BUILDING A CORPORATE ETHICAL CULTURE

BUILDING A CORPORATE ETHICAL CULTURE

MALAYSIAN TRANSFORMATION PROGRAMMEANTI-CORRUPTION INITIATIVES Introduction To Malaysian GTP and aspiration Corruption Perception Indexes (CPI,GCB,BPI) How and Why Corruption Perception Exist??? Corporate Integrity Pledge (CIP) Integrity Pact (IP)

To achieve the 2020 Vision, Malaysia introduced… Performance Now People First ETP Malaysia’s 10th & 11th Plan

6.6% 5.6% 4.8% 4.5% 4% 3% Act What it says Current figure: 53% Gradual Reduction in Fiscal Deficit… Target 2013 Target 2015 2020 target 2009 2010 2011 2012* 0% / Neutral As percentage of GDP (rebased figures) * forecast **2015 Target as per 10th Malaysia Plan Malaysian National Debt is Governed by Law Under Act 637 of the Loan (Local) Act 1959, and Act 275 of the Government Investment Act 1983: Combined loans raised domestically should not exceed a ceiling of 55% of the nation's GDP. Note: 2012 MoF estimate

COMPETITIVENESS FOCUS To Become A High-Income Nation,We Need: & We Need “Enablers” To Ensure Competitiveness We need “Drivers” to ensure focus on high-impact areas NKEAs 51 Strategic Reform Initiatives 12 National Key Economic Areas

SRI: Competition, Standards & Liberalisation Competition Act Enforced on 1 January 2012 Remove Anti-Competitive Agreements X Remove Abuse Of A Dominant Position

The Government Transformation Programme (GTP) launched to support Malaysia’s transformation into developed & high-income nation 1MALAYSIA People First Performance Now Fighting Corruption Low Income Households 3 2 1 Reducing Crime Urban Public Transport 6 Education Rural Basic Infrastructure 4 5

ASPIRATIONS Reduce corruption through enforcement and compliance Enhance transparency to improve our score in Corruption Perception Index (CPI) Improve public perception on the integrity of the government and civil service CORRUPTION = POWER + DISCRETION – ACCOUNTABILITY – TRANSPARENCY GOVERNMENT PROCUREMENT • Reduce leakage in the funds allocated for national development and operations * Ensure fairness in the award of contracts REGULATORY/ ENFORCEMENT AGENCIES • Regain public confidence in our enforcement agencies * Enhance competitiveness of Malaysia as a place to do business GRAND CORRUPTION • Prevent the abuse of power and public resources by politicians and senior civil servants *Enhance the delivery of justice against corruption Sub NKRA Integrity of Civil Service Legal and regulatory framework Detection, prosecution and punishment

Bottom Up Framework Top Down Framework • Strong commitment and message from our leaders - ‘Zero Tolerance’ for corruption • No political interference in public administration and perverting the course of justice • Allow access to information to promote public scrutiny • Increase awareness of the rights of the people • Provide channel for people to voice out opinions Political Will Freedom of Press • Checks and balances to uphold independence of judiciary, legal and law enforcement institutions • Comprehensive and robust systems and processes to ensure check and balance • Institutionalize culture of excellence and integrity Legal & Institutional Reform Civil Service Reform • Strong voice from People to endorse leaders who drive positive change • Serve as watchdog to ensure governance • Report corrupt practices, and assist investigations • Efficiency and effectiveness of law enforcement agencies • Transparency and accountability in public administrations, politics and the business sector Effective Enforcement Public Participation

Rakyat perceived Grand Corruption, Government Procurement andEnforcement Agency as their Key Concerns Base: All respondents (n=640). Q. Which one of these are you most concerned about? Source: Frost & Sullivan, 2012

Reducing Crime Anti-Corruption Rural Basic Infrastructure Urban Public Transport Low Income Household Education Cost of Living Results have been encouraging! 2010 2011 2012 121% 131% 109% Overall composite scoring

Corruption Building Blocks showing encouraging results Whistleblower Protection 11,665 reports received, 191 Awarded protection 142,268 Integrity Pacts have been signed Whistleblower Protection Integrity Pacts 1,172 corruption offenders Published in MACC website 14 corruption courts Reduces 600 Backlog cases Corruption Offender Database Corruption Courts 441 Companies Signed CIP 6,688 government contracts published online Government Contracts Corporate Integrity Pledge Figures: 2010, 2011, 2012,2013

CORRUPTION PERCEPTIONINDEX (CPI)

What is the Corruption Perceptions Index (CPI)? Transparency International Malaysia The CPI ranks countries/territories based on how corrupt their public sector is perceived to be. It is a composite index, a combination of polls, drawing on corruption-related data collected by a variety of reputable institutions. The CPI reflects the views of observers from around the world, including experts living and working in the countries/territories evaluated.

