- ‘Overlap ban’ sends wrong signal: the system fears misuse more than it values initiative
- Data analytics, digital identity, and automated audit trails offer far more effective safeguards
Malaysia’s public procurement system has evolved considerably over the past two decades, with the e-Perolehan (eProcurement) platform serving as the digital backbone of how ministries and agencies source goods and services.
Yet, some of the structural policies within the Ministry of Finance’s (MOF) supplier registration framework continue to reflect a legacy of administrative control rather than market efficiency.
Among these is a regulation that, while well-intentioned, has created unnecessary friction for entrepreneurs and small- and medium-sized enterprises (SMEs): the restriction on “overlapping” shareholders across companies registering under the same Kod Bidang (Category Code).
It doesn’t matter if they are different ventures, have different partners, or even operate in different specialisations. The system automatically blocks them.
In principle, this rule was introduced to prevent abuse — to stop the same individuals from bidding through multiple fronts for the same tender, inflating their chances of winning. In the most extreme view, this could be construed as bid manipulation or even fraud.
But here’s the problem: the rule is enforced at the wrong stage.
The policy and its intent
Under the current MOF supplier registration regime, every company must apply for specific Kod Bidang — six-digit product or service categories that determine the type of government procurement they may participate in.
The logic is sound: Kod Bidang ensures suppliers are qualified within defined technical scopes, facilitating transparent and competitive sourcing.
However, the overlap rule stipulates that where two or more companies share common shareholders, only one may be registered under the same Kod Bidang. In effect, an individual or corporate shareholder cannot hold interests in multiple companies offering services within the same category, regardless of the companies’ differing functions, partners, or business models.
The policy’s intent is legitimate. It was designed to curb bid manipulation or bid flooding — a scenario where the same individuals submit multiple bids through different entities, creating an illusion of competition and undermining procurement integrity. In the most extreme interpretation, such behaviour could constitute collusion or tender fraud.
The problem of timing
The difficulty lies not in the objective but in the implementation.
The overlap restriction is applied at the registration stage, long before any actual tender process begins.
This creates a situation where companies are excluded on the basis of potential — rather than proven — conflict.
Entrepreneurs who legitimately co-own multiple ventures — often formed with different partners, technical teams, or market focus — are prevented from registering all their companies under the same Kod Bidang, even when those businesses serve distinct functions.
The result is a form of pre-emptive exclusion:0 a regulation designed to prevent possible misconduct ends up constraining legitimate enterprise formation.
The underlying assumption — that common ownership equates to collusion — does not always hold true in practice.
When one code covers too much
The issue is compounded by how broad certain Kod Bidang categories are.
A single code, such as 210103 – Software Development Services – may encompass everything from enterprise systems and cybersecurity platforms to mobile applications and data analytics solutions.
In practice, it is entirely reasonable for an entrepreneur to establish different companies under this same code: one focusing on enterprise software, another specialising in educational technology, and a third dedicated to cybersecurity.
Each may have different partners, investors, and market strategies — yet all are treated as duplicates under the current rule.
To be clear, this situation is not confined to ICT. Similar overlaps occur in construction, consulting, maintenance, and logistics — any sector where Kod Bidang definitions are broad.
What the regulation inadvertently penalises is business diversity — the very characteristic that enables SMEs to innovate and adapt to different segments of the public market.
Legitimate reasons for multiple registrations
There are several legitimate, commercially sound reasons why a shareholder may participate in more than one company registered under the same Kod Bidang:
- Different Partnerships or Equity Structures – Joint ventures with distinct partners for different markets or technical areas.
- Specialisation Within Broad Categories – Sub-niches under a single Kod Bidang (e.g., AI development vs. mobile systems).
- Regional Operations – Separate companies for Peninsula and East Malaysia operations, often required for logistical or tax reasons.
- Risk Management – Segregation of business lines to limit liability exposure.
- Succession Planning – Gradual transfer of ownership to new partners or family members.
- Project-Specific Entities – Special-purpose vehicles (SPVs) or joint ventures formed for particular government initiatives.
All of these are normal corporate practices. None constitute collusion by default.
