What legal gaps allow foreigners to rent local business licenses?

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Existing Legal Frameworks Do Not Specifically Prohibit Foreigners from Operating Businesses Using Locally Issued Licenses

Current Malaysian law does not contain specific provisions that directly prohibit foreigners from operating businesses under the guise of locally issued licenses. This situation allows for the practice, often referred to as the "Ali Baba" concept, where local citizens' business licenses are effectively rented out to foreign entities or individuals. Law enforcement's ability to address these arrangements is currently limited to broader legislation such as the Penal Code and the Malaysian Anti-Corruption Commission Act.
Lack of Specific Legislation on Business Ownership and Renting

The absence of dedicated legislation governing business ownership and the rental of licenses creates a significant legal gap. This allows foreigners to engage in business activities using permits registered under local citizens' names without technically violating any specific statute. The Ministry of Economy has identified this as a key area requiring legislative intervention to curb the rent-seeking culture.
Reliance on General Laws for Enforcement

In the absence of specific laws, enforcement actions related to foreigners operating businesses with local licenses are presently dependent on existing statutes like the Penal Code and the purview of the Malaysian Anti-Corruption Commission (MACC). While these bodies can address criminal activities or corruption, they are not designed to specifically target the structural issue of business license rental by foreigners. This reliance on general laws has proven insufficient to effectively deter the practice.
Proposed Legal Framework to Address Rent-Seeking

The Ministry of Economy is actively studying various components to draft a new law aimed at specifically tackling the rent-seeking culture, including the "Ali Baba" phenomenon. This proposed legislation seeks to close the existing loopholes by creating clear regulations around business ownership and preventing the unauthorized rental of local business licenses to foreign operators. Preliminary proposals for this new legal framework are being developed for presentation at the National Economic Action Council meeting.

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What legal gaps allow foreigners to rent local business licenses?

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