YB DATO’ MUKHRIZ MAHATHIR
DEPUTY MINISTER OF INTERNATIONAL TRADE AND INDUSTRY
4TH ANNUAL CORPORATE GOVERNANCE SUMMIT
5th MARCH 2012 (MONDAY)
ROYALE CHULAN HOTEL, KUALA LUMPUR
Assalamualaikum W.B.T and Salam 1Malaysia.
Yang Berbahagia Tan Sri Dato’ Haji Megat Najmuddin,
Chairman of Asian World Summit;
Menbers of the Media;
I’d like to start by expressing my sincere appreciation to the organizing committee and in particular Asian World Summit for their invitation to officiate this 4th Annual Corporate Governance Summit.
I believe that such summits are an integral part in a big network of vigorous debates on corporate governance that could sprout new ideas on effective corporate governance.
We need to have regular but honest discussions to this end.
Therefore I commend the Asian World Summit for organizing this international event on corporate governance. Perhaps, the confluence of the divergent cultures and economic systems within the Asian hemisphere could produce good if not better ideas on this topic to share with the rest of the world.
I am also delighted that we will hear from the experts on how we can improve on our efforts to enhance corporate governance. That coupled with the presence of a number of prominent entrepreneurs and corporate leaders here today will positively add to the deliberations.
Mark Twain said that - “It is curious - curious that physical courage should be so common in the world and moral courage so rare”.
It is based on this profound sense of ethics that the Government has pulled out all the stops to do what is right for its citizens and create an environment where justice, ethics and integrity permeates.
I do not intend to speak much less lecture you on the topic of corporate governance of which you have dedicated your careers to. I would prefer to put into context the efforts of the Government to set Malaysia off on the right foot with the rest of the region.
For your information, Vriens & Partners, a Southeast Asia-focused corporate advisory firm specializing in political risk analysis, government affairs and public policy headquartered in Singapore has this to say about Malaysia in its ‘Good Governance for International Business 2011’ report. This report measures good governance based on 6 pillars namely Rule of Law, Openness to International Trade and Business, Political Stability, Taxation, Corruption Perception and Fiscal/Monetary Administration. These said pillars have a major impact on drawing in business and foreign investments.
For starters, Malaysia was ranked at 8th position in overall performance out of 19 economies among Asia Pacific economies.
Malaysia was ranked 7th for ‘Rule of Law’ which measures judicial independence, the protection of property rights, the effectiveness of contract enforcement, and the capacity of the legal system to settle business disputes
In terms of ‘Openness to International Trade and Business’ which assesses Government attitudes towards international business entering and operating in domestic markets-Malaysia was ranked 6th position out of 19 economies. For this pillar, assessment is based on the incentives given to international investors such as dual regulatory regimes, the treatment of international acquisitions, capital controls and the openness of the economy to foreign goods and services.
In terms of ‘Political Stability’ which assesses the consistency of Government policies as well as the possibility of violence or terrorism occurring-Malaysia was ranked 8th in the Asian region.
Malaysia scored well on ‘Taxation’ which assesses the tax environment in terms of the administrative transparency and efficiency in tax collection along with local taxation rates particularly the corporate tax rate.
In the ‘Corruption’ category that assesses perceptions in the abuse of power or fiduciary duties for personal gain in the public and private sectors be they petty or systemic forms of corruption-Malaysia was ranked 8th position.
In terms of ‘Fiscal & Monetary Administration’ that assesses the management of state finances and monetary regulation that encourages economic growth and stability, Malaysia was at 8th position which was a reflection of the stability of her macroeconomic environment and high national savings rate.
Thus, I would like to add that the said findings show that Malaysia has improved its standing in the stated categories even outperforming many other advanced Asian nations. While I don’t mean to discount the achievements of our fellow Asian countries but I think that competition amongst ourselves when it comes to corporate governance or battling corruption is indeed a good thing. I would applaud other countries that improve their rankings against ours.
These results were the culmination of various laws and initiatives instituted by the Government. Allow me to share with you some of the more recent efforts of the Government in fighting graft as well as upholding ethical practices:
· ‘The Code of Business Ethics and Integrity Pledge for SMEs in Malaysia’ (SME Pledge) was introduced to create awareness among SMEs to adopt anti-corruption initiatives. It also allows SMEs to obtain up to date information on anti-corruption measures.
