KUALA LUMPUR, Dec 14 — Malaysia marked major milestones in regional trade in 2022 when it finally concluded two major deals – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP).
Malaysia finalised the CPTPP deal on Sept 30, making it the ninth of the 11 countries to have ratified the agreement while the RCEP came into force on March 18, making Malaysia the 12th signatory of the trade pact.
CPTPP to ignite economic growth
After years of detailed deliberations, extensive consultations and careful assessments, the ratification of the CPTPP was finally done on Sept 30 and came into force on Nov 29.
Malaysia signed the pact in 2018. This agreement has already been ratified and implemented in stages since December 2018 by Australia, Canada, Japan, Mexico, New Zealand, Singapore, Vietnam and Peru.
Based on the findings of the cost-benefit analysis (CBA) carried out by the Ministry of International Trade and Industry (MITI), CPTPP will definitely elevate Malaysia’s prominence as a global trading economy with total trade expected to increase to US$655.9 billion (US$1=RM4.40) by 2030.
According to the CBA analysis published by the ministry on July 25, 2022, Malaysia is expected to achieve a higher gross domestic product (GDP) of US$56.5 billion (US$1=RM4.40) over the 2021-2030 period.
The CPTPP also offers new market access opportunities for Malaysia, namely Canada, Mexico and Peru, which it has no free trade agreements with.
MITI said that based on the 2021 data from World Bank, these three new markets collectively represented a population of over 200 million people with a combined GDP of over US$3.5 trillion – 9.4 times bigger than Malaysia’s economy.
In the meantime, China, Ecuador and Taiwan submitted their applications to be members of the CPTPP last year while the United Kingdom (UK) is currently in the process of the CPTPP “accession negotiation.”
During the 6th Meeting of the CPTPP Commission held in Singapore in early October, then Senior Minister of International Trade and Industry Mohamed Azmin Ali said the pact will add further impetus to Malaysia’s ongoing economic recovery efforts.
Most industry players have lauded the ratification, but certain groups have called for the post-GE15 new government led by Datuk Seri Anwar Ibrahim to withdraw from the CPTPP, citing that the free trade agreement has “far more costs than benefits”.
However, the Institute for Democracy and Economic Affairs (Ideas) said withdrawing from the CPTPP trade agreement would be harmful to Malaysia’s international reputation and trading interests.
Its chief executive officer Tricia Yeoh said the country backing out of the trade agreement will not only deprive Malaysia of numerous trade benefits and market access but will also be injurious to its international credibility among foreign investors.
“It took about eight years of negotiations before Malaysia finally signed the agreement in 2018, after which it took another four years before Malaysia finally ratified it late this year.”
“A U-turn now could possibly scare off foreign investors who above all crave stability in a partner country,” said Yeoh.
The new government has yet to provide a clear directive on its stance on the CPTPP.
RCEP: tapping into a 2.2 billion people market
Meanwhile, the RCEP agreement has paved the way for the country to integrate into the world’s largest free trade agreement (FTA) that involves 15 countries, with a total population of more than 2.2 billion.
Anchored on the rules-based multilateral trading system, it will enable Malaysia to enjoy the global trade and investment ecosystem, benefiting from the eventual elimination of around 90 per cent of tariffs among members.
MITI said other advantages to be gained include the further liberalisation of trade, encompassing the removal of non-tariff barriers, increased trade facilitation, and the removal of barriers to the services sector. It will also see the enhancement of the business environment through regulations relating to intellectual property protection, government procurement practices and e-commerce.
According to MITI, the establishment of the RCEP positions the Asia-Pacific region as the new centre of gravity for global commerce, boosting intraregional trade by nearly US$42 billion (US$1= RM4.40).
“Among ASEAN countries, Malaysia is expected to be the largest beneficiary of the agreement in terms of gains in exports, with a projected US$200 million increase,” it said.
The RCEP, which complements the World Trade Organisation’s development agenda, will enhance recognition of the role of small and medium-sized enterprises, including micro-enterprises, in contributing to economic growth, employment and innovation.
As the world gradually recovers from the economic repercussions of the pandemic, the RCEP presents a vital tool to re-invigorate businesses and economic activities through a marked reduction in barriers to trade across the region.
Deemed the largest FTA in the world, the RCEP was signed among 15 countries on Nov 15, 2020, after going through 31 rounds of negotiations over the past eight years.
The countries were Malaysia, Brunei, Singapore, Vietnam, Cambodia, Indonesia, Laos, Myanmar, Philippines, Thailand, China, South Korea, Australia, Japan and New Zealand.
Altogether, the countries account for nearly a third of the global population and world gross domestic product (GDP).
Revitalising APEC economies post-pandemic
During the 29th Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting (AELM) in Bangkok last month, Malaysia encouraged its members to set up a collaborative platform that addresses the financial needs and support of micro, small, and medium enterprises’ (MSMEs) participation in international trade transactions.
Chief secretary to the Malaysian government Tan Sri Mohd Zuki Ali said MSMEs are the region’s growth engine, noting that they represented an estimated 95 per cent of global businesses and accounted for some 60 per cent of employment across economies at all levels of development.
However, Mohd Zuki, in his capacity as the Special Representative of the Prime Minister, said the COVID-19 pandemic has caused MSMEs to operate under tight cash flow conditions.
“In this regard, Malaysia wishes to underscore the importance of APEC Business Advisory Council (ABAC)’s recommendations to the leaders and encourage APEC economies to consider the establishment of a collaborative platform that brings together public and private sector stakeholders to explore tangible solutions,” said Mohd Zuki at a session at the 29th AELM.
He added that to achieve a dynamic and interconnected regional economy as envisioned by APEC Putrajaya Vision 2040, a strong foundation for growth, ably supported by competitive economic players, including and particularly MSMEs, is vital.
Under the chairmanship of Thailand and guided by the theme “Open. Connect. Balance”, the APEC Economic Leaders’ Week, the group’s first in-person summit in four years, was held from Nov 14-19 at the Queen Sirikit National Convention Centre in Bangkok.
The 2019 meeting was cancelled due to the domestic situation in the host country Chile, and the meetings in 2020 and 2021 were held virtually.
The CPTPP, if the government decides not to do a U-turn, is projected to complement the gains provided for by the RCEP, and both agreements are highly regarded with regard to benefiting the country and the people.
Both pacts would invigorate trade activities and economic growth, and at the same time provide low-hanging fruits for a Malaysian economy pummelled by the pandemic in the last two years.
The two FTAs would likely create a trade diversion with more countries shifting their resources to the Asia-Pacific region, including Malaysia, amid sluggish global economic growth and various headwinds expected next year.