The breadth of Goldman Sachs’ corruption in the recent DOJ and SEC FCPA enforcement action underscored the important global goal of reducing corruption.  It goes without saying – corruption has a pernicious impact on economic development of fragile economies to the detriment of thousands, if not millions, of innocent civilians.  The measurement of such harms is often cited to describe the scope of suffering for many in the developing world.

Political and economic corruption warps government allocation of limited resources for the benefit of the public.  Companies that are otherwise unqualified may secure valuable government contracts by paying bribes.  Private businesses lose valuable investment and economic opportunities as corruption skews or frustrates the operation of market forces to promote economic development.  In the end, all of these forces combine to undermine important government institutions, resulting in an overall lower standard of living. 

The World Bank estimates that the average income in countries with a high level of corruption is approximately one-third of low corruption countries.  The infant mortality rate in such countries is about three times higher and literacy rate is 25 percent lower.

Corrupt countries and economies experience lower levels of foreign investment than low corruption countries.  Investors are reluctant to invest in high-risk corrupt countries.

Many emerging economies suffer from corruption and slow economic development.  The impact of corruption results in an inefficient allocation of resources, frustration of market forces, and poor education and healthcare.

Malaysia and the Goldman Sachs Bribery Scandal

The Malaysian economy has been growing over the last decade.  Since 2010, Malaysian economic growth has averaged 5.4 percent.  Malaysia is in the midst of transforming from an agricultural and commodity-based economy to manufacturing and service-based economy.  Malaysia is now a leading exporter of electrical appliances, electronic parts and components.

Income inequality, however, remains a significant problem.  The bottom 40 percent of Malaysian citizens have not benefited at the same rate as the top 60 percent of the population.  Malaysia is focused on promoting education, health and nutrition to increase worker health and productivity.

Corruption in Malaysia

Corruption has become a significant concern in Malaysia, primarily in response to the conviction of the first Malaysian leader for corruption in relation to the Goldman Sachs scandal. 

Former Prime Minister Najib Razak was convicted of looting the 1MDB sovereign wealth fund while in office from 2009 to 2018.  In response to his conviction, the Malaysian people rejected both Mr. Najib and his ruling party, which had governed Malaysia for 61 years since gaining independence from Great Britain.

At the center of this corruption was Goldman Sachs.  The scheme was executed by former Goldman Sachs executives and Malaysian and Abu Dhabi government officials who stole over $6.5 billion in capital from the 1MDB fund.

Since 2018, Malaysia has embraced economic reforms for clean government.  In 2019, Malaysia earned its highest rating under the Corruption Perception Index, a 53 score.  Malaysia created an anti-corruption agency and set a five-year goal to increase integrity in the government.  Nearly 1500 people have been charged with corruption offenses