MOU: Their bastardisation by Malaysian cronies and what they mean in China

Wed, 5 April: Some Malaysians don’t think much of memoranda of understanding and that’s quite, er, understandable. For there was a time when corporate Malaysia would sign MOU after MOU with foreign parties without any intention of turning them into real business contracts that would bring the nation wealth and jobs. 

The 1980s and 90s were notorious for this: the PM presided over scores of MOU churned out by cronies who were just interested in making headlines in the business pages and boost their share prices. These Malaysian businessmen were the ones who had bastardized the concept and principles of MOU,

As a result, some of us pooh-poohed PM Anwar Ibrahim when he recently announced the “historic” RM170 b worth of MOU signed during his visit to China.

What many Malaysians don’t understand is that the Chinese treat their MOU seriously. An article in the Forbes (In China, treat a memorandum like a binding contract). 

In common law countries like Australia, Canada, the United Kingdom and the United States, MOUs typically mean little. Only the signed final contract really counts. This is not typically true in civil law countries like China which hold to a much stronger concept of good faith negotiation. Under that concept, it is not acceptable to simply walk away from an MOU if that would constitute “bad faith.” 

That’s right. When dealing with China, it is important foreign companies treat an MOU with a Chinese companyu just as it wold a binding contract. 

The challenge for the Government now is to cut the red-tape that would bog down efforts to realise the inflow of investments resulting from the China MOU. Former Finance Minister Johari Ghani, who is MP for Titiwangsa and lord of this country’s media industry, has proposed the setting up of a special panel to monitor the realisation of these MOU, which is not a bad idea. 

More importantly, as one Twitter buddy rightly pointed out, “Get rid of the little Napoleons first”. These little Napoleons, I take it, are those who would make it difficult for anyone to do business in this country unless they have been paid their commission. Anwar obviously understood this, which was why he had stressed the need to stop this “commission culture among civil servants” days before he announced the RM170mb MOU with China.

The commission culture is, of course, not limited to civil servants. Politicians are probably the bigger culprits.