Malaysia is world’s No 5 in illicit outflows

Jan 20, 11

Malaysia is among the countries which registered the highest illicit financial outflows over a period of nine years in the last decade.

According to a ground-breaking report by Washington-based financial watchdog Global Financial Integrity (GFI), money flows out of Malaysia have more than tripled from 2000 to 2008.

The outflow from Malaysia in 2000 was RM67.7 billion (US$22.2 billion). Eight years later, this has ballooned to RM208 billion ($68.2 billion).

The report warned that the sharp increase of capital flight in Malaysia is “at a scale seen in few Asian countries”.

It said that it was difficult to point out the reasons behind this massive outflow of illicit capital – estimated at RM889 billion (US$291 billion) between 2000 and 2008 – without carrying out an in-depth study of Malaysia, which is outside the scope of the report.

“It is clear however that significant governance issues affecting both the public and private sectors have been playing a key role in the cross-border transfer of illicit capital from the country.

“For instance, there are reports in the Malaysian media that large state-owned enterprises such as Petronas could probably be driving illicit flows.”

The financial watchdog said that its research has indicated that political instability, rising income inequality and pervasive corruption are some of the structural and governance issues that could be driving illicit capital from many developing countries.

“In the case of Malaysia, the additional factor could well be the significant discrimination in labour markets which move people and unrecorded capital out of the country.

“As a result of some of these factors, the volume of illegal capital flight from Malaysia has come to dwarf legitimate capital inflows into the country in recent years.”

The GFI report, ‘Illicit Financial Flows from Developing Countries’, is penned by GFI economists Karly Curcio and Dev Kar, who is a former senior economist at the International Monetary Fund.

China tops the chart

China tops the chart among the world’s exporters of illicit capital with a whopping US$2.8 trillion of outflows, followed by Russia (US$427 billion), Mexico (US$416 billion), Saudi Arabia (US$302 billion) and Malaysia (US$291 billion).

Other Asian countries with high illegal capital flight are Philippines ($109 billion), Indonesia ($104 billion) and India ($104 billion).

GFI has identified deliberate trade mispricing – which allows companies to avoid paying taxes – as the major source of the illicit outflows.

“Trade mispricing was found to account for an average of 54.7 percent of cumulative illicit flows from developing countries over the period 2000-2008 and is the major channel for the transfer of illicit capital from China.”

However, bribery and theft are also major reasons for the outflows in many countries.

“Bribery, theft, kickbacks and tax evasion were the greatest conduit for the illicit financial flows from the major exporters of oil such as Kuwait, Nigeria, Qatar, Russia, Saudi Arabia, the United Arab Emirates, and Venezuela.”

The report found that about US$1 trillion flows out from developing countries to rich countries each year – a situation which resulted in many of these countries remaining perpetually poor.

GFI offers a silver bullet solution to stem the illicit financial outflows from developing countries – greater transparency.

“Increasing transparency in the global financial system is critical to reducing the outflow of illicit money from developing countries.”

  1. #1 by boh-liao on Friday, 21 January 2011 - 7:52 pm

    Wiki, wiki, where r U, we want Wikileaks 2 show us documents of $$$$ out of M’sia
    Should b interesting revelations

  2. #2 by YYC on Friday, 21 January 2011 - 8:10 pm

    Wikileaks has no guts to expose underworlds’ activities because the moment they post the things online they are dead.

  3. #3 by raven77 on Friday, 21 January 2011 - 8:44 pm

    Tell us something we dont know…

  4. #4 by Godfather on Friday, 21 January 2011 - 9:04 pm

    Wow ! We are ranked in the Top 5 ! This is a major achievement by the Najib administration. How about declaring Monday a public holiday ?

  5. #5 by HJ Angus on Friday, 21 January 2011 - 9:44 pm

    Your reCaptcha is getting impossible!
    May I suggest another control?

    If Malaysia used a similar control, I am sure the illicit funds will be drastically reduced.

    //sysadmin – We are aware that reCaptcha is a little more difficult to read over the last few months. However the increase of level of difficulty has resulted with the near elimination of spam in the last 4 months.

    The benefits of this is that when legitimate comments are marked as spam, now it can be cleared easily.

