Contradictheory: The price of greasing the gears

If Malaysia is serious about fighting graft and inefficiencies, the solution is establishing independent institutions that can keep power in check. — 123rf

On Oct 10, 2025, while presenting Budget 2026, Prime Minister Datuk Seri Anwar Ibrahim announced that Malaysia had clawed back RM15.5bil in stolen and smuggled funds in just two years. I was impressed at first. That’s a lot of money, roughly three-quarters of what was stolen in the 1MDB scandal.

But then two thoughts came to mind. First, RM15.5bil is impressive until you remember how much more is probably gone. A 2017 report by the Washington-based Global Financial Integrity think tank estimated that Malaysia lost what amounts to an average of RM200bil every year between 2005 and 2014 through illicit money outflows.

Second, if that much can leak out of the system, the system is probably producing a lot more than that. The report’s figure is about 10% of all money flows going in and out of Malaysia. And yet, despite the drain, the economy hasn’t collapsed. In fact, it has, more or less, managed to move onwards and even upwards.

So here’s a novel thought: Are there kinds of corruption that help an economy grow?

Economists call this the “grease the wheels” hypothesis. The idea is that when bureaucracy grinds too slowly, corruption can help overcome it. Indeed, some research has shown that where countries’ institutions are weak and function poorly, bribes can increase efficiency and reduce transaction costs.

But small payments grease only small gears. For benefits at a national level you need a much larger engine, with much more expensive oil.

Yuen Yuen Ang, a professor of Political Economy at Johns Hopkins University in Washington, argues that corruption can be categorised in different forms. One in particular she calls “access money”, which she describes as the “steroids of capitalism”.

If petty bribery is about paying a police officer to ignore your bad parking, access money is about paying a politician to build you the parking lot. It’s the elite form of corruption in the form of million-dollar campaign donations and policy “cooperation” that open doors to cheap credit, tax breaks, or exclusive contracts.

Ang argues that this kind of corruption is what powered China’s economic miracle. In the 1980s, low-level bureaucrats stopped extorting bribes and turned towards transactions for development. Officials still got rich, but in ways that encouraged investment. As a result, construction boomed, factories multiplied, and GDP numbers spiked upwards.

Ang draws parallels with what happened a century earlier during America’s Gilded Age, roughly 1870 to 1900. The “robber barons” Cornelius Vanderbilt, John D. Rockefeller Sr, and Andrew Carnegie grew their companies by cultivating the right political friends and bending regulations, and in the process, built railways, refineries, and steelworks that defined a modern economy.

Or take South Korea. In the 1960s, President Park Chung-hee struck a deal with emerging family-run conglomerates, the chaebol. He’d give them credit, protection, and political backing, as long as they delivered exports and industrial growth.

The arrangement worked so well that within a generation, companies like Samsung, Hyundai, and LG went from local firms to global powerhouses.

Economists call it “developmental corruption” – rent-seeking that actually produces something. The chaebol churned out ships, cars, and electronics, while the government ensured stability and markets to sell them in.

But like all steroid regimens, there were side effects. The same chaebol that once drove growth are now accused of stifling competition and dominating politics. Out of 16 presidents South Korea has had since 1948, four have been impeached or jailed for corruption linked to business leaders.

In Malaysia, it’s almost expected for politics and business to co-mingle. In fact, private-public partnerships have been formalised, for example in the form of government-linked companies (GLCs). These private sector entities are significant participants and contributors to the economy. A 2017 report by the Institute for Democracy and Economic Affairs think tank found that while GLCs employ just 5% of the national workforce, they account for 36% of Bursa Malaysia’s market capitalisation and over half of the FTSE Bursa Malaysia KLCI.

That’s not necessarily a bad thing – until it is, that is. The report also found that when GLCs control 60% or more of an industry’s revenue, smaller players tend to stay away. Imagine you’ve just launched a startup, only to discover your main competitor isn’t just a very large gorilla, it’s also owned by the government. You might consider slowly stepping backwards out of that room.

Close ties to government can be an advantage to the country as a whole, but when favours become habit, what starts as efficiency turns into entitlement.  

And because much of this happens behind closed doors, transparency often becomes an issue. Unusual financial decisions that elsewhere might be investigated for criminal breach of trust can here be defended as necessary for “national interest”.

History does show us where it can lead to. America’s Gilded Age collapsed with the Panic of 1893, leading to labour and anti-trust reforms. South Korea’s chaebol system was reined in after the 1997 Asian Financial Crisis, when the International Monetary Fund imposed conditions for bailouts. 

One hopes Malaysia doesn’t need a crisis to clean its gears. If we’re serious about fighting graft and inefficiencies, the solution isn’t just nice speeches. It’s about establishing independent institutions that can keep power in check without waiting for an economic collapse to do it for us.

So when the government says it has recovered RM15.5bil from corruption and plans to channel it into welfare and development, that’s great. But how about using it to keep more corruption in check?

Meanwhile, in August last year, the Finance Ministry announced that six government-linked investment companies had pledged RM120bil in domestic investments over five years to boost sectors such as renewable energy and semiconductors.

With that much money circulating, it’s tempting to imagine all the gears that could be greased. We just have to make sure they’re the right ones turning the country forward.

In his fortnightly column Contradictheory, mathematician-turned-scriptwriter Dzof Azmi explores the theory that logic is the antithesis of emotion but people need both to make sense of life’s vagaries and contradictions. Write to Dzof at [e-mail]. The views expressed here are entirely the writer's own.