19 December 2024 –
Private sector corruption negatively impacts societies and economies, through tax evasion, illicit financial flows, undue influence in public procurement processes and breaches of health and environmental regulations. When businesses operate with integrity and transparency, this can accelerate sustainable development and encourage competition. The United Nations Convention Against Corruption (UNCAC) recognises that corruption is not only a public sector problem but must be addressed in the private sector as well. Article 12 of the Convention calls upon States Parties to take measures to prevent corruption in the private sector, including developing codes of conduct and procedures to improve integrity among relevant private entities and to improve regulatory measures to strengthen internal controls. Article 21 of the UNCAC also recommends States Parties to have in place laws and regulations dealing with corruption in the form of bribery in private entities.
Bribery in the Private Sector
At the 19th Asia-Pacific Regional meeting, Mr. Chew Phye Keat, a Committee Member at Transparency International Malaysia, explained how corruption in business is endemic in Malaysia. According to research findings by the Association of Chartered Certified Accountants (ACCA), more than 60 percent of small and medium enterprises (SMEs) perceive that not paying bribes costs them business opportunities. The cost of bribes, which are treated as business expenses, are eventually transferred to the consumers. However, a slightly higher percentage (68%) also believed that standing up to corruption would increase their chance of trading with large public and private bodies. Another finding from the World Bank also shows that one in three firms are expected to give “gifts” in order to obtain construction permits in Southeast Asia. In order to reduce opportunities for corruption, Article 12 of the UNCAC encourages States Parties to take measures aimed at preventing conflicts of interest, such as introducing a cool-off period for former public officials to serve as business executives. Strengthening and enforcing legislation governing the private sector to prevent bribery supports fostering a clean business environment.
There is an issue of cultural tolerance towards corruption in Malaysian society. To strengthen regulations and address the cultural aspect, Mr. Chew pointed to the importance of highlighting the negative impacts of business corruption in civic education and religious texts. In June 2024, Transparency International Malaysia published “The Sin of Corruption: A Religious Perspective”, which explains how corruption and the misuse of public funds are frowned upon in all major religions in Malaysia.
The Role of Whistleblowing in Business Integrity
While the overall goal of business integrity is to uphold transparency and promote good business practices, whistleblower protection legislation plays a crucial role in ensuring that employees are able to come forward with information about misconduct and corrupt practices. According to the National Whistleblower Center, a whistleblower is someone who “reports waste, fraud, abuse, corruption”, usually to those in authority. Malaysia has a whistleblower protection law that protects those who disclose improper conduct to law enforcement agencies. The Malaysian Whistleblower Protection Act 2010 promises immunity and prevents detrimental actions against whistleblowers. Furthermore, the law provides for confidentiality and protects the identity of the whistleblowers. Thanks to whistleblowers, millions have been recovered in public funds, including funds lost as a result of corruption in the business sector. Nonetheless, Malaysian whistleblower law faces shortcomings. According to the law, a whistleblower may only report to government officials. This means that a whistleblower can not report to the media or civil society.
Corruption in the Extractive Industries Sector
Despite some countries in the region having sufficient legislation and implementation of laws around business integrity encouraging businesses to follow ethical conduct, including the recent draft of a whistleblowing protection policy by the Philippines government, these same businesses often engage in corrupt practices abroad, offering foreign authorities bribes in exchange for favourable treatment and access to public resources abroad. Beverly Besmanos, National Coordinator from Bantay Kita, highlighted how the extractive industries sector is especially prone to this form of cross-border corruption. The Philippines has a vast reserve of nickel that has attracted many international investors. Lack of transparency in the process of awarding natural resources contracts has the potential to provide a breeding ground for corruption.
The following were highlighted as further problems faced around private sector corruption in the extractive industries sector:
- Lack of transparency over the ownership of many large-scale nickel operators.
- Indications that politically exposed persons (PEPs) may be involved in operation of the nickel mines, receiving large campaign donations from businesses active in the extractive sector.
- Bribery to influence contract awards.
- Lack of integrity and transparency in community consultations, which are often regarded as a simple formality rather than collecting genuine input.
Bantay Kita is part of the Multi-Stakeholder Group (MSG) working with the Philippines government and business representatives with an interest in the extractive sector to monitor key data in the sector, including comparing mining revenues paid by the companies with those collected by the government, transparency around procurement and contracting and ensuring environmental protection regulations are implemented.
To combat private sector corruption in the extractive industries sector, civil society organisations work to ensure transparency and accountability by:
- Participating in MSG meetings
- Monitoring the operation of the mining
- Advocating for greater transparency in the sector.