    The reCaptcha have a build in function to change the text image to one that suits you. This can be achieve by clicking the icon showing 2 arrows in circular fashion. Please refer to the image here :[email protected]/5376892357/

    We welcome suggestions to other system. But reCaptcha is working exceptionally well for the past 4 months.//

  6. #6 by tak tahan on Friday, 21 January 2011 - 9:53 pm

    I am getting prouder everyday since we always top the top list among competitiveness,efficiency,and talent survey.When are we going to get one really good of the good news about our real achievement so far?

  7. #7 by tak tahan on Friday, 21 January 2011 - 9:57 pm

    The worst is surely the most frightening bankruptcy in 2019 if we still can prolong to that mentioned year itself.

  8. #8 by tak tahan on Friday, 21 January 2011 - 9:59 pm

    typo er…
    should be if we still can manage to prolong..

  9. #9 by Loh on Friday, 21 January 2011 - 10:34 pm

    We are told now that RM 889 billion have flow out from the country from 2000 to 2008, and perhaps half that amount between 1981 and 2000 when oil price was lower. So the oil revenue over the past decades has in fact gone into a few pockets and they are now overseas. That money alone could have bought 50% of equity shares in Malaysia, and the owners of these are mainly Malays, however they are defined.

    The RM 1000 billion now overseas would have increased Bumi ownership of equity in the country twice over the NEP target of 30% had the wealth been used to invest locally. Yet the government still insist on using its outdated statistic compiled as if funds owned by Malays would remain entirely in the country. As the country does not restrict Malays sending the funds for overseas investment, it is incorrect to compute only Malays ownership of equity in the country to conclude that they have not attained the level of ownership at 30% of total share capital in the country. That Malays have achieved more than 30% of the equity in the country even without taking into consideration Malays’ wealth parked overseas is a fact. Najib chose to ignore it simply because he could bully non-Malays as he pleases. The fact that Malays also owned such huge financial assets overseas should confirm that the basis of the equity share computation to achieve the stated target is outdated. Now that Malays owned huge assets overseas unlike in the 1960s, Malays ownership in local share market now understates their true economic strength. The government should compute such wealth and clearly it should declare that NEP target of the infamous 30% has been achieved.

    NEP provides the powers-that-be the excuse for operating legalized corruption, and the owners of the wealth through corrupt means found it safer to keep their money overseas. So the funds which ought to have been invested locally, though collected illicitly, would have increased per capita GDP in the country. NEP not only sends trained non-Malays on emigration, NEP makes rich Malays send their wealth overseas, and at the same time NEP is an obstacle to foreign direct investment. Mamakthir said that there is no need for foreign investors; he must have records of people taking their money out. But those who have money overseas are not stupid as Mamakthir wishes them to be, to repatriate their funds. NEP supported by the Malay over the past four decades serves to make a few Malays very rich. But their money is not invested in Malaysia. UMNOputras surely knew about this all along, but then it gives them the excuse that the 30% target had not been achieved, and also those sitting in power may also be the owners of overseas wealth.

  10. #10 by yhsiew on Friday, 21 January 2011 - 10:39 pm

    Although the report did not give details during which year illicit outflows from Malaysia began to balloon, I guess this happened after Tsunami 308 because errant politicians were awakened that it is unsafe to keep their ill-gotten wealth in Malaysia as there is no guarantee that BN will remain in power forever. Should there be a change of government, they will be arrested and required to surrender all their ill-gotten wealth.

    By moving their ill-gotten wealth to another country, they will just leave for that country, in the event there is a change of government, to enjoy their wealth .

  11. #11 by yhsiew on Friday, 21 January 2011 - 10:51 pm

    I think just months before GE13, the outflow of illicit funds will surge to another new height from RM208 billion because errant politicians are worried that there is a change of government and they are required to surrender their ill-gotten wealth.

  12. #12 by yhsiew on Friday, 21 January 2011 - 11:22 pm

    Some years ago one of our politicians was involved in carrying millions of ringgit in cash through an immigration checkpoint at an Australian airport. I believe that was a case connected with illicit fund transfer as even a Form 5 school boy knew it was not the right way to carry a huge sum of money by cash.

