RESOURCE MATERIAL SERIES No. 56

STRENGTHENING INTEGRITY: THE IMPORTANCE OF
TRANSPARENCY AND ACCOUNTABILITY IN ECONOMICSUSTAINABILITY
Tunku Abdul Aziz*
I have chosen to discuss strengthening
a national integrity system because
integrity has an important bearing on oursocial, political and economic wellbeing.
Each year, my organisation, Transparency
International (TI), publishes its Corruption
Perceptions Index.1 The index is based on
the perceptions of the international
business community about the levels ofcorruption in the countries in which they
operate. For a country to be included in
the TI Corruption Perceptions Index in any
given year, that country must have been
the subject of at least 3 or more separate
surveys. Eighty-five countries were
included in the 1998 TI-CPI. How did theSouth East Asian group of countries fare?
Singapore was placed at number 7,
Malaysia at number 29, South Korea at 43,
the Philippines at 55, Thailand at 61, andIndonesia at 80. The bigger the number,the more corrupt a country is perceived tobe.
Many detractors are quick to dismiss theindex as being of no real significance. It isinteresting to note, however, that thecountries which are facing the greatest
economic turmoil today are those perceived
by the international business community
to be among the most corrupt. Indonesia,
South Korea and Thailand are on IMF life
support systems, while the Philippines has
been kept afloat by the IMF and the World
Bank, on and off, for the last 35 years or* Vice-Chairman of the Board of Directors,
Transparency International, Malaysia.
1 For the Corruption Perceptions Index, please see
our website <http://www.transparency.de/>.

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so. On the other hand, Singapore, once
described by Habibie as “ a little red dot on
the map” was perceived to be among theleast corrupt in the world. It has survived
this crisis relatively unscathed. I leave you
to draw your own conclusions about thesedifferent countries and the relevance of the
TI Corruption Perceptions Index.
While we may not always like the way
we are perceived, particularly by theinternational business community, we haveto agree that although their perceptions
may indeed have no basis in fact, they are,nevertheless, real. Their effects on our
regional economies have been devastating,to say the least. How have these negative
perceptions come about? Have we not, in
this region, been mismanaging our
economic and financial affairs, and totally
ignoring best practices? What our foreign
investors and partners have seen of thequality of corporate governance in our partof the world has given them neither thelevel of comfort nor the degree of confidence
they require for the protection of theirinvestments in the long term.
For a start, the countries in this region,
almost without exception, consign
transparency to the back seat. The lack oftransparency in the disposal of public
assets through privatisation is causing
concern and disquiet. Equally worrying
has been the practice in many countries ofawarding mega-infrastructure and othercontracts on the basis of closed door
negotiations, rather than the fairer, andmore democratic, open bidding. Whatabout ready access to information and the113TH INTERNATIONAL TRAINING COURSE
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blanket use of the Official Secrets Act? All
this, in a country such as my own that is
promoting information technology throughthe Multi-Media Super Corridor as anarticle of faith!.
It is this cavalier attitude to bestpractices in both the privatisation andpublic procurement procedures that hasgiven rise to the expression “crony
capitalism.” Long before Thatcherism andprivatisation ever became fashionable,another Tory leader, Edward Heath,described the sort of behaviour we now
speak of as the “unacceptable face ofcapitalism.” Both these expressions share
a common characteristic - transparency
and accountability - the two importantpillars of good governance, do not form any
part of the policy equations of many of thegovernments of Asian countries. Therein,
I believe, lies the root of so many of ourcurrent economic and financial problems.
Now, let me say straightaway, that
corruption is not an exclusively Asian
contribution to civilisation. The developed
nations of the world, including Japan, arethemselves replete with scandals, greatand small, that will make your hair stand.
Worse still, until the recent adoption of theOECD Convention prohibiting the briberyof foreign officials, countries such as
Germany gave tax breaks to those of theircompanies that had resorted to bribery inorder to win overseas contracts. The
demand side of corruption is fairly well
documented; TI is now focusing on the
supply side. Corruption, as my Minister
for International Trade and Industry once
said, was like the tango, because you need
two people to dance it. I agree with her,but I have to say in all fairness, unlike thetango, there is nothing elegant about
corruption.
It is lack of confidence in the way someof us continue to manage our economic

