Malaysia to lose out if deal withdrawn


PETALING JAYA: Withdrawing from the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade agreement would be harmful to Malaysia’s international reputation and trading interests, says the Institute for Democracy and Economic Affairs (Ideas).

Ideas chief executive officer Tricia Yeoh stated for the country to back out of the trade agreement will not only deprive the country of numerous trade benefits and market access but it will also be injurious to the country’s 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.

Withdrawing means Malaysian exporters would lose access to the growing CPTPP market, which may possibly involve the economies of the United Kingdom, China, Ecuador, Uruguay, Costa Rica and Taiwan in the future,” she said in a statement.

Currently comprising 11 members from across the Pacific Rim with an aggregate global gross domestic product (GDP) of 13%, the CPTPP does not only provide market access for goods, services, and investments, but also high-quality standards on issues such as state-owned enterprises, government procurement, the environment and labour issues.

“Such high standards when implemented collectively will improve transparency and governance in trade and investment practices for all participating economies,” Ideas noted.

Based on the findings of the cost-benefit analysis (CBA) carried out by the Ministry of International Trade and Industry, Ideas added the CPTPP would be a net positive for Malaysia’s economy.

“The CBA had projected that ratification would raise GDP by RM248.2bil over the period of 2021 to 2030, thereby raising GDP growth by 1.9% relative to baseline figures in 2030. As well, the CBA also projected that Malaysia’s trade balance would measure at RM235.1bil in 2030, remaining in surplus at 8.5% of GDP within the same year,” said Ideas.

Addressing concerns on whether the government would be able to retain the right of affirmative action for the bumiputera community which includes the right to control goods and services that affect the customs, culture, and religion of the bumiputra, Ideas stated studies had revealed the trade deal would only impact businesses above certain thresholds.

A study conducted by the Institute of Strategic and International Studies in 2015 on the original Trans-Pacific Partnership (TPP) revealed that the government can retain its rights of affirmative action for the bumiputra community. This is evident for the construction contracts, whereby a 30% reservation for bumiputra would ensure their minimum participation.

“Past reports on TPP and CPTPP both found that the Investor-State Dispute Settlement mechanism would lead to better levels of investor protection, while allowing Malaysia to retain its policy space,” said Ideas.

Nevertheless, the organisation acknowledged that greater efforts need to be made to boost public buy-in of the CPTPP, through continuous assessment on the impact of the trade deal on the ground, both within the country and among CPTPP members.

“Multiple government efforts to upskill and support small and medium enterprises, including bumiputra enterprises, need to be improved upon so that a supportive ecosystem can be developed to elevate themselves to the standards expected within the trade agreement.

“In the long run, we expect to see Malaysian businesses flourishing and taking advantage of provisions within the CPTPP to improve their market access.

“Additionally, the economy as a whole will experience welfare gains in the longer term,” said research of Ideas director Juita Mohamad.

Ideas also called for additional support for small-medium enterprises to enhance their competitiveness and market-readiness so that they can effectively participate in the supply chain.

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