  13. #13 by HJ Angus on Friday, 21 January 2011 - 11:27 pm

    that is why we must oppose NEP and put in place new policies that empower the poor and those really unable to fend for themselves like the seriously sick.
    All others should be required to put in a honest day’s work.
    We should also make an election issue of illicit monies and pledge that the new government will pay rewards for those informers overseas like 10% of the monies recovered from foreign banks.

  14. #14 by sheriff singh on Friday, 21 January 2011 - 11:50 pm

    RM 889 BILLION (USD 291 BILLION) flowed out. This is alot of mooola.

    But where did the monies come from in the first place for it to be able to flow out?

    How come it is sooooooo eaasy for money to flow out?

    Man, this reCaptcha is driving me crazy. Is that word mozilla, vanilla, godzilla, manila, flotilla or alhamdulilla?

    Our Central Bank’s control systems must be very, very loose.

    Did that shortie Tun Billionaire and his cronies have anything to do with this?

  15. #15 by sheriff singh on Friday, 21 January 2011 - 11:55 pm

    Now it sekrew me up.

    I am getting alot of foreign and strange words.

    What is somerra magut?

  16. #16 by sheriff singh on Friday, 21 January 2011 - 11:57 pm

    And your time is totally wrong too. Are you on borrowed time?

    Itticus erlitzx?

  17. #17 by tak tahan on Saturday, 22 January 2011 - 12:00 am

    889,000,000 divided by 28,000,000 population is each with worth of wealth equivalent to 31.75 millions/per person.Najis my chin chia,wa lang ka ki lang ah.Lu bo thah the history LKS posted here.Come on man,spare some man..ka ki lang man..You help me,i help you also..Gua orang pasti pangkah dacing,banyak goodies untuk share share.

  18. #18 by Taxidriver on Saturday, 22 January 2011 - 12:17 am

    Najib to tak tahan: Gua bo bat lu. Lu tor lu gua tor gua.

  19. #19 by HJ Angus on Saturday, 22 January 2011 - 12:30 am

    what is truly astonishing is that BN MPs are keeping as quiet as church mice over all the disappearing moola….

  20. #20 by boh-liao on Saturday, 22 January 2011 - 12:37 am

    More RM will flow out of 1M’sia when UmnoB/BN realise dat they hv lost 2 PR

  21. #21 by Taxidriver on Saturday, 22 January 2011 - 1:57 am

    We are waiting for that loud mouth ex-PM for 22 years to say something.

  22. #22 by tak tahan on Saturday, 22 January 2011 - 2:29 am

    I rich,you no rich,shoo..shoo..tiam..tiam..I hampalang can kautim.I hampalang semua kasi jadi melayuness and i ciak bek liau.Chiak chiak khi go kok pang..sai..oops.pang lui.

  23. #23 by boh-liao on Saturday, 22 January 2011 - 3:04 am

    D former 1st Lady of Tunisia fled d country with 1.5 tonnes in gold worth >£35 million
    She is a bosom friend of our lady PM who invited her 2 attend d First Ladies’ Summit here last year, beautifully themed “A Child Today, A Leader Tomorrow” (smoke screen)
    Dis bunch of pseudo 1st ladies professed 2 b concerned abt children n human rights, while gathering unmentionable piles of skeletons n $$$$ in their cupboards
    Our lady PM must hv learnt fr Leila how 2 amass wealth haram n store it overseas

  24. #24 by tunglang on Saturday, 22 January 2011 - 8:47 am

    Estimated at RM889 billion (US$291 billion) between 2000 and 2008:
    Let us wonder how much is Blood, Sweat & Tears money of the Rakyat and national coffers.

    Actually the ‘trend’ of illicit outflows began much, much earlier from the time of MakHamMakteer era of 20% upfront of illicit ‘deposit’ for tender and direct award projects.
    God knows every cent accountable. Just wait for the Judgement Day and see the Who’s Who of Illicit Outflows from BolehLand.

  25. #25 by Thor on Saturday, 22 January 2011 - 9:37 am

    Now you can see the reason why Nutjib and his gang of merry men pooh pooh Pakatan’s 100 days reform plans.
    Tons and Tons of our country’s cash flowing out every now and then and it seems to me that these goons are taking every precaution knowing that the end is near for them.
    Pakatan should be well prepared to note down all these crooks so as to track and haul them back once they gain power.

