiality may be crucial for those in the business community, who

Jerry L. Turner, Thodore J. Mock, and Rajendra P. Srivastava, An Analysis of the Fraud Triangle (2003), http://aaahq.org/audit/midyear/03midyear/papers/Research%20Roundtable%203-Turner-MockSrivastava.pdf (accessed on 24 August 2011).
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face a trade-off between possible gains from bribery and honest survey answers to provide highquality data for market forecasting. Questions on this quarterly survey, in addition to encapsulating the local context, will be framed around the different elements of the fraud triangle, for example: 1. Motive: Have rising costs been a persistent source of concern during conversations in the last quarter? Have entrepreneurs been having difficulties in securing sufficient contracts to cover their costs? 2. Rationalization: To what extent would your peers consider it acceptable to give/receive a bribe to bypass the law [or expedite a registration, etc]? 3. Opportunity: How many incidences of corruption are you aware of that resulted in legal penalties? How many did not? Are you aware of channels for whistle-blowing in your professional field? As with the anticorruption action component of the MTI, the public perceptions component will be scored on a 10-point scale, incorporating elements such as the perceived frequency of corruption, how much a refusal to bribe hampers business relationships, and the like.

Figure 2: Screenshot from I Paid a Bribe, a well-established anti-corruption web portal in India

Source: www.ipaidabribe.com
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The final component of the MTI will constitute professional analysis of anecdotal evidence from a multilingual corruption-reporting web portal that will allow any Malaysian to anonymously incidences of corruption that they encounter. Although this component of the MTI may lack the statistical rigour of the first two components, and although it will capture primarily petty corruption (also known as bureaucratic corruption) rather than the high-profile, high-dollar cases of grand corruption or state capture, it is crucial because such small but frequent cases of corruption can greatly affect the everyday lives of average citizens and, by extension, the political climate. Beyond facilitating the collection of information on corruption in Malaysia, this portal will have the reciprocal advantage of empowering citizens to take action against corruptionleveraging on Malaysias burgeoning social media activism not least. One such website, Indias IPaidABribe.com, has seen such tremendous success in anti-corruption efforts that several copycat websites appeared in China.8 The strengths of such a corruption-reporting portal are more compelling than its limitations. Notably, the cost of this vital channel of information is negligible. Once designed, it will require little beyond technical support and renting a domain name. These are a small price to pay for a source of grassroots information and civic education. For example, IPaidABribe.com solicits and publishes not only accounts of corruption (I paid a bribe), but also of successful resistance to corruption (I didnt pay a bribe), and clean transactions with public officials (I didnt have to pay a bribe). Besides this, although such a portal may inadvertently be skewed towards urban residents over their rural counterparts despite developments in internet provision, this skew could eventually be mitigated with a parallel SMS-based reporting service. While the data from the corruption-reporting portal may be messier than that of the first and second MTI components, this will be overcome through rigorous qualitative scholarly

The Christian Science Monitor, 'I Paid a Bribe' may be a model for anti-corruption (23 June 2011), http://www.csmonitor.com/World/Making-a-difference/Change-Agent/2011/0623/I-Paid-a-Bribe-maybe-a-model-for-anti-corruption (accessed on 24 August 2011).
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analysis of the reports posted, to trace trends in the sorts of corruption and political frustrations expressed. An analysis will be included with the first and second MTI every quarter. In this respect, the MTI aims to bridge the gap between crowd-sourcing initiatives such as IPaidABribe.com, and the model of Global Integrity, an NGO that tracks accountability and transparency in governance using a gifted but small network of researchers and journalists (see Figure 3). Academic analysis of broad-based data will unite the strengths of both of these modes of corruption measurement.

