Malaysia's Government Procurement Bill 2025 faces test of state autonomy and fairness

The newly debated Government Procurement Bill 2025 aims to overhaul Malaysia’s public contract system, balancing national standards with respect for Sarawak’s and Sabah’s autonomy amid ongoing resource management tensions.

The Government Procurement Bill 2025, recently debated in Malaysia’s Senate, promises a transformative overhaul of the procurement framework at both federal and state levels, aiming to improve transparency, accountability, and efficiency i...

n public contracts. Sarawak Senator Dato Ahmad Ibrahim, speaking in the Dewan Negara, underscored the pressing need for such reforms, noting that the existing procurement system has been fraught with delays, inflated costs, and waste. He highlighted a 2023 study by the Malaysian Integrity Institute revealing that nearly 35 percent of procurement complaints relate to tender manipulation, price-fixing, and market dominance by select groups.

According to Ahmad, the bill must firmly uphold the principle that contracts should be awarded solely on merit, free from political interference, and provide genuine value for money. He called for mandatory performance audits alongside financial audits to ensure projects are not only completed but also of high quality and beneficial to the public.

Crucially, Ahmad stressed that the legislation needs to respect the autonomy of Sarawak and Sabah as enshrined in the Malaysia Agreement 1963 (MA63). He invoked constitutional safeguards such as Article 95D, which protects state administration from federal overreach without state legislative consent, and the Ninth Schedule, which grants states control over land, local government, and state contracts. The senator warned of the potential for overlapping jurisdictions between federal contracts and state laws, causing delays in reimbursements for federal projects pre-financed by Sarawak and the risk that small and medium enterprises in Sarawak and Sabah could be squeezed out by larger Peninsular companies. He advocated for timely reimbursements ideally within two years and fair access for local contractors under procurement policies.

The Government Procurement Bill 2025 itself was passed by Malaysia’s parliament in late August as part of a broader effort to reform procurement practices, curb corruption, and standardise procedures across government agencies and local authorities. Finance Minister Amir Hamzah Azizan outlined how the bill aims to reduce rent-seeking and subcontracting abuses by imposing uniform standards and clarifying ambiguities in procurement rules. However, civil society and opposition voices have expressed concerns about the bill granting ministers excessive power to exempt certain programmes from procurement rules, prompting a government commitment to revise regulations to limit such ministerial discretion.

This push for reform follows high-profile corruption scandals, including the 1MDB case, which exposed significant flaws in procurement oversight and governance, underscoring the urgent need for stronger financial integrity mechanisms. The bill is awaiting final approval from the Senate.

Parallel to procurement reforms, the context of federal-state relations in resource management—particularly in Sarawak—is critical. Over recent months, negotiations regarding the control and distribution of Sarawak’s vast gas reserves have highlighted ongoing tensions between federal authorities and the state. Despite Petroleum Sarawak Berhad (Petros) assuming the role of sole gas aggregator in Sarawak, Malaysia’s Prime Minister Anwar Ibrahim reaffirmed that the national oil company Petronas would retain its constitutional role under the Petroleum Development Act 1974 to oversee oil and gas operations nationwide. This includes continuing essential relationships with international companies and managing gas supply for major liquefied natural gas (LNG) projects in Sarawak.

Petros’ role has been framed as complementing rather than conflicting with Petronas’ operations, though negotiations to clarify roles and responsibilities have been protracted and complex. Petronas officials acknowledge ongoing talks with both state and federal stakeholders to balance interests, as Sarawak alone holds over 60 percent of Malaysia’s gas reserves. Analysts anticipate that Sarawak’s greater autonomy in gas distribution will reduce Petronas’ earnings by up to 11 percent—a relatively modest impact—while maintaining overall stability in Malaysia’s energy sector.

Such developments in natural resource management echo Senator Ahmad’s warnings about respecting state rights under MA63, extending beyond procurement into broader fiscal and administrative autonomy. The dynamics between Sarawak and the federal government illustrate the delicate balance the Government Procurement Bill 2025 must strike: enforcing national standards and integrity while recognising and protecting state-level self-governance and economic interests.

As the bill moves toward final enactment, its success will hinge on robust enforcement, protection of state autonomy, and equitable opportunities for local contractors, particularly in Sarawak and Sabah. The legislation aspires to move procurement from a system influenced by connections and entrenched interests to one firmly grounded in merit, integrity, and performance—an imperative for restoring public trust and ensuring that government spending genuinely benefits all Malaysians.

Source: Noah Wire Services