Yet, the current registration policy treats them as red flags rather than operational distinctions.
A smarter enforcement point
Modern procurement systems — including Malaysia’s own e-Perolehan platform — already possess the technical capability to detect related entities automatically at the bidding stage.
Ownership overlaps can be cross-checked when bids are submitted, enabling procurement officers to determine whether companies with shared shareholders are simultaneously competing for the same contract.
That is where enforcement belongs: at the point of potential competition, not at the point of entry.
This approach would preserve the spirit of the regulation — ensuring fair competition — without unnecessarily restricting legitimate business participation. It would also align Malaysia’s practice with international public procurement standards, where conflict-of-interest checks are dynamic and context-specific, not static gatekeeping tools.
The cost of administrative over-control
While the rule affects all sectors, its impact is most acutely felt among technology-based SMEs and Bumiputera entrepreneurs, for whom joint ventures and consortiums are a common path to market entry.
In the ICT sector, partnerships often evolve around complementary expertise — for example, one company focusing on platform development, another on cybersecurity or AI integration.
Each partnership may necessitate a new corporate entity, yet the same Kod Bidang applies.
When registration is denied because of shareholder overlap, the system effectively forces consolidation, stifling flexibility and innovation. It also risks concentrating opportunities in fewer hands — ironically achieving the opposite of competitive diversity.
Reframing the policy objective
The MOF’s overarching goal — integrity in public procurement — remains crucial. However, integrity should not come at the expense of legitimate entrepreneurship. The policy objective can be met more effectively by shifting from exclusion to transparency.
A reformed approach could include:
- Allowing multiple registrations with mandatory disclosure of shared shareholders;
- Deploying automated conflict detection at the tender stage;
- Imposing sanctions only when cross-bidding or collusion is proven, not when mere ownership overlap exists.
Such adjustments would maintain procurement integrity while enabling greater inclusivity, innovation, and participation — especially among SMEs seeking to collaborate or scale through partnerships.
A perspective from industry
As Secretary of the Persatuan Usahawan ICT Bumiputera Malaysia (NEF), I have seen how this issue repeatedly affects our members.
NEF represents around 100 active Malaysian technology companies, many of which are directly engaged in digital transformation projects across government and industry.
For these firms, the overlap restriction is not an abstract policy — it is a daily operational barrier.
It prevents legitimate ventures from forming, delays business expansion, and discourages young technopreneurs from participating in government procurement altogether.
This is not a new issue. I encountered the same limitation when I first went through the registration process earlier this year (2025), but it has existed for several years.
Towards a modern procurement ecosystem
Malaysia has made significant progress in digitalising its procurement landscape, but regulatory frameworks must evolve alongside technology. The overlap ban is a legacy rule from a paper-based era — one that made sense when manual checks were the only defence against collusion.
Today, data analytics, digital identity, and automated audit trails offer far more effective safeguards. Recalibrating this policy would not weaken oversight; it would modernise it.
In the broader context, this reform would also align with national priorities such as Madani Economy, Malaysia Digital, and SME empowerment, all of which emphasise inclusion, innovation, and good governance.
Conclusion
The challenge before policymakers is to strike a balance between control and opportunity. The MOF’s no-overlap rule aims to protect integrity, but its current implementation constrains growth.
A policy built on suspicion can only deliver compliance, not progress. What Malaysia needs is a procurement framework built on trust, data transparency, and intelligent regulation — one that ensures fairness while enabling entrepreneurs to participate fully in nation-building.
By moving from exclusion to transparency, the government can transform e-Perolehan from a gatekeeper system into a true enabler of Malaysia’s digital economy.
Saifol Bahri Shamlan is the Secretary of the Persatuan Usahawan ICT Bumiputera Malaysia (NEF), representing over 100 active Malaysian technology companies. He is also a co-founder and shareholder in two digital services firms — MedPlanner Sdn Bhd and Jooblii Technologies Sdn Bhd. Saifol has over three decades of experience in multinational corporations, government, IT (MDEC), foreign and local investment promotion, and socio-economic development, and writes on digital transformation and public-sector innovation.
