Malaysia- 1st- Trade

By Daniel Morris | 13. January 2026

A NATIONAL ACTION PLAN ON BUSINESS AND HUMAN RIGHTS IS ESSENTIAL TO MEET OUR HUMAN RIGHTS OBLIGATIONS

What is the risk of inaction?

  • “Reputational damage and loss of investor confidence: In June 2024, the UN High Commissioner for Human Rights Volker Türk pointed out that Malaysia’s foreign investment prospects are tied to its human rights performance, indicating that without improvements, the country could lose out on vital investments. Lacking a clear commitment to reform feeds a perception of risk that can drive investors and international partners away, harming Malaysia’s sustainable development goals and tarnishes Malaysia’s reputation as a trading partner.
  • ESG-linked trade barriers and exclusion from markets: A prominent example is the European Union’s Carbon Border Adjustment Mechanism (CBAM) that will impose costs on carbon-intensive imports. Alarmingly, it is projected to impact 75 per cent of Malaysia’s exports to the EU, which accounts for eight per cent of Malaysia’s total exports between 2021 and 2023.2 Similarly, the EU and other developed markets are introducing due diligence laws to address deforestation, forced labour, and other human rights or environmental harms. The EU’s Corporate Sustainability Due Diligence Directive (CS3D) will oblige large companies to identify and address human rights and environmental risks in their supply chain. Malaysian companies that cannot demonstrate compliance with these standards may find European buyers unwilling to source from them. In e¤ect, Malaysia could be edged out of critical global value chains, not by formal sanctions, but by private sector decisions driven by foreign laws and consumer pressure.
  • Barriers  to  trade  agreements  and  regional  leadership: Beyond market access issues, absence of state-led BHR reforms impair Malaysia’s ability to negotiate trade agreements or lead on economic initiatives. Major trading partners increasingly embed human rights and sustainability clauses in trade deals and a failure to demonstrate such commitments can stall negotiations or invite stricter conditions. Regionally, as ASEAN economies develop their own BHR frameworks, Malaysia could lag behind peers in meeting new norms, potentially weakening its influence in bilateral and multilateral economic engagements.”

THEMATIC PRIORITY 1: GOVERNANCE

UNGP PILLAR 1

PROCUREMENT, INVESTMENT AND TAX

No.: G1.22

Action: Develop guidance on business and human rights-related clauses for all free trade agreements.

Output Indicator(s):

  • Guidance is developed that reinforces Malaysia’s position on human rights by aligning with international human, labour, and environmental rights standards when negotiating trade agreements.
  • Stakeholder engagement is institutionalised and the conduct of ex-ante and ex-post impact assessments of international investment agreements in the context of human, labour and environmental rights, and climate change is encouraged.

Collaborative Partner(s): Ministry of Investment, Trade and Industry (MITI); BHEUU