Is the country/territory with the lowest score the world’s most corrupt nation? Transparency International Malaysia No. The CPI is mostly an assessment of perception of administrative and political corruption. It is not a verdict on the levels of corruption of entire nations or societies or of their policies and activities. Citizens of those countries/territories that score at the lower end of the CPI have shown the same concern about and condemnation of corruption as the public in countries that perform strongly. Further, the country/territory with the lowest score is the one where public sector corruption is perceived to be most prevalent among those included in the list. There are more than 200 sovereign nations in the world, and the 2011 CPI ranks 183 of them. The CPI provides no information about countries/territories that are not included.

2011 - 60th place/ 183 countries Score – 4.3 Constituent Survey - 12 • - 56th place/178 countries Score – 4.4 Constituent Survey - 9

Corruption Improved Transparency International Results 50 49* Malaysia’s CPI Ranking: 2013: 53 2012: 54 2011: 60 2013 * Score under new methodology is 50/100

GLOBAL CORRUPTIONBAROMETER (GCB)

Personal experiences of bribery The survey asked people if they had come into contact with 1 of 9 identified services in Malaysia. For each of these services they were then asked if they had paid a bribe, identify the services where people were most likely to pay a bribe and the % of people paying a bribe for each service is given as a proportion of people who had accessed that service. Those people that did not come into contact with each service were excluded from the analysis. The results by service were then aggregated such that a bribe payers was considered someone who had paid for any one or more of the services in the last 12 months. Only 1.2% of people have paid a bribe to one of 9 service providers in Malaysia.

BRIBE PAYERS INDEX (BPI)

Transparency International Malaysia Survey is about Malaysian traders who paid bribe when doing business abroad. Malaysia is ranked 15th out of 28 countries with a score of 7.6 out of 10 sharing with Hong Kong, Italy and South Africa. However, only 2 questions on corruption was taken into CPI survey whichdragged us down with the percentage of 2.7%. Source: Global Corruption Barometer 2010. Percentages are weighted. Figures are calculated for respondents who paid a bribe to the service providers. Groups were defined using cluster analysis.

WHY CORRUPTION PERCEPTION EXIST? • LACK OF TRANSPARENCY • INCONSISTENT ACTION • BAD OR DELAYED DELIVERY SYSTEM • NOT RESPONSIVE TO COMPLAINTS • LIVING BEYOND MEANS

3 Main Offences • Receiving and giving gratification as reward or inducement for favors. 2. Using documents which contain false material particulars for certain pecuniary advantage. 3. Using office or position for personal interest.

To become A Developed Countrywith High Income Nation, We need to MANAGEthe CORRUPTION PERCEPTION.HOW???

Encourage Transparency AndGood Governance

Inculcate Good ValuesWithin The Organisation

Corporate Integrity Pledge: proposed tools Appendix I - Integrity pledge i • unilaterally entered into • pledge to uphold Anti-Corruption Principles 1 Appendix II - Integrity agreements Anti-Corruption Business Principles ii • bilateral, between parties committing to each other to uphold the Principles • Target contracts relating to national development etc. – e.g. under Economic Transformation Programme • To be endorsed by members of Roundtable • Made available on websites of Bursa and IIM

CORPORATE INTEGRITY PLEDGE (CIP) “a voluntary unilateral declaration – a written commitment by a company that it will not commit corrupt acts, will work toward creating a business environment that is free from corruption and will uphold the anti-corruption principles in the conduct of its business and its interactions with its business partners and the government” 31

THE CORE PRINCIPLES OF CORPORATE INTEGRITY PLEDGE (C.I.P.) Initiative overview 1 To promote principles of transparency, integrity and corporate governance To include anti-corruption elements to strengthen its internal procedures 2 To adhere to the anti-corruption laws 3 To eradicate all forms of corruption 4 To support anti-corruption initiatives by the MACC and the Government 5

Corporate Integrity Pledge: proposed governance mechanism Principles published on Bursa/ SC / CCM/ IIM website Companies that sign on listed on Bursa website Agreements signed and accounted for under GTP/ ETP and published on PEMANDU website

ANTI-CORRUPTION PRINCIPLES FOR CORPORATIONS 1. Committed in promoting values of integrity, transparency and good governance 2. Strengthening internal systems that support corruption prevention 3. Compliance of the laws, policies and procedures 4. Zero tolerance on corrupt practice 5. Support MACC anti-corruption initiatives. 34

