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Malaysian Business Sector: TPP to Drive Growth and Jobs

Joint Press Statement

The Malaysian business sector, as represented by the: 

a. Federation of Malaysian Manufacturers (FMM)

b. Malaysian International Chambers of Commerce and Industry (MICCI)

c. The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM)

d. Malay Consultative Council (Majlis Perundingan Melayu) (MPM)

e. SME Association of Malaysia

f. Malay Businessmen and Industrialist Association of Malaysia (Persatuan Pedagang Dan Pengusaha Melayu Malaysia) (PERDASAMA)

g. American Malaysian Chamber of Commerce (AMCHAM) 

express our joint support for Malaysia to sign the Trans-Pacific Partnership (TPP) agreement. We are of the view that the signing of the TPP is the key to Malaysia’s aspirations to enjoy sustainable growth and move into the ranks of a high income nation. We believe that it holds immense potential for boosting exports, generating economic growth and creating employment. It also promises Malaysian companies and all TPP countries a degree of transparency and predictability in investment rules and tariff concessions.  

The Cost Benefit Analysis (CBA) studies by Institute of Strategic and International Studies (ISIS) and PricewaterhouseCoopers (PwC) further reaffirms that TPPA is expected to bring more positive than negative impacts on the Malaysian economy and is in our national interest. 

Being a signatory to the TPP will mean that Malaysia will have access to an enormous free trade market of 800 million people with a combined GDP of USD27.5 trillion. As a result of TPP, tariffs will be eliminated on 85% of Malaysia’s trade with its new FTA partners – Canada, Mexico, Peru and USA. This will ultimately represent USD$1.2 billion of tariff savings a year for Malaysian industries. We have identified products that will benefit from duty free access to the TPP countries are automotive products, machinery and equipment, electrical and electronics, textile and apparel and rubber products among others. Malaysia will eliminate import duty for several sensitive E&E products and petroleum & chemical products which will open up more opportunities for local players to procure better quality raw materials from its TPP partners at a lower price to produce high value added products.  In turn, exports of higher value added finished products from Malaysia are expected to increase. Recognising the economic benefits that can be reaped from the TPP, countries like the Philippines, Thailand, Indonesia, South Korea and Taiwan have also expressed their interest in joining TPP in the foreseeable future.

SMEs are already competing under existing FTAs. For instance since January 2010 over 90% of our tariffs under the ASEAN-China FTA had been eliminated but Malaysian SME companies have continued to survive and in fact able to compete more effectively due to cheaper imported raw material and inputs. Under the TPP, a chapter is dedicated to facilitate SMEs will be facilitated to participate in the global supply chain, by enhancing transparency and sharing of information on-line among TPP countries, as well as developing capacity building programmes to assist SMES to remain relevant under TPP.  

The TPP is now more important than ever to ensure that Malaysia continues to attract Foreign Direct Investments (FDI). It is also crucial to help protect our investments abroad given that Malaysia is now a net exporter of capital – largely because of the investments and expansion of local corporations into overseas market.  

We are confident that having a first mover advantage in the TPP would yield positive results. Given the uncertainties in the global trading environment, especially in traditional export markets, can Malaysia afford not to sign important FTAs like the TPP and later, other FTAs in the pipeline like the EU Malaysia FTA or RCEP? If we fail to conclude the TPP, our ASEAN neighbours, Vietnam, Singapore and Brunei will move ahead of us strongly and we will be relegated to the side-lines and relocation of our exporting industries to Vietnam cannot be ruled out. As such, the opportunity cost of not aligning ourselves with the global economy now would only get costlier for Malaysia over time.  

We recognise that there are challenges in implementing such a broad and high-standard agreement across different countries. The Government has managed to successfully negotiate numerous exclusions and exemptions to safeguard the nation’s and stakeholders’ interests especially in the areas of national sovereignty, Government Procurement (GP), State Owned Enterprise (SOE) and the Bumiputera agenda. The Government retains its rights of affirmative action for the Bumiputera community. Market access obligations in GP will gradually reduce preferences over time. Malaysia can also elect to deny tobacco control measures from Investor State Dispute Settlement (ISDS) provisions.  

Being an open and competitive trading economy has served us well in the past and our development experience tells us that we should not be held back by the unfounded fears of a few. It is with this in mind that we, the Malaysian business sector urge our government to look into the future and take the steps necessary to lead the TPP into a reality. We stand ready to support a truly comprehensive, high-standard and ambitious TPP agreement that opens the Malaysian markets to the fullest extent possible. To this end, we urge that all stakeholders focus on the overall interests of the nation going forward.

January 20, 2016

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