· The SME Pledge recently launched on the 23rd of December 2011, is a collaborative effort between SME Corp. Malaysia and the Malaysian Anti-Corruption Commission (MACC); with the support of the Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC), Institute of Integrity Malaysia (IIM), Companies Commission of Malaysia (SSM) and Transparency International (TI).
· The MACC is also encouraging Government-linked companies (GLCs) as well as private companies to sign a corporate integrity pledge with the aim of creating a corruption-free business environment. One of the important elements of this pledge is the Corporate Integrity Pact (CIP), intended specifically for companies involved in the procurement of large projects. By virtue of the CIP, both the owner of the project and the prospective bidder will undertake a pledge not to engage in corrupt practices throughout the tender process.
· Furthermore, Malaysia has come up with the Kuala Lumpur Principles which for the moment is intended for the medical device sector. This is a business ethics guideline that will provide companies especially resource constrained SMEs without compliance personnel or adequate ethical procedures with greater clarity on what constitutes appropriate business interactions across the Asia Pacific region. This set of principles for the region’s medical devices industry is the first of its kind and will ultimately improve the quality of patient care, encourage innovation and promote the growth of SMEs that produce medical devices. However, it is our hope that the code of ethics for the medical devices sector will only be the beginning to many more guidelines that will cover all economic sectors in the country.
· For your information, the Government has also undertaken other anti-corruption initiatives such as various internal auditing systems and the Malaysian Code of Corporate Governance to mention but a few.
· The MACC has also formed a dedicated division to further reduce the chances of corruption involving government departments, government-linked companies and enforcement agencies. Dubbed the Inspection and Consultation Unit- it is staffed with around 60 well-trained officers specialising in various fields that will identify and propose measures to fight corruption which is getting more complex in nature.
· The Government has also passed the Whistleblower Protection Act 2010 to encourage the disclosure of corrupt acts while protecting the informant’s identities. The Malaysian Judiciary has also set up special corruption High Courts as well as Session courts.
The fight for better corporate governance and anti-corruption is not merely the realm of the public service. Many people feel that the Government owes a duty to be transparent and ethical to its citizens but that the private sector operates in a vacuum where the free-market or being a capitalist is a licence for entrepreneurs to adopt unethical activities. This is not correct. Both the public service and the private sector must strive for better ethical practices and not seek loopholes around the law and rules. It is not uncommon for business people to employ the best brains be they accountants or lawyers to circumvent corporate governance rules to make profits. Private companies must not indulge in unethical or worse illegal behaviour while competitively bidding for overseas tenders as such acts affect Malaysia’s standing as a whole.
Mark Twain was spot on when he spoke for the need of moral courage. It will certainly take a lot of courage to do what is ethical and the Government is leading the charge.
My fellow Asians,
Let today’s summit be the catalyst for an Asian idea on corporate governance. Asian values have long rested on our sacred religious beliefs, strong family bonds and a concern for the greater good of our communities. Even to this day, we firmly hold on to our values while accepting the good in modernity and rejecting the negative aspects of Western culture. We must never trade those in for what the German historian and philosopher dubbed the “Faustian Civilisation” when he predicted the “The Decline of The West” in his book published in 1918. Indeed, it is undisputable that US capitalism devoid of the fibre of morality or ethics is partly to be blamed for their problems. Spengler charged that the West was on a destructive path in pursuit of money. The EU for that matter shows the world the devastating effects of economic mismanagement of intertwined national economies.
In this context, the US subprime mortgage crisis unravelled the failure if not complicity of an entire regulatory system of checks and balances. How did the likes of Lehman Brothers, Freddie Mac, Fannie May and American International Group carry on for so long what the Federal Bureau of Investigation calls the possibility of fraud? Why didn’t the relevant stakeholders check on their companies’ activities? Were the stakeholders equally greedy? To top it off, the Federal Reserve known to be a stickler for rules facilitated these transgressions and worst still exercised the largest bail out in modern history. These are all examples of how a system can not only discard good governance but actually encourage unethical behaviour.
This brings me back to my earlier point that no amount of rules and regulations can substitute a firm belief in ethics. We have to get our political and economic philosophy correct right off the bat. And we can do this premised on our good Asian values. Asia must develop its own corporate governance policies for this New Asian Century or suffer the same fate currently plaguing Western nations.
I entrust all of you with this enormous task. The future of Asia is bright and let’s keep it that way.
And with that, I take my leave. I wish all participants a pleasant stay in Malaysia. Please do revert back to my office on the findings of this summit and I hope to see you soon.