The term procurement in business might not be as popular as its other camaraderie like marketing or logistics but it is indeed one of the most important aspects in ensuring a business is successfully running and is able to make profits.
Despite having the potential to run globally, it is still important to understand the procurement landscape of the country you are operating your business. In Malaysia for example, some things might be done differently. Not only that, the policies and processes might also have its own guidebook.
Here’s a little insight on the procurement landscape in Malaysia for those who are planning to do businesses in Malaysia, or simply just want to add on to their knowledge.
Government Procurement in Malaysia
In Malaysia, procedures relating to procurement are outlined in the Financial Procedure Act, 1957, Supply Act 1957 and the Government Contract Act, 1949. The act details how government agencies manage contracts and supplies of goods and services as well as granting of rights and concessions.
There are 5 objective of the government procurement in Malaysia:
- Sustainable Supply of Goods and Services
The policy is designed to ensure the sustainability to the supply of product and services and helps government departments to run its operations efficiently.
- High Value for Money Government
Government procurement aims at lowering the operational cost
- Promotion of Local Industries
Part of the agenda is to help promote local businesses as clearly specified in the National Development Plan (NDP) and the Industrial Master Plan placing the development of SMIs as a measure to promote growth.
- As a way to achieve National Development Goals
One one of the most important objectives of the government is to create a strong and resilient Bumiputera Commercial and Industrial Community (BCIC). This is part of the New Economic Policy aimed at dealing with poverty and bridging the gaps between the ethnic groups in Malaysia.
- Transfer of Technology and Expertise
The procurement policy in Malaysia is used as a tool to promote transfer of technology and expertise. This is done through international tenders where foreign companies are encouraged to join venture with the local contractors.
As mentioned above, the Malaysian government are heavily involved with the procurement processes in Malaysia. While the policies might seem confusing at first, it is basically aimed at protecting local industries.
The government policy isn’t the only effort the government has put in order to help the local industries.
Economic Transformation Programme
In 2010, the Malaysian government created the Economic Transformation Programme (ETP) as a way of converting the country into a high-income economy. ETP aimed at creating 3.3 million new jobs and indirectly meet the gross national income (GNI) levels required to uplift Malaysia to developed-nation status.
The ETP identified 12 National Key Economic Areas (NKEA) that significantly affects the contributions to GNI. The identified that one NKEA area in Malaysia being increasingly likely to reach this status is the area of business services, and the industry of shared services centres (SSC) has been the core focus in this growth thanks to a multi-lingual population and a well-developed infrastructure.
With procurement being so closely related with the SSC rise in Malaysia, it comes to no surprise that the nation is recognised by multinational corporations as the perfect location for procurement hubs.
According to Deloitte’s 2017 Global Shared Services Survey, 73 percent of respondents from over 1,100 shared service centres headquartered in 37 markets reported significant increase in productivity compared to the number in 2015. This was 2 years ago, and as the world progresses into technology, procurement in Malaysia shows no sign of slowing down. In fact, companies involved with procurement are experimenting the uses of e-procurement to help increase their productivity even further.
Malaysia might still be in the early days of digitalising procurement and most vendors and suppliers are still more comfortable with the traditional ways of managing things. However, that doesn’t mean that Malaysia is far behind.
Genting for example already has their digital procurement platform to help them manage suppliers. Those who are interested in working with Genting only has to download their procurement app and they will receive every documentation and details they may need from terms and conditions, bidder agreements, supplier criteria as well as a checklist for online supplier.
While it may take some time for Malaysia to fully embrace the digital procurement system, most companies are already taking one step ahead by familiarising themselves with the available technology, hiring new IT-savvy employees and training their existing employees.
The Malaysia Procurement outlook
All in all, Malaysia has a strong government policy when it comes to procurement and the country is standing strong as one of the better procurement hubs in the Asian region. However, it may have not fully grasp the digital side of things but with a little more time, Malaysia’s procurement landscape has the potential to flourish digitally.
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.