Saying no to corruption
Business needs to be held accountable in developing economies.
By Marc Gunther, Fortune senior writer

(Fortune Magazine) -- Anwar Ibrahim was a rising star in Asian politics during the 1990s as Finance Minister and then Deputy Prime Minister under Malaysian Prime Minister Mahathir Mohamad. But in 1998, after leading a campaign against government corruption, Ibrahim was thrown in jail on trumped-up charges and held in solitary confinement for six years.

He has since become an advocate for democracy, a teacher at Georgetown University, and honorary president of AccountAbility. Fortune's Marc Gunther spoke with him recently in his office on the Georgetown campus.

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What did you learn from your experiences in Malaysia about the role of business in development?

Business has to be part of the development process, so we made intense efforts to promote the private sector. I strongly support market reforms, deregulation, privatization, all the mantras of today's global economy.

But for this to work, we need business to be accountable, and we observed serious flaws in this regard. In my experience, business can tend toward cronyism, corruption and other poor practices in the absence of a free press, a vibrant civil society and effective law enforcement.

Was the corruption driven by local businesses, or were global companies involved as well?

It was primarily local, but the multinationals cannot be absolved. Often it's not a question of blatant, outright corruption. It's the subtle endorsement of unsatisfactory practices - for example, when it comes to labor standards or the exploitation of natural resources. Some international corporations become involved in inappropriate practices when meeting their financial bottom-line goals requires working with repressive governments.

Some say that it's wrong to apply Western ideals on issues like the environment, labor rights, and democracy to the developing world. What's your view?

Many use the notion of Asian values to make excuses for governments that do not support democracy, accountability, the need for a free press and an active civil society. Others say security and development take precedence over freedom and democracy.

I don't accept any of this. Certainly there may be regional variations in how business is done, but accountability, universal human rights, an independent judiciary and a free press are not Western or Eastern values. They are universal values that we should all embrace.

Still, there are those who say it is wrong for Western governments or NGOs to force the developing world to adopt the labor or environmental standards of highly mature industrial societies while they are still developing.

Emerging economies should not be dictated to by European or North American lobbies. In Malaysia we have in the area of Sarawak about two million acres of timber. More extreme environmental groups would deny us the right to any extraction. This position is as misguided as the equally extreme position by the Sarawak state government to allow for the indiscriminate rape of these jungles. Sustainable forestry is the right balance, accountable to those communities that need a livelihood with the need to protect the environment.

Did any companies you dealt with in Malaysia impress you with their commitment to accountability and social responsibility?

Intel (Charts) and Motorola (Charts) come to mind as two that made major investments, shared technology, invested in training locals and were more honest and transparent than others.

Any that disappointed you?

Many, sadly, but this is not the place to name names. I recall one occasion when a major multinational hosted me for a dinner shortly after I came into office. They proposed an "arrangement" to facilitate their interests, pointing out that this was merely a continuation of their ongoing practice in Malaysia. They were astonished and distressed when I referred them to the official ministry channels rather than to an intermediary through whom they could funnel funds on my behalf. These occasions convinced me of the need to introduce stronger measures against corruption when I was acting Prime Minister in 1997, a decision that ultimately landed me in jail.

Did any of the Western companies you had done business with come to your aid?

None that I'm aware of. Many individuals and human rights organizations took up my case, but it was only after I came out of prison that some businesspeople expressed sympathy.

Would you have known if any businesses had lobbied on your behalf?

Oh, yes, they could have contacted my wife, my family, my lawyers.

Did they?

No.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.