It is no secret that a business cannot operate effectively without a proper procurement management. Therefore before you even begin thinking about running a business, you should always do your due diligence and do some research into how a procurement system works.
Needless to say, like everything else, different countries might have different approaches to doing things. In countries like Malaysia where the government is heavily involved with procurement, it is important to first understand how it works.
So if you are planning on starting a business in Malaysia, here is how the procurement industry works here:
First thing’s first, procurement in Malaysia is overlooked by the Malaysian’s government treasury. According to the Malaysian Government Procurement, their policies are as follows:
- a) To stimulate the growth of local industries through the maximum utilisation of local materials and resources;
- b) To encourage and support the evolvement of Bumiputera (indigenous) entrepreneurs in line with the nation’s aspirations to create Bumiputera Commercial and Industrial Community;
- c) To increase and enhance the capabilities of local institutions and industries via transfer of technology and expertise;
- d) To stimulate and promote service oriented local industries such as freight and insurance; and
- e) To accelerate economic growth whereby Government procurement is used as a tool to achieve socio-economic and development objectives
You can read more on these policies on the Malaysian Treasury website.
Hence, if you are planning to work with the government, these are definitely some guidelines for you to follow.
That being said, here are some of the acts that pertain to procurement in the Malaysian government:
The Federal Government financial authority is entrusted with the Minister of Finance and the Secretary-General of the Ministry of Finance with directions from the Minister. In the case of State Governments, the financial authority is vested with the respective Chief Ministers, and the respective State Financial Officers with directions from the respective Chief Ministers. The financial authority in Local Authorities and Statutory Bodies is vested with the respective Chairpersons and the Councils or the Board of Directors.
Financial Procedure Act 1957 (Revised 1972)
The Financial Procedure Act 1957 (Revised 1972), provides for the control and management of the public finances of Malaysia and outlines financial and accounting procedures. It includes procedures for the collection, custody and payment of the public monies of Malaysia and of the States, and also the purchase, custody and disposal of public property and related matters.
The Treasury Instructions (TI) detail out financial and accounting procedures and encompass the regulations that need to be adhered to in the management of Government funds including procurement.
Government Contract Act 1949
This empowers the respective Ministers in the respective ministries to enter into contracts and also empowers the respective ministers to delegate powers to Government Officers to enter into contracts on behalf of the Government.
Treasury Circular Letters
Treasury Circulars are issued from time to time to inform, clarify, implement, improve and amend certain policies, rules and procedures whenever required by the Government and financial authorities.
Federal Central Contract Circulars
Federal Central Contract Circulars are issued to inform the users on the availability of common user items which are centrally purchased. The Central Contract Circulars normally contain details such as items, name of suppliers, areas of supply and time of delivery. Apart from procurement principles and objectives, most often the Central Contracts objectives are to promote local products and develop vendors.
Understandably this might all seem overwhelming however it is important to bear in mind that such rules and regulations only apply if you are seeking to get involved with being part of the government’s procurement.
While most businesses in Malaysia, somewhat follows the same policy – putting local businesses first, there isn’t as much strict rules when working with private companies that are operating in Malaysia.
It is however important to know that Malaysia is a country of multiple races and religions and the ways of operations might slightly differ – Malaysia has more public holidays than most Western countries for example and that might affect your procurement planning as most vendors and suppliers don’t operate during important holidays such as Chinese New Year and Hari Raya.
Malaysians also value good relationships. In an area where networking and rapport is important, it comes without surprise that if you want to ensure your procurement runs smoothly, you should build and maintain personal relationships with your vendors and suppliers as well as your delivery company.
There is not much difference in the way procurement works in Malaysia compared to elsewhere in the world unless you are aiming at serving as part of the Malaysian Government’s procurement team. Apart from that, know your industry well, embrace the multi-racial, multi-lingual and multi religion that Malaysia is, implement it into the way you network and you should have a great procurement management ahead.
ThunderQuote is the most comprehensive business services portal in Singapore, Australia and ASEAN , where hundreds of thousands of dollars of procurement contracts are sourced every month by major companies like Singapore Press Holdings, National Trade Union Congress and more.