The news have been out for a while: irrespective of all the official regurgitation of policies to attract FDI the country is a net exporter of capital -now recognised as the 5th largest among 10 Asian countries! So the policies to attract FDI are all insincere and half-hearted. If the local welath holders have confidence in investing their (probably ill-gotten wealth?) within the country-we need not even bend our rules a bit to attract the FDI! Now: who are responsible for exporting wealth from the country? And from Sarawak? A previous report said that the logging revenue was siphoned off by the head of government in Sarawak-can the government investigate its own head?
Malaysia’s illegal capital outflow tripled in last decade
Malaysia has earned a fifth spot among 10 Asian countries that chalk up the highest illicit financial outflows.
A report by Washington-based financial watchdog Global Financial Integrity (GFI) found that Malaysia’s outflows tripled from US$22.2 billion in 2002 to a staggering US$68.2 billion in 2008.
GFI defines illicit financial flows as the transfer of money earned through illegal activities such as corruption, transactions involving contraband goods, criminal activities and efforts to shelter wealth from tax authorities.
The report titled “Illicit Financial Flows from Developing Countries: 2000-2009” further described Malaysia’s massive increase as a “scale seen in few Asian countries” and pinned it on “significant government issues affecting both public and private sectors”.
“The reasons behind this inflation are unknown as it would require an in-depth study of the country, which is beyond our scope,” the report said.
“But it is clear that governance issues have been playing a key role in the cross-border transfer of illicit capital from the country.”
The report also noted that the Malaysian media has hinted at the possibility of government-linked companies like Petronas driving illicit flows.
GFI’s research has attributed these illicit outflows to political instability, rising income inequality and pervasive corruption.
In Malaysia’s case, however, it has included the additional factor of significant discrimination in labour markets, which move people and unrecorded capital out of the country.
“As a result, the volume of illegal capital flight from Malaysia has overtaken that of legitimate capital inflows into the country in recent years,” the report added.
China topped the list of 125 developing countries with an illicit outflow of US$2.18 trillion followed by Russia with US$427 billion.
Other Asian countries with high illegal capital flight are the Philippines (US$109.3 billion), and Indonesia and India (both US$104 billion).
GFI has predicted that illicit flows from developing countries in 2009 will total US$1.30 trillion – a significant slowdown from the 18% rate of growth over 2000-2008.
The projected slowdown is based on a decline in trade mispricing resulting from a slowdown in world trade following the global financial crisis.