  26. #26 by sotong on Saturday, 22 January 2011 - 10:03 am

    This the direct consequence of decades of bad leadership and gross mismanagement of the country.

    During the 1997 Financial Crisis, IMF’s assistance would have prevent this enormous problem….it’s too late.

  27. #27 by Ray on Saturday, 22 January 2011 - 10:21 am

    This is the evil work of Umno… Too Many hidden fanthom voters and undemocratic deeds ..
    No wonder Umno damn so desperate spending big project ,built low cost housings,to distract rakyat by their decietful sinful deeds and spend big money to buy votes hencefore to retain their putraja power …and pretend to prosper a tiny crony of business associates to generate free money giving out donation for each voter who voted them back in power.

  28. #28 by dagen on Saturday, 22 January 2011 - 10:24 am

    Foreign investors are shunning our shores. Our own monies, legal and illegal ones, are leaving our shores by the hundreds of billions. And even our brains are taking off in worrying numbers. Retailers could not find customers in sufficient numbers. Businesses could not find suitably qualified/competent staffs. Manufacturers could not get production workers in sufficient numbers. Contractors could not find site engineers and excavator drivers.

    Oh but we have human smugglers, drug traffickers, money launderers, thieves, robbers, murderers, self-stranglers, never-finish-gobermen-project-ers, overpricing-ers and umnoputras.

    So I guess we will be ok.

    Ask cintanegara. Its all in the Prinsip2 Ekonomi Pokok Rambutan.

  29. #29 by monsterball on Saturday, 22 January 2011 - 10:45 am

    Tiny Malaysia is world No5 in illicit outflow.
    Investors shunt investing in Malaysia…..which means the illicit outflow of funds cannot be profits earned by foreign investors….as investments into Malaysia is one of the worst amongst developed countries.
    We can conclude…..illicit outflow of money is largely due to funds that cannot see daylight in Malaysia…..illegally earned.
    Who can earn by the billion illegally and transfer funds out…escaping the eyes of the various lawful Depts.. and Bank Negara?
    Since we can also safely say…..both eyes are closed…only UMNO B can make that happen.

  30. #30 by tak tahan on Saturday, 22 January 2011 - 10:46 am

    Foreign investors,do not ever cross your mind to invest here cause your money will be looted in the daylight right,right under you nose.Robbery here is so rampant and all the goons here have impunity to take everything for granted right from PM offices till MACC dog and PDRM goons.We are also very very caution now a days even worry till sick about our EPF savings.Invest la In China.Ya lastly soon our land will be bare land except litter with few rambutan trees here and there.And those fruits are not to be shared,mind you.

  31. #31 by yhsiew on Saturday, 22 January 2011 - 12:10 pm

    With so much illegal monies being transferred out of the country, why do UMNO elite claim that the NEP still has not achieved its aim and make the Chinese a scapegoat for the NEP failure?

  32. #32 by dagen on Saturday, 22 January 2011 - 12:21 pm

    We just neither be rich nor comfortable with umno. But we can be poor and happy sans umno.

  33. #33 by baochingtian on Saturday, 22 January 2011 - 12:25 pm

    May be Dr Zeti the governor of BNegara could comment one or words here to give us an insight of the currency outflow….

  34. #34 by Godfather on Saturday, 22 January 2011 - 1:04 pm

    Beh Tahan #17:

    889 billion has NINE (9) zeros after the first three digits.

  35. #35 by Godfather on Saturday, 22 January 2011 - 1:12 pm

    The prime minister, Najib Tun Razak, today defended Governor Zeti of Bank Negara following reports that Malaysia is in the top 5 of illicit flows of money out of the country, putting it in the same league as Philippines, Indonesia and Russia.

    “Governor Zeti has done a great job. Without her diligence, the illicit outflow would have been substantially larger” said the prime minister. When asked how he knew that the illicit outflow would have been larger, the prime minister merely smiled, and said that as prime minister, he has full access to information.

