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IMPACT OF OPENING UP OF ECONOMY
Example 1: South Korea
In 1960s, South Korea faced economic difficulties. The population was growing at 3%, GDP per capita US$155, high unemployment and lacked natural resources.
Today, South Korea's market economy ranks 15th in the world by nominal GDP and 12th by PPP, a high income economy, member of the G20 and OECD. The per capita income grew from US$1,689 in 1980 to US$24,329 in 2013.
South Korea is a competitive economy and has industrial strength in heavy industries such as automobile manufacturing, shipbuilding and construction.
Chaebol system produced Korean MNCs e.g. Samsung and LG.
IMPACT OF OPENING UP OF ECONOMY
Example 2: China
In 1978, Deng XiaoPing introduced "Socialism with Chinese characteristics" to reform the Chinese economy by opening its markets to the world.
From 1978 to 2010, China grew rapidly at 9.5% per annum. China is now the 2nd biggest economy in the world after United States and is projected to become the biggest economic power in world by 2025 (Frost &
Sullivan).
China is now a major consumer market. It has developed in recent years excellent infrastructure facilities to promote connectivity within China as well as with rest of the world.
President Xi Jinping is continuing with reforms. China has opened the Shanghai Free Trade Zone to upgrade financial services, promote trade and improve governance as well as measures to encourage foreign investment in 18 sectors in the country's tightly regulated service industry. China has issued 25 licenses to operate in the zone.
Economy Indicators Before After
GDP US$200 billion
(Yr 1980)
US$8.227 trillion (Yr 2012)
Trade Value US$38 billion
(Yr 1980)
US$3867.1 billion (Yr 2012)
Income per Capita US$200
(Yr 1980)
US$6,000 (Yr 2012) Annual Growth Rate
(1978-2010)
9.5%
CHINA: BEFORE AND AFTER WTO
• China is now the world’s leading automobile manufacturer surpassing the United States with production of 22.1 million units in 2013 (US 11.4 million units).
Example 3: Myanmar
IMPACT OF OPENING UP OF ECONOMY
After a parliamentary government was formed in 1948, Prime Minister U Nu attempted to make Burma a welfare state and adopted central planning.
The 1962 coup d'état was followed by an economic scheme called the Burmese Way to Socialism, a plan to nationalize all industries, with the exception of agriculture.
The catastrophic program turned Burma into one of the world's most impoverished countries.
Economic liberalization (2011-present).
Myanmar's gross domestic product (GDP) per capita has grown 11 times since it joined ASEAN. ASEAN makes up for 13% of Myanmar's total exports and 20% of their total imports.
Myanmar recorded US$4.1 billion in foreign investment for fiscal year 2013- 2014, tallying the total investment from 34 countries to US$46 billion.
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ICT has allowed wide information access.
Goods and services can move cheaper thanks to cheap transportation and ICT.
The world is more borderless.
In a flat world, competition searches for lowest cost.
WHY GLOBALISATION IS AN IMPERATIVE?
WHY TRADE IS IMPORTANT TO MALAYSIA?
Openness (GDP Trade Ratio) Malaysia: Exports % As Per GDP
4.40 3.94
1.77
1.651.40 1.35 1.02
0.71
0.56 0.48
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
Hong Kong Singapore Malaysia Viet Nam Taipei, China Thailand South Korea Philippines China Indonesia
119.8
110.4 108.3 106.9 115.4 117.5 116.5 110.0
103.2
96.4 97.3
0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Third most international trade dependent nation in Asia after Hong Kong and Singapore.
In 2013, Malaysia was ranked as the 25th largest exporting and 24th largest importing country in the world.
Singapore: Exporter - 14, Importer - 15
Thailand: Exporting - 24, Importer - 20
Indonesia: Exporter - 27, Importer – 27
Malaysia population: 30 million, total trade: RM1.4 trillion (2013).
Small domestic market, need to expand to new markets to spur exports and seek new investments. Malaysia is developing infrastructure and other facilities to be connected globally e.g. Port Klang, KLIA, KLIA2.
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WHY WE ARE IN WTO / APEC / ASEAN / REGIONAL FTAs?
