Malaysia - Commercial Guide
Selling to the Government

Discusses the legal requirements for selling to the host government, including whether the government has agreed to abide by the WTO Government Procurement Agreement or is a party to a government procurement chapter in a U.S. FTA. Specifies areas where there are opportunities.

Last published date: 2020-08-19

Government procurement refers to the acquisition of supplies, services, and works following Malaysia's current rules and regulations to achieve a set of objectives. In line with good governance practices, the Government of Malaysia emphasizes good procurement practices for public accountability, transparency, best value for money, open and fair competition, and fair dealing.  Any individual, company, or corporate body wishing to participate in the Government procurement of supplies and services must register with the Ministry of Finance Malaysia (MOF). For works, they must register with the Contractors Service Centre (Pusat Khidmat Kontraktor; PKK) and the Construction Industry Development Board Malaysia (CIDB), which are agencies under the Ministry of Works Malaysia.

The Government of Malaysia categorizes procurement into the following:

Works: 

Works contracts include construction and engineering activities involving infrastructure and structures such as buildings, airports, roads/highways, dams, drainage, etc. It is also inclusive of mechanical and electrical aspects of works.

Supplies: 

Supplies include raw, intermediate, or finished goods and products for any activity of users. Also included are construction materials, food products, uniforms, vehicles, equipment, spare parts, and furniture.

Services:

Services include engagement of labor, expertise, and consultants in the areas of feasibility studies, research, designing, surveying, and management.  Repairs, maintenance, and cleaning services are minor activities under this category.

Types of procurement include:

Direct Purchase:

This procedure allows procurement of supplies and services up to the value of RM50,000 directly through the issue of a Government Order to any known registered suppliers of consistent and reliable goods of acceptable quality.  Procurement of works valued up to RM20,000 may be through the issue of a Works Indent to a contractor that registered with the Contractors Services Centre (PKK) and Construction Industry Development Board (CIDB) Malaysia.

Tender: 

Procurement of works, supplies, and services valued above RM500,000 must go through tender processes. All contractors intending to participate in any local tenders must register with the Government of Malaysia.  International tenders will be invited for supplies and services if there are no locally produced supplies or services available. For specific works, if local contractors do not have the expertise and capability, tenders may be called on a joint venture basis between Malaysian and foreign contractors to encourage the transfer of technology. International bids result when Malaysian contractors have the expertise and capability, and a joint venture is not possible.

Registered Contractors: 

All individuals, companies, or corporate bodies intending to participate in Government procurement are required to register with the Malaysian Ministry of Finance and relevant Ministries and Agencies.  The registration process ensures that all companies or contractors are genuine,  committed in their business fields, and possess the capability to carry out works or supply and provide the services. 

Notes:

Specifications (1)

·       Specifications drawn are functional or performance-based.

·       Tailored specifications to suit any brand or country are strictly forbidden.

·       Objection to tailored specs – 14 days for local tenders and 28 days for international

Tender Deposits (2)

·       Local suppliers and contractors registered with the Government are exempted from tender deposits; International bidders are required to furnish a tender deposit ranging from RM60,000 for bids below RM5 million; RM 1 million for bids exceeding RM30 million for supplies and services.

·       For works contracts, bidders need to furnish tender deposits ranging from RM60,000 for contracts below RM10 million to RM 1 million for contracts exceeding RM100 million.

Selection of Successful Bidder (3)

·       All tenders are to be considered by the Agency Procurement Boards.

·       Tender of above RM100 million for works and RM50 million for supplies and services, the Ministry of Finance (Treasury) has the final decision.

eProcurement

Public procurement before 2018 was at best translucent with many of the government infrastructure projects awarded on a negotiated tender.  After the Pakatan Harapan won the election in 2018, the private sector requested a fair and public procurement law with more transparency and integrity incorporated into the procurement process.  This request resulted in new procurement legislation which was presented and adopted by Parliament in 2019.  This new legislation governs all procurement processes to ensure transparency and competition while discouraging abuse of power, negligence, and corruption.  However, with the change in government in early March 2020 by the Perikatan Rakyat lead by the former Minister of Home Affairs, there are concerns as to whether these policies will be maintained.

The policies enacted in 2019 emphasizes on the efficiency of the financial management of Government agencies, the Malaysian Treasury had put into place procedures and appointment of a Controlling Officer to carry out these obligations.  The Minister of Finance will appoint a Member of the Federal Procurement Board while the Chief Minister will appoint a member of the State Procurement Board.   All federal procurements are published in the eProcurement and approving limit was set as follows:

PROCUREMENT BOARD

GOODS/SERVICES

WORKS

CONSULTANCY

Board members

1.     Ministries

2.     PM’s Office

3.     Public Works Dept

Tender of value less than or equal to RM50 Million

Tender of value less than or equal to RM100 Million

Physical Project:

Value of less than or equal to RM300 Million

Studies: Value of less than or equal to RM5 Million

Federal State of Sabah and Sarawak

Tender of less than or equal to RM30 Million

 

 

Statutory Bodies

Tender of less than or equal to RM100 Million

 

 

Government Linked Companies

Tender of less than or equal to RM300 Million

 

 

Financing of Projects

In Malaysia, Government initiated projects are usually funded by the Ministry of Finance (MOF). Though other ministries may implement the tender or be in charge of technical committees, MOF is the final decision maker in all significant projects. Government procurement is one of the areas that the recently launched National Anti-Corruption Procurement Plan (NACP) plans to reform to improve efficiency and transparency. The Islamic Development Bank (IDB) finances a few projects in Malaysia, mainly in the areas of healthcare and university expansion. Malaysia is considered to be a high or mid-income country by the IDB and a partner in providing technical expertise to other IDB member countries.

