by SHAHEERA AZNAM SHAH
Corruption practice has proven to have a trickle-down impact on the average Malaysian consumer, according to research conducted by the Institute for Democracy and Economic Affairs (IDEAS).
“The most direct impact that corruption can have on the cost of living is through increasing the costs of doing business, costs which are then passed on to the consumer.
“When suppliers of goods and services are required to engage in corrupt practices – such as paying bribes, this increases the cost of doing business, and these costs will be passed on the consumers,” it said.
The report, titled “Corruption in the Supply Chain: forms and impacts on consumers” was co-authored with Coalition for Business Integrity (CBI).
While bribery is the most common form of corruption in both public and private sectors, other forms of corruption are often taking places such as extortion, embezzlement, fraud, abuse of discretion and favouritism, IDEAS said in the report.
The report stated that the costs of corruption for businesses, and ultimately the consumers, are high in Malaysia as corruption practice is a common reality for many businesses in Malaysia.
“As a result, corruption can directly increase the prices of essential goods and services.
“Increases in the cost of doing business will be passed on to the consumer. For example, one has reported increases in housing prices due to the various leakages and corrupt transactions that occur along the supply chain.
“Developers sell units at higher prices increasing the burden of Malaysian buyers. The education sector also reported that higher education institutions are forced to charge higher tuition fees to account for the various leakages along the supply chain,” it said.
The report also noted that corruption also inflates the cost of housing as it relates to the cost of property development based on information.
“There is a possibility that this cost is passed on to customers. Corruption can also have an indirect impact on prices by reducing competition in the market.
“When markets are competitive, firms will compete to offer the lowest price at the best quality and consumers benefit.
“Corruption also increases price levels by reducing the efficiency of private markets as it pushes businesses underground and reduces the purchasing power of citizens,” it said.
When bribery is pervasive, it creates a barrier to entry for firms unwilling to engage in bribery, the report added.
“Bribery filters out parties who are not willing to engage in corruption from those who are. Those parties who partake in paying bribes enjoy the gains derived from these actions or decisions gained from the party receiving the bribes, while others lose out.
“This is a loss of business opportunities and expansion that is seldom calculated, for example, the opportunity costs that we miss when firms exit due to their unwillingness to engage in corrupt practices,” it said.