Malaysia Country Profile

Public Procurement and Contracting

Business Corruption

According to several observers, there is a substantial lack of transparency in public procurement in Malaysia, and competitive bidding in the procurement process is widely disregarded when major public contracts are awarded. Political considerations, such as affirmative action and personal connections, are reportedly the main criteria for awarding large contracts. The US Department of State 2008 reports that the formal Malaysian procurement policy is discriminatory, as it explicitly seeks to encourage greater participation of bumiputera (ethnic Malays) in the economy. The Bertelsmann Foundation 2010 reports that government policies that grant huge infrastructure projects to selected Malay companies and Malay individuals with close ties to the UMNO without an open bidding process, and which grant special licences to the same group, have encouraged corruption. All small-scale government contracts are only open to Bumiputera companies. Intense lobbying and closed-door negotiations between companies and government officials for public projects are known to take place. Government projects awarded to companies without competitive bidding include the privatisation of Malaysia Airlines, the building of the North-South expressway and other highways, the light-rail transit systems and bridges. The City of Kuala Lumpur was required by the Ministry of Finance Monitoring and Control Division to recall some tenders due to major failures resulting from the lack of open bidding.

See more information on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

A new e-procurement service (in Malay) is intended to limit opportunities for corruption and graft in the civil service in matters related to procurement and tenders. However, according to the US Department of State 2008, closed-door or direct negotiations are still allowed in special cases, intended to help bumiputera win tenders. The political opposition claims that public procurement in Malaysia is characterised by a web of shell companies with unclear ownership structures bidding on tenders. According to the same source, the tendering process is still obscure and non-transparent and concerns about irregularities have been voiced by US companies. Despite the establishment of the e-procurement system, not all ministries provide user-friendly information on government tenders.

See more information on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 4.1 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 3.7 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

Transparency International: Global Corruption Barometer 2009:
- 93% of the households surveyed reported to have paid a bribe to a public official before issuing a license.

Transparency International Malaysia: Transparency Perception Survey 2007:
- 71% of corporate respondents say that there is no transparency or openness in the government procurement system.