3 NOVEMBER 2025
PRESS STATEMENT
During the recent ASEAN Summit 2025, Malaysia and the United States of America signed a Trade and Investment Framework Agreement (TIFA). Among the terms of the agreement was the commitment by Malaysia that local government-linked companies (GLCs) would procure various goods and services from the US amounting to approximately RM1 trillion. The Center to Combat Corruption and Cronyism (C4 Center) is gravely concerned about these commitments, calling into question whether governance frameworks such as the soon to be gazetted Government Procurement Act (GPA) will apply to these procurements.
Minister of Investment, Trade, and Industry, Tengku Zafrul, stated in Parliament that both Malaysian multinational corporations as well as GLCs would be involved in these investment obligations.
Details of Malaysia’s procurement obligations to the US are listed in Annex IV: Purchases and Investment of the TIFA. These include purchases and investments including:
- 30 Boeing aircrafts by Malaysian Aviation Group,
- 3 million tonnes of liquified natural gas a year by Petronas valued at USD2.04 billion (RM8.56 billion) a year,
- Various other goods such as semiconductors, aerospace components, and data centre equipment,
- Potential investment into the US’ manufacturing sector valued at USD66 million (RM276.7 million),
- Capital investment of USD70 billion (RM294 billion) over the next 10 years.
There are major concerns regarding the governance of Malaysia’s procurement practices and investment decision-making in relation to its obligations under the TIFA. The TIFA requires that Malaysia invest heavily in certain US industries, which raises alarm bells over the possibility that these may be bad investments that Malaysia may not be able to opt out of. In such a case, how will the government and GLCs be held accountable?
More importantly, while the TIFA itself does not seem to prescribe any changes to Malaysia’s procurement regulations, it remains pertinent to question if the GLCs involved will be bound by the regulations set out in the GPA.
The GPA does consider certain GLCs to be under its purview – Section 5 extends the definition of “Federal Government entity” to include companies where more than 50% of shares are owned by Minister of Finance Incorporated (MOF Inc.) or any Federal statutory bodies. However, it remains unclear how this applies to companies where MOF Inc. only exercises indirect ownership, even if they are still majority shareholders through their holding companies such as Khazanah Nasional Berhad.
The status of the TIFA occupies an uncomfortable grey area in how the application of the GPA would play out:
- Are US-based companies still bound to adhere to the protocols of government procurement set out in the GPA and its related subsidiary legislation i.e., tender bidding and registration requirements?
- Does the existence of these obligations create biases within procuring entities to favour bids by US-based companies for the purposes of achieving the obligations under TIFA?
- Alternatively, will the procuring divisions of government entities and GLCs receive explicit instructions to greenlight tender bids by US companies even when there are better, more qualified, or economically sound bidders?
Such government-to-government (G2G) agreements are in essence agreements in principle, and involve the promise of a procurement contract in the future. However, the existence of a pre-determined target of meeting procurement and investment obligations possibly defeats the scrutinising function of procurement regulations. This is especially pertinent in procuring national infrastructure where quality and value for money should be the primary objective. In this regard, G2G agreements are highly dangerous, allowing the government to unilaterally sign away huge amounts of public funds with virtually no checks and balances.
Additionally, even where applicable, Malaysia’s GPA remains a shoddy piece of legislation. C4 Center’s analysis of the Act revealed that unfettered decision-making and administrative powers concerning government procurements are placed under the Minister of Finance Anwar Ibrahim.
This presents a two-fold problem – that G2G agreements exploit loopholes for public funds to be promised away by the government without any form of accountability, and that even if enforced, the weaknesses of the GPA and its unclear ambit in this context render it an ineffective check and balance.
Good governance principles should not be made subordinate to geopolitical concerns or on the basis that it “potentially” may result in better economic outcomes, especially when the livelihoods of Malaysians are involved. The notion that a government can promise away more than double the 2026 National Budget to a foreign government without scrutiny is ludicrous.
Hence C4 Center strongly calls for the government to:
- Establish clear guidelines and legally binding policies as to how decision-making processes will be conducted throughout the life cycle of the TIFA, mandatory public consultations, and publishing obligations of procurement and investment information for public scrutiny of the health of these investments;
- Exercise its rights to amend the terms of the TIFA under Article 7.3 if it is found that they are no longer favourable to Malaysia;
- Establish a moratorium on the application of the GPA until its problematic provisions are amended, following meaningful consultations with civil society organisations and academics;
- Ensure that future subsidiary legislation arising from the GPA adheres to international standards of good governance and transparency.
END OF STATEMENT
Issued by:
Center to Combat Corruption & Cronyism (C4 Center)
For further enquiries, please contact:
c4center@gmail.com
019-216 6218
