WORLD> Asia-Pacific
Tough graft battle in Southeast Asia despite campaigns
(Agencies)
Updated: 2008-12-16 20:28

The five-year-old Indonesian Corruption Eradication Commission, has acquired something of a cult status in the world's fourth-most populous nation. Last month, it signed an agreement with the FBI for help with training and investigation.

Fauzi Ichsan, an economist with Standard Chartered Bank in Jakarta, said corruption is no longer seen as one of the main barriers to foreign investment in Indonesia. "The government's anti-corruption campaign has been quite revolutionary," he said.

What concerns foreign investors the most is not the run-of-the-mill bribes that must be paid to get a phone installed or a shipment through customs -- some developed countries even allow companies to take tax deductions for these "facilitation payments" -- but institutionalised corruption.

"While under-the-table payments are a relatively common thing, what multinational companies object to most is crony corruption that gives special privileges to selected groups with government connections, those winning plum government projects," says Varakorn Sarnakoses at Bangkok's Dhurakij Pundit University.

Thailand has been embroiled in three years of political chaos whose proximate cause has been allegations of crony capitalism and corruption in the administration of Thaksin Shinawatra, ousted in a 2006 coup.

Thailand's army-backed 2007 constitution now provides for political parties found guilty of electoral fraud to be dissolved. "The fact that two of our last three prime ministers have lost criminal cases should make politicians wary of being caught on the wrong side of the law," Varakorn said.

Crony corruption and political patronage is deeply embedded in neighbouring Malaysia, largely due to its system of special privileges to uplift majority Malays, especially government contracts that tend to go to well-connected tycoons.

Lame duck Premier Abdullah Ahmed Badawi, who like Yudhoyono was elected in 2004 on a clean government campaign, finally introduced anti-corruption legislation in parliament last week, after his ruling coalition suffered its worst electoral showing since independence from Britain in 1957.

Abdul Jalil Rashid, fund manager for Aberdeen Asset Management Malaysia, calls corruption "a huge barrier" to investment in Malaysia.

"There's also lack of transparency which then leads to the perception that something is going wrong," the manger of a $1.38 billion fund told Reuters. "If you compare Malaysia with other countries, I think it is large-scale here rather than petty".

The Philippine government has been mired in a series of scandals that the Arroyo government has failed to explain to the public. Chief among them was a botched $329 million national broadband project that was scrapped over allegations of bribery and deal-fixing involving the president's husband.