    “To be mentioned in the same breath as China is already a major achievement” he added. “Nobody in China has asked for the resignation of the Chinese government, so the question of whether my administration should be held accountable for the illicit outflow of funds does not arise.”

    Najib also added that he is setting up a task force within the PM’s office to seek to tap into this vast source of funds. “My Talent Corp is working overtime to find professionals who can work with the underground sources.”

    Quoted from The Rambutan Post Jan 22, 2011

  36. #36 by dagen on Saturday, 22 January 2011 - 2:32 pm

    OMG, did jib actually say: “Governor Zeti has done a great job. Without her diligence, the illicit outflow would have been substantially larger.”? (see Godfather #34)

    Isnt that an acknowledgement by jib that illegal transactions and activities in the country actually are worth substantially more than the amount that has flowed out? And and jib was not shocked by the report? He is not surprised? Not taken aback? Not dissapointed? Not at all sad that it has happened?

    Wow. It only takes 5billion to arm jib with tower-power. Imagine. We could very well pave every available inch of kl city centre with jib’s tower-power if all those money did not flow out. Or we could cover the whole country with rambutan trees.

  37. #37 by tak tahan on Saturday, 22 January 2011 - 3:24 pm

    Surprisingly jihadist honcho,ibrahim never make noise on this.I suggest he instruct his goons to fly back the illicit RM889 billions and he take 60 and we take 40 only.O.K.

  38. #38 by Loh on Saturday, 22 January 2011 - 9:12 pm

    The target of Malays owing 30% of equity share capital in the country is no longer relevant to the decision for NEP to continue. It is because the percentage share in Malaysia corporate share capital no longer represents the economic position of Malays because the government have not and does not ensure that Malays who were alloted share capital to achieve the NEP target hold them within the Malay community, like Malay reserve land. As it was RM 50 billion worth of shares at par value which were alloted to Malays had been divested; some ending in overseas market. When Malays chose to park their money overseas, how can the non-Malays be responsible when Malays’ share in equity capital do not show the results that satisfies the government? In fact it has been proven that despite the leakage of Malays funds going overseas the target of 30% had long been achieved, way back in 1990, at the expiry of the 20-year plan for NEP.

    The government should no longer use Malays’ ownership in equity share capital in Malaysia as a basis to argue that they are economically weak. Malays money is making waves overseas. It is proven now that NEP has been utilized by the powers-that-be to enrich filthily whoever the powers-that-be chosen. NEP is a curse to Malaysia.

  39. #39 by yhsiew on Saturday, 22 January 2011 - 9:41 pm

    PR was right when it claimed that if leakages (corruption and illicit outflows) were stopped, there would be enough funds to support the 100-day reform program.

  40. #40 by baochingtian on Saturday, 22 January 2011 - 11:19 pm

    #35 When cornered, this UHM-IHU (u help me I help u) desperado will always say he has abundabce of info, pretending he knows a lot of things. This is a defensive behaviour for someone who is actually weak in the topic discussed, but the desperado thought this is the intellectual way of speaking; haha, ss!

  41. #41 by monsterball on Saturday, 22 January 2011 - 11:21 pm

    Malaysia have earned many first in the world stage….first and foremost was kangaroo court case revived and performed… to make sure the whole world will forget Malaysia.
    We are talking about the best trained monkeys and donkeys….lost in the woods….performing.

  42. #42 by tak tahan on Saturday, 22 January 2011 - 11:37 pm

    Talking about Malaysia,everything also can be first from the last.What else we cannot?Got cure or not for this bolehland to wake up and party again in orgy.Oops..i mean everybody like brothers and sisters mixing around without being schizophrenia.Vote umno out and the continious no-end sad story will be heard.That’s for real..real sure.Johorean bloggers,please make sure our message is clear out there.

  43. #43 by tak tahan on Saturday, 22 January 2011 - 11:52 pm

    I meant there in #42..that the continuous no-end sad story would end there and then onwards.

  44. #44 by Cinapek on Sunday, 23 January 2011 - 12:58 am

    It is bad enough to have such a huge sum of money to have left our country.

    It is even worse when we are a comparatively smaller country to those ranked above us. Countries such as China and Russia have huge economies and could well afford such exodus of funds.

