In spite of protestations by governments to the contrary, the Asian economic crisis is far from over. What the ongoing situation has clearly demonstrated is that if the region is to avoid a repeat of the devastating turmoil experienced in the closing years of the century just ended, Asian political and economic leaders must focus their undivided attention on, and apply their energies towards, reforming their political, economic and social institutions, and at the same time seek ways of changing public behaviour and attitude towards business ethics.

The failure of many crucially important organs or institutions of government, weakened as the result of decades of chipping away at the very foundation of the democratic mechanisms of checks and balances, was instrumental, in large measure, in wiping the tigers and dragons of Asia off the world economic radar screen in 1997. Three years on, the screen is still not looking too good.

Crony capitalism

We cannot even begin to discuss the role of the private sector in the fight against unethical public behaviour or, not to put too fine a point on it, corruption, without examining the part governments play in shaping the environment in which business is conducted.

It is now widely recognised that the Asian economic crisis had, in a sense, less to do with economics and more with politics. No less a person than Lee Kuan Yew of Singapore, the world's leading proponent of "Asian Values" came to that conclusion when in October 1997 he addressed leading American businessmen at the Fortune 500 Forum.

There is, of course, a great deal of truth in this observation because at the end of the day, it is governments that set the moral and ethical tone, just as it is they who were wholly responsible for developing the incestuous relationships with certain favoured corporate sector entities that helped spawn crony capitalism in our region of the world.

In spite of the cracks that were clear for all to see, the haste with which development institutions such as the World Bank, the ADB and the IMF waded in to give their stamp of approval to the high growth Asian economies, holding them up as models of economic and financial management worth copying was, to say the least, unseemly and quite indecent.

To begin with, these economies were hardly models of probity and rectitude in either the way they practised their political craft or, worse, in the manner in which they calculated the long-term impact of their brand of business ethics on the economic future of their countries. It was highly improbable that these economies could be sustained without transparency and accountability. Neither the IMF nor the World Bank was about to spoil a good party and stop the merry-go-round.

Business integrity

Given that political will is critical to the whole process of developing globally accepted standards of business integrity, its absence can only mean one thing. Corruption is tolerated as an indispensable part of our business culture. Just another example of the growing tolerance for unethical public behaviour, much in evidence in many parts of Asia today.

The disregard for ethical business and political standards precipitated the economic turmoil that swept across Thailand, Indonesia, South Korea and Malaysia. It impoverished, in its wake, millions of innocent people whose only fault was that they had the misfortune to live under political leadership that had completely ignored the time-honoured obligation to protect the weak and advance, as James Wolfensohn of the World Bank once said, " the interests of the many over those of the few."

Let me add quickly that I am far from suggesting that corruption was the sole cause of the Asian crisis; that would be too simplistic an approach. There is no doubt, however, that corruption in all its manifestations contributed significantly to the collapse of the Asian "tiger economies."

The corporate sector was very much part of the problem. It was opportunistic and manipulated the often inadequately enforced laws and regulations to create a business environment that encouraged practices bordering on the criminal. The absence of effective compliance standards did not help matters.

The curse of Asian business?

Former Thai Prime Minister, Anand Panyarachun, the man who gave Thailand the world's first ever anti-corruption national constitution is particularly concerned about the role connections play in the Asian business equation. He says that while the Thais have adopted readily enough Western-style capitalism, this has created an internal contradiction because they have continued to retain their system of patronage networks, a system built on connections to allocate values and resources. He feels that while personal connections can be innocent, they can become deadly because patronage is not based on merit, and, therefore, tends to breed inefficiency and corruption.

The private sector must accept the need for reform in order to bring about greater transparency and accountability in both domestic as well as international business transactions. It must develop a sustainable business climate by making it possible to conduct business ethically without resorting to corruption. It must put its house in order, for example, by developing and adopting an enforceable code of business ethics, specifically prohibiting bribery and corruption..

The business community must realise that corporate life is not just about managing risks, making sound investment decisions, and coping with economic imponderables. More to the point, it is about what it can do as a group to bring about the sort of change that will create a new ethical, and level, playing field on which business can take place fairly and transparently. What all this means in effect is closing windows of opportunity for corruption, including cronyism by institutionalising the system of checks and balances.

It is enormously encouraging to see that Asia is in the frenzy of reforming the corporate sector. What is significant about all this is the fact that it is largely self-motivated and driven, and that being the case, there is every expectation that it will be sustained. Asia is badly in need of these various measures to curb corrupt business practices as well as generate investor confidence.

Good corporate governance

In the case of the Malaysian corporate sector, the issues of good corporate governance, incorporating "best practices" are addressed in the 'Report on Corporate Governance' released in March last year. It covers, in essence, the need to strike a proper balance in satisfying the competing demands of business, namely:

- the company's basic objectives, - shareholder expectations, - stewardship and trusteeship as a basis for ensuring the interests of other participants in the affairs of the company are served and protected.

The report looks at good governance, and rightly so, more as a process than a structure, and makes it absolutely clear with whom the primary responsibility lies. It is the board's. The composition and quality of its members individually and collectively are matters of the greatest importance. The role of effective and truly independent directors particularly on the audit committee in ensuring compliance with "best practices" cannot be over-emphasised.

Among the report's main recommendations are:

1) At least one-third of the board should comprise persons who are independent of the controlling shareholders.

2) Board representation should reflect the interests of all shareholders, including minority shareholders.

3) The board must disclose the procedures used in nominating candidates for election to the board.

4) An independent Institutional Shareholder Watchdog Committee be established to monitor and act in cases of abuse against minority shareholders.

Securities' watchdog

The good old days of unfettered excesses look set to change for the better with the coming into force of the new measures. The revamping of the Securities Commission with wider powers to deal with insider trading and to address such key regulatory principles as investor protection and market integrity will go a long way in ensuring better corporate behaviour. Recent successful prosecutions of 'big names' have driven home an important point that it is not only a period of imprisonment on which to concentrate the mind, but also the blighted, irreparable damage of the reputation of the company to contend with.

All of this notwithstanding, shareholders have an important role to play in the fight against corruption and nepotism. They must be prepared to take a serious interest in their rights and responsibilities. Although the primary responsibility for ensuring compliance with "best practices" remains with the board, shareholders have every right to require the board of directors to subject all of their actions to public scrutiny.

A company's annual general meeting is the best occasion for shareholders to raise governance issues and to satisfy themselves that accounting and disclosure standards as well as other approved procedures are complied with. Shareholders attending their company AGM for a free lunch are hardly likely to develop an appetite or stomach for fighting corruption in the companies in which they invest their money. A real pity. There is so much at stake that is worth fighting for - transparency, accountability, and above all integrity as a way of life.

TUNKU ABDUL AZIZ is president of Transparency International Malaysia, an anti-corruption NGO. He delivered the above paper at the Seoul Conference on 'Combating Corruption in the Asia Pacific Region'.