Anatomy of Malaysian Corruption: The State Level

In tiny, isolated northern state, sleaze abounds

By Murray Hunter

Although the US$4.6 billion corruption case involving the state-backed sovereign investment fund 1Malaysia Development Bhd and the marathon trial of former Prime Minister Najib Razak are drawing most attention over corruption in Malaysia, the fact is that corruption is rampant throughout the country down to community grassroots.

1MDB is not so much about Najib Razak personally as it is about those who have run government administration over the past decades. With stories now emerging about corruption within the Pakatan government, it is clear that the issue is not exclusive to the United Malays National Organization. Najib, for instance, was abetted and excused by an entire administration well into the past to his performance as defense minister, where millions of dollars were mismanaged or stolen.

But hidden from the public spotlights are the country’s 13 state governments with their respective administrations and agencies, largely unbothered by the under-resourced Malaysian Anti-Corruption Commission, with just 3,000-odd officers and support staff nationally. MACC sources say a three-month list of cases is waiting to be investigated, a timeframe almost certain to slip more. 

Malaysia’s smallest state Perlis, the northernmost peninsular state with a population of around 250,000, is an example. Primarily agricultural-based, it is a logistical entrée into Thailand via road and rail, an education hub, and public sector center. It is one of only two states left with a Barisan Nasional government after the Pakatan Harapan onslaught in the 2018 general election – partly because of heavy vote buying with both cash and gifts by Arau MP and former Perlis chief minister Shahidan Kassim both before and during the campaign. 

Local Perlis people see the extremely wealthy Shahidan Kassim as a type of Robin Hood, stealing and giving to the poor. To many, corruption is not a gross wrong, an indifference that is a major part of the problem.

The position of chief minister is highly coveted. The state’s CEO, the Menteri Besar, as he is known in Malay, has a wide executive ambit with authority over land issues, contracts and licensing and the state budget. Short state parliament sittings and subservient state executive councilors reduce scrutiny. A chief minister’s ability to benefit from his office greatly depends upon how he can override his executive councilors and top civil servants.

This most visible act of corruption is taking commission from petty contractors. The present chief minister Azlan Man, who is said to be under investigation, and the previous two chief ministers Shahidan Kassim and Md Isa Sabu were all said by local civil servants to be involved in taking commissions. A bank officer told Asia Sentinel that Shahidan Kassim had a bank account where all such contractor payments were deposited, with contractors paid from Shahidan’s account rather than the state treasury. No investigation has ever ensued despite frequent reports to the MACC. 

Current chief minister Azlan Man is often seen driving class F contractor’s homes at night, where critics say he collects commissions. He was summoned to the MACC office in Penang late last year and interrogated for three days. To date, no charges have been officially laid. 

Azlan is delaying the deployment of an MACC integrity officer within the chief minister’s office even though a transparency agreement was signed with the MACC last year and a number of state assembly members have requested an officer be situated within the chief minister’s office. 

The Perlis State Economic Development Corporation (PKENPs) is a fully owned subsidiary of the Perlis State Government. The corporation’s objectives are to attract investment to the state and assist in state development. It is involved in many commercial activities including property development, manufacturing, logistics, and hotel management. 

Most of these companies “lose” money in difficult-to-track ways because of their commercial nature. One former director was arrested for abuse of power in the purchase of land a few years ago. Ex-corporation employees told the Asia Sentinel that this is only the tip of the iceberg. 

Numerous Auditor-General reports have accused the development corporation of being extremely lax in property and asset management, particularly land-derived revenue. Last year it defaulted on more than RM80 million. It appears the other state development corporation, MBI Incorporated, directly under the control of the chief minister has not been audited for years. 

Federal development grant projects are usually managed by the state. One such project at the Timoh Tasoh dam in Berseri. The grant was for building a tourist food stall complex for local hawkers on very limited incomes to make a better living. The manager of the project at the time, Kangar Municipal Council (MPK) leased the stalls to cronies who sub-leased them to local hawkers who worked the stalls. Rents were 10 times what they should have been for the hawkers, who could abandoned the complex, which remained empty for years and has now been redeveloped as a hotel and resort. 

The municipal council itself operates without transparency, reporting directly to the chief minister. Insiders say payment procedures are lax, open to abuses that no external organization is able to scrutinize. In one case, former MPK president Baharudin Ahmad was charged with soliciting and receiving a bribe from a contractor of a housing development in Padanag Besar. According to the charges, Baharudin promised the council wouldn’t interfere in exchange for RM60,000 and a Mizuno golf set. 

Universiti Malaysia Perlis (UNIMAP) was founded in 2002 mostly on rental properties from the Perlis State Economic Development Corporation as a temporary campus while the permanent campus was being built at Ulu Puah. According to a retired UNIMAP officer, the leases were above market rental values. Irregularities occurred in the construction of the permanent campus. Payments were made to the major contractor before the agreement was fully negotiated and signed. Construction was shoddy and student facilities like hostels weren’t built. 

The then-Vice Chancellor Kamarudin Hussin entered into a contract with a local developer to build another campus Uniciti Alam at Titi Tinggi to lease back to UNIMAP. Currently he is under investigation for using his position to secure projects and procurement issues related to companies he may have either a direct or indirect interest in. 

At lower levels, university employees have set up companies to supply goods and services to the university. There are also regular payments for procurements the university didn’t receive such as servicing and repairing vehicles. Corruption is not limited to UNIMAP, the director of Perlis Vocational College was arrested and charged with making false procurement quotations. 

Federal agencies are also not beyond reproach. It is an open secret that two illegal casinos are operating in Kuala Sanglang and Puah. Someone is collecting payoffs to keep them open. The public still doesn’t know what role the Royal Malaysian Police played in the Wang Kelian immigrant transit camps, in which an unknown number of illegal migrants appear to have been murdered. The final Royal Commission report has been handed to federal cabinet, but not been made public. 

Recently the MACC showed video footage of customs officials accepting bribes at the Padang Besar-Thailand border. A number of Road Transport Department (JPJ) officers were arrested and charged for receiving bribes from lorry drivers in Perlis. Civil servants have been caught making fraudulent travel and accommodation claims. 

Finally, within the Perlis Religious Department, a concerned official told the Asia Sentinel that mandatory payments by Muslims each year to distribute to the poor, known as Zakat and Fitra, are sometimes misused to fund state Religious Department officials’ trips to the Middle-East for meetings. More alarmingly, these officials are picking up large cash donations from unknown Saudi sources to “promote Wahabism in Perlis.” 

The official said these donations were brought back to Malaysia without customs declarations, bringing up the issue of potential clandestine foreign influence within the state, a threat not only to the independent sovereignty of the state, but Malaysia’s national security as well. 

The Perlis state government is RM408 million in debt. Corruption in the form of fraud, bribery, abuse of power, and improper land and money transactions is widespread. Details of state level corruption are rare, surfacing publicly. The MACC relies on tips offs to make investigation. However, tip offs have decreased over the last few years. This brief case study of Perlis is indicative of what is happening across Malaysia’s 12 other states.