    And most of the funds leaving these countries are probably used for a good cause such as oversea investments whereas we all know that the majority of funds leaving Malaysia are due to corruption and other sinister reasons.

  45. #45 by ablastine on Sunday, 23 January 2011 - 10:23 am

    No, I do not think that all of these funds are just corruption money. A lot of these are borrowed money from banks supposedly use for grand mega projectes which will take many years of the rakyat’s sweat and blood to pay back. From this you can infer that the UMNO government is not only just robbing the people but their future and descendants as well. They would have figured that the easiest way to gets lots of money is to have the government guarantee all sorts of development loans and when all the money from these loans goes into their pocket and when the government changes to perhaps under Pakatan, they would have gotten their free money and Pakatan will be left holding the hot babies with years of debts to repay in a country which is already made bankrupt. Why are the MCA and MIC keeping their mouth shut when they know jolly well that their respective communities’ rights have been trampled on to non existence? What do they have to fear of NGO like Perkosa when they are supported by more than 40% of the population of the people in the minority groups. Simple reason. They implicitly agree to be traitors so that they can hold position of power in the country and join in the plunder of the nation for as long as the gravy train runs. Just look at how rich all the top MIC and MCA politicians with their families and relatives have become over time. What happened to the billions they borrowed using various names to run projects all over the country? How many succeeded? I do not believe these projects did fail because of poor business or poor management. When the whole idea of running a business is to extract or siphon borrowed money to ones account they can only be one outcome – insolvency. They are doing it on a small scale for more junior members of BN. The more senior ones do it at the national level. I dare the Ministers, MCA and MIC senior members and UMNO warlords to declare theirs and their proxy real assets in the country and overseas. I have a feeling the richest man in the world may not be Warren Buffet or Bill Gates or Sultan of Brunei but more likely one of these shadowy character like Daim and the Mamak who has more than 50 years to siphon the national treasuries and Petronas ATM into their own and family account. Even Wikileak will not be able to expose completely their holdings because they would have been smart enough to have it placed everywhere .. untraceable.

    So while they are emptying the country’s treasures with the compliance of the national leaders and national bank and as our EPF, our Petronas money becomes their weekend pocket money in some overseas banks, our nation drift quickly into a fail State. Our future generations will have to sell they bodies and souls to remain alive as Malaysia will be a raped to near death. That happens when the ringgit devalue drastically.

    Even with all this crystal clear to the majority of us here, there still remain a large population out there who still continue to vote these BN robbers in. I sometimes feel perhaps they and their descendents do deserve what is to come.

  46. #46 by monsterball on Sunday, 23 January 2011 - 8:13 pm

    Tonight..Lee Chong Wei created a first and recorded in the Guinness Book of Records.
    Good first and make Malaysians proud are always created by Malaysians….never by our sickening corrupted Government.
    All the bad first…they are the culprits.

  47. #47 by monsterball on Monday, 24 January 2011 - 8:14 am

    Yes funds flowing out have so many reasons and “ablastine” is right too.
    But all boils down to the government have a hand in all these things happening in Malaysia.
    So many sons of the big time political crooks can borrow hundreds of millions with no collateral to speculate and gamble. Win they pocket the money and return the borrowings…all legal.
    Read and study how present Indonesian government exposed big fishes in illicit money matters.
    Until big fishes are exposed…you can never get the real truth.
    And the big fishes are all in UMNO B.
    That’s how smart UMNO B bringing Malaysians on a world roller coaster tour..making sure all are groggy and confused.
    But Malaysians are now smarter than UMNO B thinks that we are all stupid…like the ones they fed with small money to be goody goody and satisfied.

  48. #48 by Not spoon fed on Monday, 24 January 2011 - 2:36 pm

    It is time to uproot the old tree (Barisan Nasional) which bears no good fruits for the past 50 years. This illicit outflow shows hidden corruption. Just like previous transport minister, Ling Liong Sicked. There are certainly more big fishes which are freely swimming now who made rich during Mathathir’s 20+ years of rulings due to numerous mega projects. Since 1957, NO state and federal government of Basisan Nasional has ever received a praise from Transparency International. Penang state government is the only state received this praise in 2009: ( attached page 272: download [page 247-304])

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