A growing middle class is Malaysia’s best bet against corruption, says former director-general of the World Trade Organisation, Pascal Lamy.
“Growing the part of your population that pays taxes is the best way to fight corruption,” Lamy, who is also a member of the advisory board of Transparency International, told reporters after delivering a talk entitled “Importance of global trade in the age of rising protectionism” yesterday. The event was organised by the Institute for Democracy and Economic Affairs.
This, he said, has proven to be effective in the medium to long term on top of proper regulation, more transparency and more rules about conflict of interest between business and politics.
“There is a direct connection between growing your economy and getting rid of corruption,” he added, pointing to countries such as Singapore and Rwanda which have seen corruption diminish as their economies grew stronger.
Lamy said an economic system is more efficient when its actors are able to act in a transparent way and information circulates without asymmetry.
Meanwhile, he believes that Malaysia is on track to achieve high-income nation status as it has developed and followed a clear strategy and has a good trade balance “for the moment”.
However, the country would have to redirect its resources to improve education and human empowerment instead of relying on natural commodities in order to continue growing, he added.
“It is important for Malaysia to remain open to trade, specialising in value-added services to grow its economy.”
The issue of non-tariff barriers between Asean nations must also be addressed by levelling the playing field in regulatory areas, Lamy said. Some barriers are positive in order to protect the well-being of its citizens and this can be done by harmonising the barriers and ensuring that any regulations imposed on foreign producers are equal to domestic ones.
Failing to distribute the benefits of more open trade equally in society has been one of the key drivers of more protectionism in developed countries, he said.
“Social systems have failed to cope with these changes, either because globalisation has been too rapid for welfare systems to keep up with, or because these welfare systems have been shrunk in favour of other objectives such as financial deleveraging,” he added.
As a country becomes more economically developed, however, it should begin to allocate more of its resources to healthcare and education.