Why Malaysia needs a new public procurement law

Malaysia has no shortage of scandals on the mismanagement of public funds. The Scorpene submarine affair and the more recent Littoral Combat Ship scandal centered around mismanagement within defence procurement. The infamous 1-Malaysia Development Berhad case (1MDB) – likely the largest global financial scandal to date – led to the imprisonment of former Prime Minister Najib Razak. Throughout the pandemic, significant amounts of public funds were disbursed without seeking parliamentary approval, and the procurement process itself became tainted by multiple instances of corruption and cronyism.

In 2019, the then Pakatan Harapan (PH) Government introduced the National Anti-Corruption Plan 2019-2023 (NACP), a comprehensive five-year roadmap aimed to combat corruption and address critical governance challenges. Among the reform areas identified was the country’s public procurement system. The strategy outlined in the NACP aimed to establish a dedicated public procurement law and revamp existing procurement practices. However, the NACP was shelved after the collapse of the Pakatan Harapan government and the disruptive impact of the COVID-19 pandemic.

In 2022,  a new unity government was formed under Prime Minister Anwar Ibrahim coalition’s leadership. One of the initial pronouncements made by Prime Minister Anwar was the tabling of a public procurement law in parliament, rekindling hopes for stalled anti-corruption reforms. At the Center to Combat Corruption and Cronyism (C4 Center), we believe the enactment and implementation of a dedicated public procurement law is urgent. It would signify a major leap forward in Malaysia’s battle against corruption and mismanagement of public funds. By instituting a clear legal framework and stringent enforcement mechanisms, the nation can chart a path toward a more equitable and efficient governance system. The anticipated public procurement law, coupled with the revival of anti-corruption initiatives and institutional reforms, symbolizes a renewed commitment to good governance and the prudent management of public resources.

The nation’s public procurement system is characterized by a web series of circulars and regulations each offering a glimpse of sound principles on paper. 

However, the real challenge lies in translating these principles into effective practices. Instances of favoritism, corruption, and misallocation of resources have raised alarming questions about the integrity of the procurement process. Every year, the Auditor’s General report continues to expose mismanagement of public funds and wastages occurring across government agencies and projects. By codifying these circulars into a comprehensive procurement law, Malaysia can lay down a clear roadmap for both public officials and private entities involved in the procurement process.

Malaysia must set out clear principles for all public procurement procedures in a single piece of overarching legislation and create a robust and comprehensive public procurement law rooted in open contracting principles – putting transparency, competition, and efficiency at the forefront.

But at the heart of this transformation lies the principle of transparency. Open contracting, a globally recognized framework, advocates for transparency at every stage of the procurement lifecycle including planning, tendering, awarding, and contract management. 

For all stakeholders to monitor and participate effectively – including businesses, civil society, independent oversight institutions and government itself,  relevant information needs to be disclosed at each stage, from procurement plans, bidding documents, contract terms, performance data, and payments. Countries such as Chile, Colombia and Ukraine have successfully implemented these principles, leading to improved accountability, competition, cost savings, and enhanced public trust.

For instance, Ukraine’s ProZorro platform – in operation even during a war – revolutionized the country’s procurement landscape by creating a centralized and open portal for procurement information. This not only facilitated fair competition among suppliers but also empowered citizens to monitor government spending, thereby curbing corruption. Similarly, Colombia’s SECOP system ensured that procurement information was accessible to all, creating a level playing field for businesses while enabling efficient scrutiny by civil society groups.

Malaysia can learn from these successes – and prior efforts in the country to identify corruption risks, link data and improve the planning and delivery of public health and education infrastructure – to apply similar open contracting principles. By introducing a comprehensive public procurement law that mandates the disclosure of procurement information at every stage, from planning to contract execution, the country can establish a culture of transparency that fosters trust and deters misconduct. Publication needs to go hand in hand with strong anti-corruption and conflict of interest provisions – and with procedures to enable public participation and monitoring across the entire procurement cycle.

The economic benefits will be enormous if we consider the wastage due to leaks and mismanagement within the procurement process has led to billions in wastage of public funds and undermining of economic growth. 

The time has come for Malaysia to take a bold step towards transparent governance by codifying its procurement practices into a law firmly grounded in open contracting principles and strong accountability mechanisms. Enforcement of the law using carrots by making it easy to publish and sticks such as penalties and sanctions for non-compliance will be critical.   

Such a move will not only elevate the nation’s standing in the global arena but will also safeguard public resources needed to address critical social reforms and strengthen public trust in the government’s actions.