MALAYSIA: Kickback Or Incentive In Penang Tourism?

A former president of Transparency International Malaysia has voiced disagreement with those who deny that corruption has taken place when tour companies and taxi drivers demand payment from a company for promoting its business through their services.

“If anyone says it is legal, then there must be some form of documentation or contract to prove that those providing the referrals are entitled to a cut,” said Ramon Navaratnam.

He urged the authorities to investigate whether tour companies and taxi operators were asking for kickbacks in return for referring customers to businesses providing services in the tourism industry.

“Businesses that have been asked to give a cut should lodge a report with the MACC (Malaysian Anti-Corruption Commission),” he said.

He drew a contrast between a kickback and an incentive. An example of an incentive, he said, would be a tip a tourist would give to a taxi driver or tour operator for recommending a good place to visit.

“But asking the businesses for a cut is corruption,” he added.

The question of whether the payment of such commissions constitutes corruption arose recently when a theme park operator in Penang said tour operators and taxi drivers had demanded kickbacks from him for taking tourists to his park.

Association of Tourism Attractions Penang chairman Ch’ng Huck Theng said the practice of giving such commissions was not illegal and it was therefore wrong to call it “corruption”.

He said the giving of commissions or other incentives was at the discretion of the tourism-related businesses.

Khoo Boo Lim, chairman of the Penang chapter of the Malaysian Association of Hotels, said the word “kickback” was also inappropriate because it was not illegal for a company to give incentives to those who brought business to it.

The Centre to Combat Corruption and Cronyism (C4) said any perk or incentive needed to be written out clearly in a company’s policy guidelines and the law.

“Anything given under cover or in secret without it being declared as income or a bonus can be considered a bribe, especially if there are conflict of interest issues,” said C4 executive director Cynthia Gabriel.

On MACC’s website, corruption is defined as the “act of giving or receiving of any gratification or reward in the form of cash or in kind of high value for performing a task in relation to a job description”.

The website adds that the four main offences stipulated under the MACC Act are soliciting or receiving gratification, offering or giving gratification, intending to deceive, and using an office or position for gratification.

It also says that “any person who knows and fails to report an act of giving and offering of bribes is committing an offence under Section 25 (1) and (2) of the MACC Act 2009, and can be fined up to RM100,000 or jailed up to 10 years or both.”

Lawyer Syahredzan Johan also weighed in on the issue, saying what Sim Choo Keng – the theme park operator who alleged he had been asked for kickbacks – highlighted may “not be legal after all”.

“This is especially so with the allegation that kickbacks were demanded by tour organisers and taxi operators, and failure to comply resulted in the theme park being boycotted,” he said.

“If we look at the MACC Act 2009, paying them a sum to bring people to the theme park can amount to gratification.”

He added that Sim’s allegations warranted investigations.

A businessmen who wished to be identified only as “Ng” blamed the demand for commissions for the closure of his interactive gallery in George Town a couple of months ago.

“In my case, the tour companies never asked for kickbacks,” he said. “They only asked if we could give discounts for really large groups. But all this was done officially and a standard business practice.

“But it was the taxi drivers and individual tour guides who would ask for a cut to refer tourists, especially tourists who had a free and easy day, to my gallery.”

He said said these taxi drivers and tour guides would ask for a 50% cut of the ticket price for foreigners and a 40% cut of the ticket price for Malaysians.

“The competition in terms of the kickbacks became insane. Some museums and other attractions were willing to pay commissions of over 50%.

“After two years, I knew it wasn’t worthwhile. I was losing money and I decided to close shop.”

Ng said he still saw a lot of potential in Penang’s tourism industry and was planning to open a new gallery at a location in the heritage area, where there are usually many more tourists than at his previous location and he would not have to depend on referrals from taxi drivers and individual tour guides.

Sim said some people would use the word “commission” to try to legitimise bribes. “And when the money is not given, it results in threats. This business attitude reflects poorly on our tourism culture.”

He said he doubted that many tourists were aware that some taxi drivers, tour companies or tour guides received cuts for taking them to certain attractions.

He said tourists should not be trapped in an itinerary based on where taxi drivers or tour companies or guides would receive the most money.

“Happy tourists will come back and recommend that their friends visit Penang. They will not do so when they feel shortchanged or when their Penang experience is compromised.”

He added that tourism authorities must act without delay as the problem had become acute, with kickbacks offered reaching as high as 60%.

“Perhaps there is no other way out except enforcement. There is too much money and vested interests involved in the practice of soliciting kickbacks for referrals.”

Sim said he had been boycotted and received threats as a result of his refusal to pay kickbacks.

A Malaysian who has made it in the theme park industry on the global stage, has described the local attractions and tourism support industry in the country to be “extremely corrupt”.

Sim Choo Kheng, the founder and CEO of Sim Leisure Group, said this when sharing his experience on the hidden cost of doing business in Malaysia at a dialogue in Kuala Lumpur last week.

The Penang-born Sim, whose company has designed and built some of the high-profile theme parks in over 50 countries, claimed corruption was the norm in this part of the world.

“When we talk about corruption, most people only think about the corruption in governments.

“But the private sector is more corrupt than the public sector,” he said at the dialogue organised by the Institute for Democracy and Economic Affairs (IDEAS) on tax and regulatory policies.

“Corruption also doesn’t just mean you will be paying inflated prices for goods and services, but the hidden cost is that you’re not getting the right person for the job because it’s not based on merit.”

Sim said this was why he left Malaysia to seek a level playing field and has based his company in Dubai, where “the best” companies congregate and compete based on merit.

But despite his success abroad, Sim said he wanted to contribute to the tourism industry in Penang, and built ESCAPE, an adventure theme park in 2012.

Sadly, he said, the industry in Penang was “very corrupt”.

He claimed that many people, from tour organisers to taxi operators, demanded kickbacks from him to promote or bring passengers to the theme park in Teluk Bahang.

“But we refused to give in to this corruption. We refused to pay, so we were victimised. We have been boycotted since day one with all sorts of threats.

“Some of them ask for a 10% to 20% cut from entrance fees, and I got to know that in the George Town area, some of these tour organisers and taxi operators are getting a 40% to 60% cut.”

Sim said the higher demand for kickbacks in the George Town area was due to the popularity of the area as well as the growing number of attractions there, with some 35 so-called “museums” in George Town.

“This corruption makes the market less competitive because people aren’t competing based on the quality product and services they offer, but based on how much in bribes they can give.

“What hope do we have with the business community conducting its businesses based on how much bribes they are willing to give out?

“Everyone in the industry has been silent, fearing boycotts.

“But I have been vocal about the issue for the last four years now.”

Sim said he was frustrated as there had been no changes to this unethical practice and there were clear signs that many of the establishments which are paying lesser in kickbacks are, as a result, seeing fewer visitors.

He said he hoped the authorities would intervene in the matter to avoid more attractions from becoming victims.

Sim added that he had previously lodged a report with the Malaysian Anti-Corruption Commission on being asked for kickbacks, but the problem still continued.