ENTERPRISE POLICIES AND GUIDELINES ON : • GIFT RECEIVING • POLITICAL CONTRIBUTIONS • CHARITABLE CONTRIBUTIONS/ SPONSORSHIP • FACILITATION PAYMENTS • GIFTS/HOSPITALITY AND EXPENSES • CONFLICTS OF INTEREST • REFERAL POLICY CORPORATE SOCIAL RESPONSIBILITY (CSR)

RAISING CONCERNS AND SEEKING GUIDANCE • Provide secure and available channels through which employees and others able to raise concerns and whistle-blow (without retribution) (i.e establish an integrity unit) • Provide guidance in respect of the interpretation of the Principles/ Code

Code of Ethics and Code of Conduct is a must

71 companies had signed CIP Among those are:

SIGNEES OF C.I.P. UPLOADED IN CISM PORTAL COMPANIES/BODIES SIGNEES NO MULTI NATIONAL COMPANIES (MNCs) 35 1 GOVERNMENT LINK COMPANIES (GLCs) 47 2 PRIVATE LINK COMPANIES (PLCs) 19 3 59 SMALL MEDIUM ENTERPRISES (SME)/INDUSTIRES 4 4 NON GOVERNMENT ORGANISATION & OTHERS 5 GOVERNMENT BODIES 15 6 TOTAL 179

Ministry of Finance issued Integrity Pact directive on 1st April 2010; guidelines on 16 December 2010 • Official invitation to participate in tender/quotations • Declaration of abstention from bribery – by all parties, at all stages of contracting (including registering as a supplier/ firms) • Formulation of Code of Conduct • Contractual provision to abstain from bribery 1 2 3 4

WHAT IS AN INTEGRITY PACT (IP)? “an agreement between the government, or a government department (the authority, the project owner) and all bidders for a public sector contract” - An IP is both a document (a legal contract) and a process - An IP is an activity of the CIP - Use in public procurement/contracting - To ensure clean bidding, a level playing field 42

Solutions It contains rights and obligations that all parties will not engage in, pay, offer, demand or accept bribes while carrying out the contract Elements of IP Description Pact • A pactbetween a government office inviting public tenders for any type of contracts related to goods and services and thebidders for the contract • Undertaking by the principal that its officials will not demand or accept any bribes, gifts etc., with appropriate disciplinary or criminal sanctions in case of violation • Statement by each bidder that it has not paid, and will not pay, any bribes in order to obtain or retain the contract • Each bidder to disclose all payments made in connection with the contract to anybody (including agents and other middlemen as well as family members etc.) Code of conduct • Bidders are also advised to have a company Code of Conduct (clearly rejecting the use of bribes and other unethical behaviour) and a compliance programme for the implementation of a Code of Conduct throughout the company Sanctions • A pre-announced set of sanctions for any violation by a bidder which may include: • Denial / loss of contract, forfeiture of the bid security and performance bond, liability for damages to the principal and the competing bidders, debarment of the violator by the principal for an appropriate period of time • The use of arbitration as a conflict resolution mechanism and the instance to impose sanctions Independent monitoring system • Use of an independent monitoring body which can be performed by any structure with independence, accountability and credibility Source: Transparency International

IMPLEMENTATION OF INTEGRITY PACT ON MEGA PROJECT • The MRT SBK Line project was proposed for full-scale showcasing of Integrity Pact2 NEXT ACTIONS: • To include arbitration clause in the next project. • To implement IP on privatisation project as well.

Role to Play by Employer :>Reduce Bureaucracy/Red Tape>Simplify Processes >Encourage Reporting on Corrupt Practices or Abuse of Power >Protect Whistle Blower >Know your employee (Be busy body) and take care of their welfare.

Direct interaction between two parties who holds a position and involves discretionary power gives opportunity for corruption. Automation is the best solution to reduce discretion. 246 CCTV installed at 17 entry points involving 12 states

CHALLENGES 1. PUBLIC APATHY AND EMPATHY - LACK SUPPORT 2. PERCEPTION ISSUES 3. DIFFERENCES IN: - CULTURE & TRADITION – eg. gift giving during festive seasons - VALUES of the gifts – nominal, modest, non-commercial - LEGAL PRACTICES – anti-corruption laws, facilitation payments

'NO GIFT POLICY' BY PETRONAS BEST PRACTICES ‘WHISTLE BLOWING POLICY’ BY PKNS

WHISTLEBLOWER PROTECTION ACT 2010 Dec 15, 2010 – Act came into force IMPACT: Whistleblowers will be encouraged to report and will receive: • Protection of confidential information • Immunity from civil/ criminal suits • Protection against detrimental action

Smile Say ‘Thank you’ Respect Others Tolerate UPHOLD INTEGRITY

BUILDING A CORPORATE ETHICAL CULTURE