affairs that is apparently the cause of thejitters in the market place. If this is true,
and I believe it is, then quite obviously thecommon sense thing to do is to reverse, at
once, negative foreign investors, and forthat that matter, domestic investors
perceptions about our national integrity.
How do we go about restoring confidence?
Can we step aside and leave governments
to put matters right? The answer, I am
afraid, quite simply is, no!. This is because,even with the best intentions in the world,most governments, including that of mycountry, find themselves falling short of thelevel of political will required to finish thejob properly. And without the support ofall sections of society, working as coalition
partners to address the issue of confidencebuilding as part of a long-term strategy todevelop and strengthen our national
integrity systems, the task is an impossible
one. The empowerment of civil society andother components of our population, so thatthey can all play their part in rebuilding
our shattered national credibility, is crucial
to the success of this effort.
You and I, ordinary men and women, thecorporate sector, and civil society need tobe directly involved in this damage control
operation because national integrity is too
precious a part of our democratic values tobe left to the tender mercies of politicians.
Society as a whole must be an active“custodian” if good governance is to becomea reality in our countries. Without
accountability to society, and transparency
in government, as well as in the private
sector, and without integrity in national
life, sustainable human development (ofthe level and quality to which we aspire)
has little hope of finding its true expression.
Sadly, in our Asian political tradition of“Father Knows Best”, these apparently
heretical thoughts will probably not sit too
well with some people in power in yourcountry, or for that matter, mine. I am nothere to dispute the mandate and legitimacy

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RESOURCE MATERIAL SERIES No. 56
of elected governments, but...
Unfortunately, experience elsewhere has
shown all too often that even enlightened
governments tend to forget that thelegitimacy they enjoy is derived from anunspoken social contract with the people.
In return for the right to govern, agovernment agrees to honour and defend
the constitution. By reason of this contract,
an elected government must be preparedto subject its official behaviour, forexample, to public scrutiny and to be held
totally accountable for its actions to its
constituents. By implication, the mandate
given must be applied to achieving one
object only - to put, as James Wolfensohn,
the President of the World Bank says, “theinterests of the many over those of the few”.
It is under a moral obligation, in carryingout its functions, to adopt universally
recognised and accepted “best practices”,
consistent with the economic, social andmoral needs of an ethical and caring
society. In other words, good governanceis a price that a responsible government is
be expected to pay, and pay willingly, forthe sacred privilege and trust it enjoys. It
goes without saying that the principle oftrusteeship is central to the whole conceptof stewardship, both in the governance ofa nation, as well as (in the case of theprivate sector) the management of publiccompanies.
I turn now to the role of the private
sector, specifically, in promoting corporatetransparency. In his paper ‘Civil Society
in the Fight Against Corruption’, presented
at the 8th International Anti-Corruption
Conference in September, 1997 in Peru, Dr.
Peter Eigen, Chairman of Transparency
International, after arguing that it isgovernments that have a formal
responsibility to reform national andinternational integrity systems, goes on tosay; “The private sector has a unique input
to make. It is the dominant engine of the388

economy and an effective anti-corruption
campaign can hardly be sustained against
the opposition of the corporate community.”
Let no one underestimate the power forgood that the private sector can wield, if it
so chooses. It is, therefore, encouraging to
see that the private sector in many of ourcountries is beginning to be concerned
about the colossal damage done to ournational economies and prestige bycorruption, a word defined by Transparency
International as the “abuse of entrusted
power for private profit.” This definition
includes also corrupt practices within theprivate sector community itself. It is
entirely proper that the desire to reformand bring about transparency andaccountability in the way we do businesshas come, in this case, from within thecorporate community.
The wide-ranging institutional reforms
being undertaken, for example, by the
Securities Commission and the banking
sector in my country, and no doubt other
Asian economies as well, encompassing allof the important areas requiring reform,
such as the desirability of developing a
corporate disclosure policy, the importanceof adopting much greater transparency incorporate financial reporting, the need forbetter banking practice and regulation, andthe need to ensure that there is a clear
understanding of what international
institutional investors expect and wantfrom the companies in which they invest,
are obviously all steps in the right
direction. These are only some of theexamples of the hard-nosed, practical
approach that the corporate sector isapparently capable of bringing to bear, as
part of its own reform initiatives, on theeconomic and financial problems afflicting
our countries today.
One question is should we not, perhaps,
have bolted the financial stable doors