Figure 3: Screenshot from Global Integritys 2010 report on Malaysia

Source: http://www.globalintegrity.org/report/Malaysia/2010/

Another way of aggregating the corruption-reporting portal data is summing the total value of bribes reported in each town or state, and keeping a running tally of the top towns for bribes or something similar, as is done on Indias IPaidABribe.com (see Bribe Analytics in
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Figure 2). While international competition to reduce corruption is unlikely to have any significant impact, friendly competition between districts or states in Malaysia may well bolster an anticorruption consciousness, akin to interdepartmental productivity tallies in a corporation.

3.A PPLYING THE M ALAYSIAN T RANSPARENCY I NDEX As noted in at the beginning of this paper, corruption is a pervasive problem in Malaysia. Consequently, stakeholders throughout society have strong incentives to better understand and minimise this scourge. Whether politicians, policy makers, academics, NGOs or businesses, these stakeholders can gain substantial and overlapping benefits from consistent and rigorous tracking of corruption through the MTI. Politicians have a vested interest in tackling corruption within their constituencies, not least because it is becoming an increasingly prominent electoral issue. Furthermore, in policymaking, corruption is a multifaceted challenge: grand corruption depletes public resources, petty corruption decreases delivery of public services, and patronage proffers government contracts to the most favoured rather than the most efficient provider. More broadly, because corruption is by nature a stealthy activity, it adds uncertainty into data on the circumstances and outcomes of policy; this uncertainty hampers rigorous planning. For academics and those in NGOs, there are strong moral and intellectual motivations to measure and minimise corruption. Even if a scholars or NGOs work is not primarily concerned with combating corruption, such abuses of power are often a complicating factor in political dynamics, welfare delivery, and any number of other fields of interest. In recent years, NGOs and public intellectuals have also become increasingly visible as political players in Malaysia, making their role in fight against corruption even more crucial.

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For those in the business community, petty corruption imposes an additional tax to transaction costs. Besides such palm-greasing for licensing or other business-related permissions, patronage or state capture can unfairly skew the playing field for entrepreneurs in a competitive market. In short, governmental and non-governmental work against corruption form a selfreinforcing loop that has benefits across society (see Figure 4).

Figure 4: Business, government and society linkage in combating corruption

Lobby for change to improve Government

Policy makers Politicians Academics NGOs

Attract businesses

Government
(reelection)

Society
(improve standard of living)

There are two key sets of advantages of monitoring corruption through the MTI rather than the existing CPI. First, the metrics of corruption and measurement methodology in the MTI are consistent and tailored to be sensitive to Malaysias circumstances. Unlike the CPI, the general set of data sources in the MTI will not change from year to yearthe focus will be on internal changes in a single country over time. This will enable rigorous time-series tracking, which will not only facilitate accurate policy and business forecasts, but also boost Malaysias international credibility as a state serious about transparency and as a conscientious location for investment. Another central advantage to the CPI is that the composite nature of its measurement offers a far more nuancedand, hence, far more actionablepicture of corruption in Malaysia. Some of the most useful insights from this composite index will come from comparisons
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between the different components, and also against the international benchmark of the CPI. For example, if the anticorruption action score does not show any increase in the volume of corruption cases, but the corruption-reporting website shows a spike in the number of cases reported, this may signal to policy-makers that legal enforcement against corruption should be enhanced, and to NGOs that whistle-blowing awareness campaigns may be expedient. Alternatively, if all three MTI components show that corruption is on a downward trend in Malaysia but the CPI does not show any similar decline, politicians and business leaders may realise a need to be more proactive about demonstrating Malaysias improved transparency to potential foreign investors. Besides all this, there will room for rich analysis of causes and linkages by the academics who work with disaggregated data from the public perceptions survey, especially when tracked in tandem with local authorities data from the anticorruption action component and the anecdotal evidence from the corruption-reporting portal. Ultimately and indirectly, all members of society stand to benefit from concerted action against corruption. Combating corruption in Malaysia encapsulates formidable challenges but real rewards. It is both a moral and economic imperative, and can be greatly enhanced through the refined benchmarking of the MTI.

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