Check and balance: (From left) Dr Yeah, Dr Shankaran and Akhbar say more transparency can help curb shadow economy.
PETALING JAYA: With hundreds of billions of ringgit lost to the shadow economy, putting a rent-seeking legislation in place is crucial to weed out economic corruption, say economists and anti-graft crusaders.
Rent-seeking refers to the practice of manipulating public policy or economic conditions for financial gains without contributing back to the economy.
This includes lobbying for government grants, subsidies or tariffs, giving away money for personal gain, piracy, manipulating government agencies for coercive monopoly and eliminating competitors who are at a disadvantage.
Sunway University economics professor Dr Yeah Kim Leng said rent-seeking activities are unproductive and also weaken the economy by raising costs to consumers, eroding competitiveness and deterring a genuine entrepreneurial class from emerging.
He estimated Malaysia’s shadow economy to range between RM300bil and RM600bil or 15%-30% of the 2023 gross domestic product (GDP) based on current prices.
The shadow economy refers to illicit activity which exists alongside the country’s official economy, including black market transactions and undeclared work.
“Together with efforts to ensure transparency and competitive bidding in government procurement contracts and awarding of projects, the latest legislation proposal signals the present administration’s commitment to stamp out corruption and rent-seeking activities,” says Yeah, who is also in the special advisory body to the Finance Minister.
Meanwhile, senior fellow at the Malaysian Institute of Economic Research (MIER) Dr Shankaran Nambiar said there has to be transparency and good governance, especially in government procurement.
“For instance, we need to tighten our government’s procurement policies and processes to make sure we’re getting the best bid at the lowest price. This is not going to happen in closed-door, direct negotiation processes,” he said when contacted.
He said procurement processes must be done electronically and information must be shared by the relevant stakeholders to a permissible extent.
He said there should also be avenues to question decisions made and room to appeal.
“The awarding of licences must also be closely monitored. We can’t have Ali being awarded a licence and Baba operating it. There will be monitoring costs involved,” he said.
“This will make sure the government can procure at the best price for a given level of quality. There are cost savings when you do that; you don’t overpay.”
“In matters of national security, it may be more difficult to ensure transparency. But a mechanism must be put in place in the procurement of defence items to avoid abuse in that sector,” he added.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said a legislation is timely to ensure governance and only those who are qualified will be granted opportunities in a fair and transparent manner.
Former Transparency International Malaysia president Datuk Seri Akhbar Satar said it was high time to consider this policy after 60 years of independence.
“Several years back, there were efforts to crack down on it, but there was no political will.
“The rent-seeking system manipulates the social and political system to gain an unfair advantage over others while not adding any value,” said Akhbar, who is also a former Anti-Corruption Advisory Board member.
He added that legitimate and competent Malay businesses could go bankrupt if the “Ali Baba” practice went unchecked.
“Smaller Malay companies will lose out the most, failing to pick up the skills needed to operate in an increasingly competitive market,” he added.
Akhbar, who is the current Malaysian Association of Certified Fraud Examiners president, added that tougher laws and enforcement were needed to make the system harder to manipulate.
“Government contracts should be posted online to increase transparency and accountability,” he said, stressing the need to do away with cronyism and political interference.
“In Malaysia, things have gone so bad that when the political leaders change, they promise to eradicate corruption but do not walk the talk,” he added.