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before the international investors had time
to make a dash for greener pastures? It is,of course, pure conjecture, but if we hadtaken the trouble to recognise theirconcerns about the way we managed ourbusinesses, might we have helped to stem
the tide? Perhaps, but the important thingis that the various individual, as well as
the collective initiatives on sustainablecorporate governance, appear to confirm along-held suspicion that we ourselves were
not entirely happy with things as theywere, and that we wanted to change ourbusiness culture in a way that foreign, as
well as local, investors might reasonably
expect that the field on which they would
be invited to play the “money game” would
not only be level, but also guaranteed to be
free of hidden traps; and that the goal posts
would not be shifted while the game wasin progress. Investors value predictability
and detest uncertainty.
The current crisis is, in many ways, a
blessing in disguise. This period of
economic downturn has given us, thegovernment and the private sector alike,an excellent opportunity to look inwards.
This should be a time for introspection, atime to search our collective soul, a time to
ask all the right, but difficult questions, tochallenge operating systems, policies andprocedures hitherto accepted without amurmur, irrespective of their merit or
virtue. It is also now the time to ferret out
the real, and not just the politicallyconvenient, reasons for our current
economic condition and, dare I say, stop
blaming the likes of Mr. Soros, as my Prime
Minister so often does, because, for themost part, the problems are of our own
making and he is only doing what he does
best - finding chinks in our financial andeconomic armour and cutting us downruthlessly and efficiently. That is the nameof the game. I believe that while external
influences are important, they are only as
strong as our internal weaknesses. We

must, therefore, strengthen our systems
and institutions.
This coming to terms with reality will, I
am sure, help strengthen our resolve anddetermination to address, in a businesslike fashion, the many issues and apparent
distortions and contradictions in our
economic management that have brought
about all those negative perceptions in thefirst place. The challenge before us is real,and so is the world we inhabit. Thatchallenge (which will, without doubt, test
the true measure of our wisdom andmaturity) must be taken up if Asia is not
to be remembered merely as a footnote
when the economic and social history of thiscentury comes to be written.
It is well to remember that the
globalisation of our economies means only
one thing; the rules are no longer ours tolay down and manipulate according to ourmood. We either play by the new global
rules, which demand of us much greatertransparency and accountability than wewere used to in the past, or remain, at best,
mere spectators on the sidelines. There isno halfway house. We are either in or outof the global economic game. As there isreally no viable alternative, it makes
enormous sense to put our house in order,
get our act together, and conform to globally
recognised best practices.
We have in the last year or so been
continually reminded by leaders that “Oureconomic fundamentals are strong”.
Accepting that they are indeed as strongas the authorities say, the question worth
repeating is: why was it that we were sosavagely and mercilessly attacked, leaving
us in such a frightful economic andfinancial mess? The truth of the matter isthat investors had lost confidence in oursystems and institutions and decided topull out. They had seen too many instancesof intimate relationships between the389

RESOURCE MATERIAL SERIES No. 56
government and certain select groups
within the private sector. In the case of
my own country, this pattern of economic
behaviour goes under the rather grandname of Malaysia Inc., which, in the minds
of many people, rightly or wrongly, isnothing more than a convenient formula
for unfettered cronyism and abuse of public
power for private gain.
All of these might have been perfectly
harmless and innocent, but for the fact thatso many deals have been struck undercircumstances perceived to be less thaninnocent. In the absence of transparency,
and given the scarcity of authoritative,
accurate and timely information, is it any
wonder that the good, old-fashioned
grapevine or the equally old-fashioned
bush telegraph is winning the battle for
information hands down?
In many countries around the world, thedemand for the “democratisation” of
information has assumed battle cry
proportions. The information age has
arrived, and societies that are unwilling toaccept this new reality, as part of the global
business equation, are inflicting serious
economic injury upon themselves. The
floodgates of global information are
opening, and no power can reverse theprocess.
We Malaysians were upset that foreign
investors failed to recognise our special
financial economic position. With our eightpercent annual growth rate for nearly two
decades, foreign investors had the cheekt o l u m p u s t o g e t h e r, s o m e w h a t
unceremoniously, with the likes ofThailand, Indonesia and the Philippines.
We wondered aloud about those ill
informed, somewhat naive investors/
speculators (the words were usedinterchangeably) who did not see theinherently strong fundamentals
underpinning our political and economic390

system.
Our fundamentals
notwithstanding, they perceived (again
rightly or wrongly) similar unhealthy
trends in all of the countries of East Asia.
Some of the countries of ASEAN were home
to some of the world’s greatest proponentsof Asian values. Sadly today, these values
are seen in reality as part of a morally
indefensible and decadent heritage, one
grounded in complete and utter disdain fortransparency and accountability in the
management of those matters that have“public interest” implications.
In retrospect, Asian values were used tojustify excesses in both human andeconomic terms. They became part of apolitical culture that demanded complete
acquiescence and conformity, regardless ofthe damage to the human spirit andenterprise. Happily, both Dr. Mahathir and
Mr. Lee Kuan Yew are now silent on the
much-touted virtues of the Asian values
that, according to them, had much to dowith the Asian economic miracle. So muchfor self-deception.
Recognising as we do the important roleof the private sector in national economic
development, it is entirely proper that weshould, as part of our quest for corporatetransparency, consider seriously the urgent
need to develop a national code of businessethics to regulate our business
transactions, both within our own country
and with the outside world. Such a code of
ethics has to have a clear set of objectives,and must, among other things, include
measures to combat extortion and bribery
in business transactions. After all, thewhole purpose of transparency is to reduce
opportunities for corrupt practice in society
as a whole. The ICC (International
Chamber of Commerce), the Paris-based
world business organisation, issued an
important and far reaching policy paper,
Document No.193/15 in 1996, setting out
actions that needed to be taken by

