Generally, NO.
In 2022, Bank Negara Malaysia issued a Direction on Dealings with Specified Person and in Restricted Currency (‘the Direction’) which came into effect on 3 January 2022. The Direction was made pursuant to section 216(1) of the Financial Services Act 2013 and section 227(1) of the Islamic Financial Services Act 2013, which give power to Bank Negara Malaysia (‘BNM’) to issue directions to ANY PERSON in Malaysia, to prohibit, restrict of require the doing of any act as may be specified by the BNM. The word ‘any person’ here, according to both Acts, includes individual, any corporation, statutory body, society and any other body or organisation.
According to Section 216(4) of the Financial Services Act 2013 and Section 227(4) of the Islamic Financial Services Act 2013, any person who fails to comply with any direction issued under subsection (1), such as the Direction by BNM, that person commits an offence and shall be liable to imprisonment for a term not exceeding ten (10) years or to a fine not exceeding fifty (50) million ringgit or both. In other words, everyone in Malaysia – be it individual or not, is bound by the Direction issued by BNM.
In the Direction, under Paragraph 3, it states:
“3. (1) No person in Malaysia shall undertake or engage in any dealing or transaction with or involving a Specified Person.”
In other words, no individual, company, body, society or organisation is allowed to enter into an agreement, business transaction, arrangement, or any form of commercial, financial, or professional engagement with or involving a Specified Person.
“Specified Person” here refers to, the State of Israel, a citizen or permanent resident of Israel, an entity incorporated, established or registered in Israel, any person or company owned or controlled, either directly or indirectly, by Israel, citizen or permanent resident of Israel or Israeli company. [1]
HOWEVER, the rule on the prohibition of dealing or transacting with an Israeli Company is not absolute. A Malaysian Company may opt to contract with the State of Israel, an Israeli or and Israeli Company in limited circumstances:
“4. (1) Notwithstanding subparagraph (1), where an international trade with or involving a Specified Person—
(a) in goods is licensed under the Customs Act 1967 [Act 235], or does not involve movement of goods in or out of Malaysia; or
(b) in services is allowed in writing by a relevant authority exercising statutory power in Malaysia, or does not involve provision of services to or from a person in Malaysia, “ [2]
According to paragraph 4(2) of the Direction, if the trade does not fall within the circumstances mentioned above, a Malaysian company may proceed with the transaction only with the written approval of Bank Negara Malaysia.
The general prohibition stated in the Direction issued by BNM is in line with the political position taken by Malaysia:
- Malaysia maintains a non-recognition policy towards Israel, and does not have diplomatic relations with it.
- In 1974, several nations, including Malaysia, imposed trade embargoes against Israel and denied entry permits to Israeli citizens.
- The current Malaysian Prime Minister, Dato’ Seri Anwar bin Ibrahim, has on numerous occasions expressed his support for Palestine and has taken actions to call for an end to the ongoing aggression by Israel against the Palestinians.
- In 20 Dec 2023, Dato’ Seri Anwar Ibrahim declared that all Israeli-flagged ships, especially an Israeli company called ZIM (which had permission to dock in Malaysia since 2002) would be barred from docking in Malaysian ports, and ships heading to Israel would be barred from loading cargo. This was done with immediate effect.
- Malaysian passports are not valid for travel to Israel.
- Last but not least, Malaysia has always been a country that strongly supports Palestine and its people and has always condemned Israel’s actions against the Palestinians. For example, in 2014, Astro received public criticisms for entering into an agreement with Amdocs, an Israeli company, to obtain Amdocs’s service in subscriber management system.
In conclusion, generally a Malaysian Company is not allowed to enter into contract with an Israeli Company, except in limited circumstances as provided in paragraph 4(1) of the Direction or with the written approval of the Bank Negara Malaysia as provided in paragraph 4(2) of the Direction.
[1] Paragraph 2, Definition of the Direction on Dealings with Specified Person and in Restricted Currency.
[2] Paragraph 4 Definition of the Direction on Dealings with Specified Person and in Restricted Currency.
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