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Corruption And The Weakening Of Ringgit


Malaysian Ringgit (Ringgit) is now hovering around the RM4.40 mark against the US Dollar (USD) after hitting a low of RM4.74 in early November 2022. The pressure eased slightly after Pakatan Harapan won the 15th General Election and Dato’ Seri Anwar bin Ibrahim was sworn in as Malaysia’s 10th Prime Minister.

Today we will be taking a closer look at corruption and the weakening of Ringgit has affected the nation as a whole.

A quick throwback, we had a similar experience during the Asian Financial Crisis back in 1998, where Ringgit fell to its lowest at RM4.71 against the USD and this had caused a massive impact to Malaysia as foreign investors pulled out their investments from our country.

Malaysia subsequently pegged the Ringgit at RM3.8 to the USD and it was eventually removed in 2005 when we were under Tun Dr Mahathir bin Mohamad’s leadership. Today, as the cost of goods, prices and business costs continue to soar due to the continued depreciation of Ringgit, Tun Dr Mahathir had suggested that the Ringgit should once again be pegged to the USD.

Currency pegging due to devaluation is a nightmare for investors in the country as well as those who intend to invest in Malaysia. It causes Malaysia to lose its monetary sovereignty in managing our own monetary policy based on our economic situation, instead of the economic situation of the country which the Ringgit is pegged to.

One way to regain the Ringgit’s strength is through Foreign Direct Investments (FDI), plus it is the most desirable form of country capital inflows because it is less susceptible to crises and sudden stops. However, there are many factors that could affect FDI inflows and outflows.

Malaysia had experienced a major fall with regards to FDI. Malaysia went from being one of the preferred ASEAN countries to invest in, to being behind the Philippines, Singapore, Indonesia, and Vietnam. In the year 2020, Malaysia had posted a drop of 68% in FDI according to Malaysian Investment Development Authority (MIDA).

Read: Is Malaysia Going To Go Bankrupt?

The Story Of Corruption And The Weakening Of Ringgit

One of the main reasons why investors choose to stop investing in our country is due to corruption. Malaysia had scored 48 points out of 100 in the 2021 Corruption Perception Index (CPI) as reported by Transparency International. The level of corruption in the host economies is regarded as one of the most important factors that determines which country will benefit from FDI.

This is where you can see the link between corruption and the weakening of Ringgit.

Source: Statista

In relation to this, Department of Statistics Malaysia (DOSM) revealed that although Malaysia’s FDI dropped in 2020, the accumulated investment increased to almost RM700 billion during the pandemic.

Source: DOSM

The 1Malaysia Development Berhad (1MDB) scandal has dampened investor’s sentiment towards Malaysia amidst growing concerns over the extent of corruption, levels of impunity, and overall erosion of the rule of law. Another reason that caused foreign investors to exit the local stock market is due to the uncertainty of Malaysian politics.

In May 2022, researcher David Seth Jones published a research paper which contains his analysis regarding Malaysian corruption. He mentioned that the public and private sector corruption are rampant in Malaysia, and is reflected in the prevalent cases of bribery, embezzlement, and fraud.

Furthermore, it was specified that bid rigging in procurement, money laundering at the highest levels in major investment such as logging, infrastructure, and procurement projects are the main causes of corruption. His research findings were backed by data gathered from the Malaysian Anti-Corruption Commission (MACC) and Malaysian government reports combined with the reports provided by international organisations such as Transparency International, the World Bank, PricewaterhouseCoopers, media reports, and various academic publications.

He further stated his findings that corruption remains widespread in Malaysia due to the weak enforcement of anti-corruption measures, political interference within investigation and prosecution of corruption cases, the politics-business nexus, and the issue of money politics as well as limited impact of anti-corruption measures and bodies.

Read: Fraud Awareness Week 2022: Find Out More About Fraud, The Common Frauds And Its Impact On Investment

FDI, Corruption And The Weakening Of Ringgit

It is proven that FDI inflow is positively correlated to the convenience of the entrance of the market, economic stability, political consistency as well as free from corruption. Thus, with the FDI inflows, it can help strengthen our Ringgit once again.

Government has a crucial role to play in keeping the country clean of corruption by taking up the necessary control measures. Strict law enforcement and governing without fear or favour, severe punishment from the courts and effective government administration are pivotal. Only through this, the goal to reduce corruption can be achieved.

As corruption decreases, we can expect FDI to increase, and ultimately Malaysia will prosper and is able to realise its potential as the Tiger of Asia. Let us pray that the new government can make a positive impact in eradicating corruption from our beloved country.

It is clear that there’s a strong link between corruption and the weakening of Ringgit.

About the Author

Azah Atikah Binti Anwar Batcha has an Accounting, Finance, Auditing, and Islamic Finance background. She has worked with two of the Big four firms prior to pursuing her postgraduate studies at University of Technology Malaysia (UTM), Kuala Lumpur. She can be contacted at

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