113TH INTERNATIONAL TRAINING COURSE
VISITING EXPERTS’ PAPERS“international organisations, governments
and by enterprises, nationally andinternationally, to meet the challenging roleof greater transparency in international
trade.” All of us have a major contribution
to make to the process of building andstrengthening confidence in the totality of
our national integrity systems.
In February last year I visited Thailand
on a special Transparency International
mission to assess the impact of corruption
on the state of the economy. It wasrefreshing to hear the views of a large crosssection of business, professional, academic
and media leaders who, without exception,
all agreed that the absence of an integrity
system both in government and the private
sector had contributed enormously to theircurrent problems. Refreshing because of
the candor with which they discussed andanalysed the role of corruption in bringing
about the collapse of their economic base.
More important was a willingness, on thepart of the Thais, to find a solution and takethe bitter pill, if that was required, in orderto put the country back on its feet. I am
pleased to note that international
perceptions about Thailand are improving
each day. Thailand, a proud country, is not
too proud to admit where it had gonewrong.
In Bangkok I was privileged to be invited
to attend the first annual lecture organisedby the Asia-Europe Foundation anddelivered by Khun Anand Panyarachun on‘Good Economic Management andGovernance’. Asia’s best known democrat
and a man of the highest personal integrity,
Khun Anand, two-time Prime Minister ofThailand who gave his country what isregarded as the best an anti-corruption
national constitution anywhere in theworld, observed that it had to take afinancial crash to drive home the point thatmany of the Thai institutions were illequipped to operate effectively in the global

economy. He said that in the case of his
own country, the integration into the world
economy was far from smooth. For
example, while the Thais adopted readily
enough Western-style capitalism, this hadcreated an internal contradiction because
they continued to retain their traditional
system of patronage networks, a system
built on personal connections to allocate
values and resources. While maintainingthat personal connections could be
innocent, he warned that when they
became a factor in public affairs, they could
be deadly, because patronage was not basedon merit and tended to breed inefficiency
and corruption.
Khun Anand recognised that good
governance would not bring about some
idyllic utopia. In fact, it could be rather
messy-the chattering masses could be
difficult to satisfy-but he thought this waspreferable to the government taking public
policy decisions in secret or by a small
group of ministers or officials, which in theend would compromise and harm the public
interest. He went on to say: “To avoid suchoccurrences, the decision process must betransparent and open to scrutiny. The
people must be given free access to all
information pertaining to public policies
and projects”. Khun Anand, as you might
have gathered, does not subscribe to the“Father Knows Best” culture. He obviously
believes in the“People Know Best”
principle.
It is only through full disclosure of all
relevant information that the public could
reasonably be expected make informed
judgements and decisions about thematters that affect their lives. Access to
information would translate into greater
freedom of information across the national
spectrum. I see in freedom of informationa real victory for transparency andaccountability, because where timely andaccurate information is readily accessible,

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RESOURCE MATERIAL SERIES No. 56
corruption is deprived of oxygen.
Information that is freely available iscorruption’s worst enemy. Freedom of
information will enable the people to judge
whether the leaders they have elected arelooking after “the interests of the many
over those of the few” to borrow, once again,
the words of James Wolfensohn.
In conclusion, let me just say this: thefight for good governance is not an easy one.
It would be naive in the extreme to suggest
otherwise. It has become a major global
concern because, as Nobel Peace Laureate,
Oscar Arias Sanchez of Costa Rica, reminds
us, “Powerful financial organisations haveglobalised corruption as an accepted toolof business; the fight against corruption
must be globalised as well. If people do not
act to preserve their democracy, if they lackcivic virtue and the commitment of theirgovernment, then democracy will fall preyto the vulture of corruption.” Let us
therefore ensure that our institutions andsystems are strengthened. We must guard
their integrity jealously. Corruption takes
over when we allow our national
institutions and democratic systems to be
subverted by unprincipled politicians
determined to abuse “entrusted power for
private profit”.

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