Judiciary killing off foreign investment

Foreign Investor Advisor

Modified 29 Jan 2008, 10:21 am

I noticed that the Malaysia corruption problem has been worsening as indicated by the recently released report by the US State Department.

As indicated by this report, the US State Department is now warning US businesses to take extraordinary caution when investing in Malaysia due to its worsening corruption as indicated by the report's section under 'Corruption'.

Particularly, under the section of 'Dispute Settlement', the US State Department is warning American businesses that the legal system in Malaysia is difficult to deal with as highlighted by paragraph two of the same section.

'Malaysia also is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The domestic legal system is accessible but generally requires any non- Malaysian citizen to make a large deposit before pursuing a case in the Malaysian courts, and can be slow and bureaucratic.

'The US Embassy is aware of one case where a US investor plaintiff reports that, after 31 months and 17 hearings, the Malaysian court has yet to address the merits of his case. Plaintiff claims to have provided the court with documentation both from Malaysia and from a US court case involving the same company that the company's assets continue to be drained through ongoing fraud.

'However, the court stayed his petition that the company be put in receivership until the matter is resolved. The court also stayed plaintiff's petition for discovery.'

This type of advice is very negative toward Malaysia as it simply implies severe corruption at the heart of Malaysia's legal system and that there is virtually no law in Malaysia to protect US businesses.

All of this will push American businesses toward investing in other Asian countries as opposed to Malaysia. I feel the Malaysian media ought to be alerted. It is to Malaysia's economic benefit that the existing government be more affective in curbing corruption. This type of deterioration is quite alarming.

Cautionary advice generated by the US State Department typically provides great impact on the investment climate of Malaysia that will translate into substantial economic losses if one takes a look at the size of US direct investment in to Malaysia, which stands as high as 28.8% of overall investment.

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