The 1MDB scandal dragged Malaysia down two spots to sixth place in the Corporate Governance (CG) Watch 2016 ranking of 11 Asia-Pacific countries.
Malaysia scored 56 points, behind Singapore (67), Hong Kong (65), Japan (63), Taiwan (60), and Thailand (58), The Edge reported, citing data released by investment banking group CLSA and the Asian Corporate Governance Association (ACGA) yesterday.
The financial daily added that Malaysia’s overall score tanked due to an 11-point fall under the “political and regulatory” pillar, which negated a seven-point climb under enforcement.
“While we upgraded Malaysia this year for enforcement of capital market offences and several favourable regulatory and policy changes, the fallout from the 1MDB crisis has had an adverse effect on the political and regulatory environment for public and corporate governance.
“This has resulted, on balance, in a modest decline in the overall score,” said ACGA specialist consultant Benjamin McCarron in the biennial report.
The ‘political and regulatory’ score drop was reportedly due to “the lack of a clear, consistent and credible government policy on CG; a perception of reduced effectiveness on the part of the central bank in exercising its powers; the depth of media skill and freedom in reporting on CG; the independence of anti-corruption commission; and whether (the) government was making progress in improving standards of public governance.”
The Corporate Governance report is based on a 95-question survey covering five pillars: CG rules and practices; enforcement; political and regulatory environment; accounting and auditing; and CG culture.
ACGA secretary-general Jamie Allen was quoted by The Edge as saying that Malaysia would have done “much better” had there been no 1MDB, and could have scored the same points as Thailand.
“1MDB has affected capital markets’ perception of Malaysia. People are concerned about what’s going on. When public governance standards drop over the medium-to-long term, it does have an impact on (investment) decisions,” Allen said.
Meanwhile McCaron also wrote that while it was a shame to see the fallout from 1MDB crisis in Malaysia, direct financial impact from it appears to have been contained.
The 1MDB saga has had a significant impact on the Malaysian political landscape over the past two years.
Prime Minister Najib Abdul Razak had axed Muhyiddin Yassin as his deputy for criticising the government’s handling of the issue, which led to the rise of Umno offshoot Parti Pribumi Bersatu Malaysia (Bersatu).
It has also seen strange bedfellows in the form of ex-premier Dr Mahathir Mohamad, the opposition, and civil society activists banding together to fight against Najib.
1MDB is currently the subject of a US Department of Justice civil suit, which claims that more than US$3.5 billion had been stolen from the state investment firm.
Najib has denied accusations of misappropriating public funds, saying the allegations were part of a plot to topple him.
Attorney-general Mohamed Apandi Ali has also cleared the prime minister of any criminal misconduct in cases relating to 1MDB.