How the business-political nexus seeks to wrest control of Malaysia’s political system

A major feature of Malaysia’s political system has been the persistent link between politics and business, a phenomenon commonly referred to as money politics or political business.

(Aliran) – This political-business nexus has a multi-dimensional form, with each trait subject to change.

The Center to Combat Corruption and Cronyism (C4 Center) has prepared “Business in Politics: Seeking Control of Malaysia’s Political System“, a report that draws attention to previously unnoted forms of connections between politics and business that merit attention, what we have termed as business-in-politics, with a focus on sitting members of Parliament.

The MPs under review have been mired in controversial corporate-related matters, have off-shore accounts and foreign business interests, or have ‘hopped’ out of the party or coalition under whose ticket they won a seat in Parliament.

Four forms of business in politics have been identified:

1. Politicians who belong to a family business or are closely related to owners of such firms
2. Children of former government leaders who were active in business, but now are MPs
3. People in business entering politics
4. Former executives from the private sector and government-linked companies now in politics.

Group 1: Family business and politics

There is a growing presence of politicians who belong to a major family business or are closely related to owners of such enterprises.

A related issue is that of marriage ties between children of politicians and well-connected business people, suggesting new elite political-business links. The politicians in this group are Larry Sng, Fadillah Yusof, and Robert Lawson, all MPs from Sarawak.

Group 2: Children of former ruling politicians in business and now in politics

The children of former chief ministers and an ex-prime minister who were active in business and are now in politics are Hanifah Taib, daughter of Taib Mahmud, former Sarawak Chief Minister; Yamani Hafez Musa, son of Musa Aman, former Sabah Chief Minister; and Mukhriz Mahathir, son of former Prime Minister Mahathir Mohamad.

The case studies focus on the business activities of Hanifah and Yamani, as the history of Mukhriz’s involvement in the corporate sector is well recorded.

Group 3: Businessmen in politics

This group comprises four politicians of which two, Hamzah Zainudin and Syed Abu Hussin, both originally with Umno, are now in Bersatu. Tiong King Sing is a long-term Sarawak-based MP, while another businessman in politics is Adham Baba of Umno.

Group 4: Private sector executives and government-linked company professionals in politics

This group comprises four politicians, of whom two have moved from one party or coalition.

They are Mohd Redzuan Yusof and Edmund Santhara, both first-time MPs. Santhara left PKR for Bersatu, but is now an independent MP. The other two are William Leong of PKR, who held a senior managerial position in the private sector, and Tengku Zafrul Aziz, the CEO of a major government-linked companu when he was appointed Finance Minister.

Key findings

• This business-in-politics trend, occurring in numerous ways, is a central factor in power struggles. Business people in politics function differently. Different actors, differentially positioned in politics and business, collide or collude with each other, leading to new elite networks and emerging business-politics power blocs whose composition can vary significantly
• A new generation of children of politicians is active in politics and in business through family firms. In family firms, there is a complex mix of politicians, business people and bureaucrats
• In Sarawak, family firms are key players in the state’s political system. A new trend: the second or third generation have sought to create ties with companies in the peninsula
• Private firms co-opting politicians as directors is problematic because:
  • an influential politician on the board is an avenue to secure access to government
  • elected representatives prioritise their own corporate interests over the wellbeing of the electorate
  • directorships are a major source of income, crucial to finance political ascendency.
• The presence in politics of wealthy professionals suggests they bring with them the funds they require to finance their electoral campaigns. Their personal source of funds for political activities ensures their importance as candidates during electoral campaigns
• Government-linked company directorships serve functions differently from those in private firms. Directorships are a form of employment; a method to learn how this business-in-politics system works; and used to develop a political support base. Government-linked company directorships are a key political control method or source of reward, offered in a range of government-controlled institutions
• Government-linked company-private firm ties in Sarawak have occurred in a different manner. A former chief minister’s brother-in-law is a leading bureaucrat, as chairman of a government-linked firm, a nexus that facilitates implementation of land-based business matters
• A serious lack of transparency in the public procurement process allows influential business people access to federal- and state-level public contracts. Ministerial appointments are important to gain access to procurement contracts
• Foreign ownership of firms, as seen in the expose by Pandora Papers, with ministers and deputy ministers named. MPs who can shape tax-related matters have directorships or ownership of companies in tax havens
• These companies have a huge presence in plantations, infrastructure, construction and property development – all land-based sectors. They also have a significant presence in services but not in the manufacturing and industrial sectors.

With these findings in mind, C4 Center has additionally identified furthercore concerns:

• Political strategy: Business-in-politics methods used to obtain access to government. The interests of business people can be embodied in policies: they are privy to information that can enhance their corporate interests, and they have easier access to lucrative concessions
• Shaping policies: How will politicians-cum-business people vote in Parliament on matters that do not serve their business interests? Will they shape budgets to favour their companies? How will they vote on environmental policies if they have an interest in infrastructure and in plantations? How will they approach welfare systems, featuring social benefits for employees, and the minimum wage?
• Abuse of government-linked companies: A family member, who is a bureaucrat, in a government-linked company is vital to obtain access to concessions. Government-linked companies serve as a training ground for politicians to learn how the political-business nexus works. Directorships in these companies are a means to reward or pay off politicians for political support
• Escalating rent-seeking: Selective patronage has contributed to a heightening of corruption. Conflicts of interest occur when business people venture into politics, an expected outcome as the persistent political-business nexus has constantly resulted in corporate controversies and political feuds
• Dysfunctional politics: MPs involved in ‘party hopping’ (defections), between parties and between coalitions, suggests a search for access to power. The setting up of parties and coalitions, as well as the shifting of parties between coalitions, has contributed to the fall of federal and state governments, creating a highly dysfunctional political system. These trends are inextricably linked to growing concerns about how the political system is funded and how the government’s vast government-linked companies ecosystem is being abused, signifying key outcomes of growing business-in-politics trends.

This report underscores the important point about candidate selection by parties. As Malaysia heads towards its general election, party leaders should be aware that since the problem of money in politics is a growing concern, they are duty-bound to nominate candidates who have an unblemished corruption record.

C4 is of the view that politicians who have corruption cases pending in court should not be nominated to run in this general election.

The expansion of the business-political nexus has major implications, with an increasing number of business people in politics and politicians in business. Given this blurring of the lines between business and politics, all candidates must declare their assets and corporate ties. This is fundamental towards ensuring transparency and accountability in the governance and administration of the country when the next government is formed.