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Any attempt to withdraw from CPTPP would have grave opportunity costs, shake investor confidence, says FMM

FMM In The News: THE EDGE MARKETS, KUALA LUMPUR, Tuesday, November 29, 2022: Any attempt by Malaysia to withdraw from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which entered into force on Tuesday (Nov 29), would have grave opportunity costs and shake up investor confidence in the country.

Malaysia submitted its instrument of ratification for the CPTPP to the depository in New Zealand on Sept 30.

In a statement, the Federation of Malaysian Manufacturers (FMM) said Malaysia cannot afford to withdraw from the CPTPP as the country would run the risk of being relegated to the sidelines. It is also lagging behind its Asean neighbours in expanding its global market share.

“Our Asean neighbours have moved ahead strongly. Vietnam, for instance, is ahead of Malaysia as it already implemented the CPTPP in January 2019 and within that year significantly increased its exports to Canada, Mexico and Peru by 29.7%, resulting in an overall export growth of 8.5%. In addition, Vietnam also benefited greatly from foreign direct investment (FDI) from CPTPP countries, which accounted for US$39 billion (RM175.81 billion) or 24.2% of total FDI into the country in 2019,” said FMM president Tan Sri Soh Thian Lai.

Malaysiakini reported on Monday that the Coalition of National Sovereignty had urged newly appointed Prime Minister Datuk Seri Anwar Ibrahim to withdraw from the ratified agreement.

The coalition reportedly reminded Anwar of his own appeal to review the country’s participation in the trade bloc a year ago — over concerns about its adverse effects on job security and the country’s affirmative action policy.

Last month, the Consumers’ Association of Penang also urged the Government to withdraw from the CPTPP, saying the free trade agreement has “far more costs than benefits”.

The FMM said as the main thrust and centrality of the CPTPP agreement is to facilitate and promote regional economic integration, trade and investment, it is confident that Malaysia’s interest is safeguarded extensively through the necessary carve-outs to protect domestic interests and 22 suspended provisions from the original Trans-Pacific Partnership (TPP) agreement.

“In safeguarding Malaysia’s sovereignty, foreign investors can no longer make an investor state dispute settlement (ISDS) claim under the CPTPP for violation of private investment contracts with the Government, or investment authorisations,” said Soh.

Soh said Malaysia’s participation will certainly benefit businesses in the country in terms of preferential access for exports to three new markets, namely Canada, Mexico and Peru, for which Malaysia has no free trade agreements with.

These three new markets collectively represent a population of over 200 million, with combined gross domestic product of over US$3,500 billion, 94 times bigger than Malaysia’s economy, said Soh, citing data from the World Bank.

“Any attempt to withdraw from the CPTPP now will be disastrous for our economy. Indeed, the relocation of our exporting industries to other countries in Asean cannot be ruled out, and Malaysia will become a less attractive investment destination for investors. At the same time, Malaysian exporters will not have preferential access to the growing CPTPP market, where China, Ecuador and Taiwan have submitted their applications to be members of the CPTPP last year, while the UK is currently in the process of CPTPP accession negotiations.

“South Korea, Thailand and the Philippines have also expressed interest in joining the CPTPP, and have informally studied what it would take to formally accede to the trade pact.

“As such, there should not be any flip-flop on the decision to implement the CPTPP, which has already been approved by the Cabinet and Parliament,” Soh stressed.

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