Malaysia has good infrastructure and an institutional foundation for a competitive market-based economy firmly in place. However, the number of high-profile corruption cases, increasing ethno-religious tensions, and growing political instability have led to growing investor concerns that doing business in Malaysia is a riskier prospect than in the past. Moreover, market-based principles are not applied in cases involving individuals with high-level political access. According to several sources, Malaysian business executives rank corruption as one of the most problematic factors for doing business in the country, and a substantial amount of the corporate respondents admit to having paid bribes or knowing someone who has done so, mainly to avoid inconvenience. The government has recognised the problem and promised to curb corruption, but the results have so far not met expectations.

Positive developments in relation to corruption and investment:

• Since the Whistleblower Protection Act came into force in December 2010, there have been more than 6,000 reports of improper conduct.
• A new government tender portal, MyProcurement, was launched in April 2010 to provide procurement-related information, including an hourly update on tender advertisements and the names of successful bidders. The new portal aims to reduce corrupt practices and enhance transparency in the procurement process.
• The overall regulatory environment in Malaysia has significantly improved in recent years, and includes reducing extensive red tape, and facilitating business start-up by introducing more online services.
• The Malaysian government passed two bills in 2008, aiming to improve the integrity and transparency within the judicial system.

Risks of corruption:

• For public procurement, closed-door negotiations are allowed in cases where it is possible to help local companies obtain a foothold in the economy through the acquisition of a tender. The secrecy of the awarding procedure has fostered corruption.
• The judiciary is reportedly not independent and there have been several instances of selective prosecution, preferential treatment and arbitrary or politically motivated verdicts.
• The policy of awarding huge infrastructure projects to selected bumiputera companies (ethnic Malays and other Malaysian indigenous peoples) without open tender, and giving special licences to the same group has encouraged corruption between public officials and domestic and foreign companies.