The Commercial Service maintains Commercial Liaison Offices in each of the leading Multilateral Development Banks, including the Asian Development Bank and the World Bank. These institutions lend billions of dollars in developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help American businesses learn how to get involved in bank-funded projects and advocate on behalf of American bidders.

Export – Import Bank of U.S. ( Exim Bank)

For many U.S. exporters,  lack of financing can stand in the way of global growth. EXIM has several forms of support that can provide a solution such as working capital loan guarantee, export credit insurance. For more information on: EXIM Bank

U.S. International Development Finance Corporation (DFC)

DFC is America’s development bank and partners with the private sector to finance solutions and invest across sectors including energy, healthcare, critical infrastructure, and technology. DFC also provides financing for small businesses and women entrepreneurs to create jobs in emerging markets. DFC investments adhere to high standards and respect the environment, human rights, and worker rights. For more information : DFC

U.S. Trade and Development Agency (USTDA)

The U.S. Trade and Development Agency helps companies create U.S. jobs through the export of U.S. goods and services for priority development projects in emerging economies.  USTDA links U.S. businesses to export opportunities by funding project preparation and Some of USTDA’s tools include funds for early-stage project preparation activities such as feasibility studies, technical assistance, and pilot projects, which provide the analysis needed for projects to attract financing and reach implementation. Additionally, USTDA creates market access for U.S. companies, connecting them with key decision-makers in emerging economies by hosting reverse trade missions (RTM), conferences, workshops, and training.  The Agency’s reverse trade missions bring overseas decision-makers to the United States to introduce them to the design, manufacture, and operation of U.S. goods and services that can help advance their infrastructure development goals.

USTDA facilitates U.S. business participation in the preparation and execution of infrastructure development projects.  The Agency helps build the infrastructure for trade, match U.S. expertise with overseas development needs, and facilitate business partnerships between the U.S. industry and emerging markets.  These partnerships allow the Agency to target its investments toward projects that are most likely to be implemented using U.S. goods and services

In Malaysia, USTDA has successfully provided grant funding for technical assistance for a Smart City project that will transform how Malaysia’s fast-growing Iskandar region manages its urban planning and development through advanced data analytics.

Source: USTDA

For more information: USTDA Advances Malaysia’s Smart City Priorities

 

Contact details:

USTDA regional office ( covering Southeast Asia) :

Brandon Megorden, Regional Manager for Asia, bmegorden@ustda.gov   

Rachaneekorn Sriswasdi, Deputy Regional Manager for Asia, srachaneekorn@ustda.gov

 

Washington, DC:

Verinda Fike, Regional Director for South and Southeast Asia, vfike@ustda.gov 

Alissa Lee, Country Manager, alee@ustda.gov

Jeffrey Philips, Country Manager, jphillips@ustda.gov

John Krotzer, Country Manager, jkrotzer@ustda.gov

Multilateral Development Banks

Asian Development Bank (ADB) assistance to Malaysia focuses on advancing regional cooperation and integration, providing advisory services, building institutional capacity, and promoting sustainable development and green growth.

ADB supports and facilitates Malaysia’s active involvement in the Association of Southeast Asian Nations (ASEAN), the Brunei Darussalam–Indonesia–Malaysia–the Philippines East ASEAN Growth Area (BIMP-EAGA), the Indonesia–Malaysia–Thailand Growth Triangle (IMT-GT), and the Coral Triangle Initiative. Priorities include cross-border infrastructure projects, economic corridor and border development, energy cooperation, and coordinated management of coastal and marine ecosystems ADB operations in Malaysia are expected to strengthen under the Arrangement of Cooperation and beyond. The bank will target sectors and identify thematic priorities to help Malaysia achieve its development agenda.

Source: ADB

Financing Web Resources

Bank Negara Malaysia | Central Bank of Malaysia

Asian Development Bank

World Bank

The international reserves of Bank Negara Malaysia (BNM) amounted to USD102.8 billion as of June 15, 2020. The reserves position is sufficient to finance 8.2 months of retained imports and is 1.1 times total short-term external debt. 

Source: International Reserves of Bank Negara Malaysia as at June 15, 2020

Advocacy

U.S. companies bidding on a Mexican Government tender may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center, coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies.

The Advocacy Center works closely with our network of domestic U.S. Commercial Service Export Assistance Centers and with the U.S. Commercial Service in Mexico to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.