Storify Feed Feedburner Facebook Twitter Flickr Youtube

ROS Lboard

Malaysia’s illegal capital outflow tripled in last decade

 | January 21, 2011

Malaysia has earned a fifth spot among 10 Asian countries that chalk up the highest illicit financial outflows.

KUALA LUMPUR: Malaysia has earned itself fifth placing in a list of 10 Asian countries that registered the highest illicit financial outflows in the last decade.

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.


Comments

Readers are required to have a valid Facebook account to comment on this story. We welcome your opinions to allow a healthy debate. We want our readers to be responsible while commenting and to consider how their views could be received by others. Please be polite and do not use swear words or crude or sexual language or defamatory words. FMT also holds the right to remove comments that violate the letter or spirit of the general commenting rules.

The views expressed in the contents are those of our users and do not necessarily reflect the views of FMT.

Comments