Ranked No.6
Ease of Doing Business 2014 among the 189 countries
Ranked No.12
Most Competitive Country from 60 participated countries
Ranked 19th
Business Environment (2014-2018)
(Malaysia is now the top 20 investor-friendly nations) 19/82 Countries
(World Competitiveness Yearbook 2014 )
MALAYSIA IN THE EYES OF THE WORLD
Ranked 53/177
Corruption Perception Index 2013
An agreement between two or more countries that provides favourable treatment such as:
Improved Market Access for exports as a result of elimination or reduced import duties;
Relaxation or Removal of Quantitative Import Restriction or Non-Tariff Barriers;
Trade Facilitative Measures;
More liberal, predictable, transparent investment regime, providing a more conducive environment for investment;
Improved market access for various commercial and professional services; and
Cooperation and capacity building.
249 FTAs/RTAs have been notified to WTO and estimated 100 more not notified or under negotiations.
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FREE TRADE AGREEMENT - DEFINITION
Globalisation of Trade and Investment Complement
liberalization efforts at the multilateral level in
WTO
More Intense Competition for FDIs First mover advantage
- setting rules
Enhancing Competitiveness - Preferential market
access
Creation of bigger market
Ensures Malaysia remains an important
investment and production hub
Capacity building &
economic and
technical cooperation Consumer benefits
IMPORTANCE OF FREE TRADE AGREEMENTS
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MALAYSIA’s FTAs
Malaysia has concluded 12 Free Trade Agreements. The FTAs are as follows:
ASEAN Free Trade Area (1992 ), ASEAN-China (2004), ASEAN-Korea (2006), ASEAN-Japan (2008), ASEAN-India (2009), and ASEAN- Australia-New Zealand(2009); and
Malaysia-Japan (2005), Malaysia-Pakistan(2007), Malaysia-New Zealand (2009), Malaysia-Chile (2010), Malaysia-India (2011), Malaysia-Australia (2012), Malaysia-Turkey (17 April 2014).
Malaysia is still negotiating the TPPA, RCEP.
• ASEAN – Association of Southeast Asian Nations.
• Established on 8 August 1967 in Bangkok, Thailand with the objective to strengthen regional cooperation, promote peace, stability and economic growth in the region.
• Started with five (5) founding members:
(i) Indonesia;
(ii) Malaysia
(iii) The Philippines;
(iv) Singapore; and (v) Thailand.
• Membership expanded: Brunei Darussalam (1984), Viet Nam (1995), Lao PDR (1997), Myanmar (1997) and Cambodia (1999).
HISTORY OF ASEAN
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A. POLITICAL-SECURITY PILLAR (Ministry of Foreign Affairs)
Rules-based Community of Shared Values and Norms, Good Governance, Human Rights and Adherence to the Principles of Democracy.
B. ECONOMIC PILLAR (Ministry of International Trade & Industry)
Single Market and Production Base, Competitive Economic Region, Equitable Economic Region and Linkages to Global Economy.
C. SOCIO-CULTURAL PILLAR (Ministry of Tourism & Culture)
Education and Human Resource Development, Science and ICT, Entrepreneurship, Poverty Alleviation, Social Safety Net, Health, Natural Disasters, Environment, ASEAN’s Cultural Heritage and Regional Identity.
ASEAN COMMUNITY 2015
ASEAN – BETWEEN 2 GIANTS
CHINA INDIA
Manufacturing giant with the lowest prices
Infrastructure that lures foreign investment
Good distribution of wealth with higher per-capita income
Strong technology and service industry
Relatively efficient capital market
Strong private sector and legal framework
Younger workforce & growing population
ASEAN
3rd largest economy in Asia & 7th largest in the world
Young and growing middle class
Huge national resources and human capital.
Strong manufacturing base
Favourable investment destination despite increasing
competition posed by other regional groupings / countries.
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Single Market and Production Base
•Free flow of goods
•Free flow of Services
•Free Flow Investment
•Freer flow of Capital
•Free Flow of Skilled Labor
•Food Agriculture and Forestry
Competitive Economic Region
• IPR
• Competition Policy
• Consumer Protection
• Infrastructure Development
• Taxation
• E-Commerce
Equitable Economic Development
• SME
• Narrowing Development Gap Integration into the Global Economy
• External Economic Relations
• Global Supply Networks
Cooperation in Other Sectors:
• Transport, Energy, Minerals, ICT, Tourism, Healthcare, Customs, Standards & Conformance
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WHAT IS AEC?
FEARS OF AEC
Opening up of market in ASEAN leading to inflow of goods from neighboring countries, leading to stiff competition to domestic industries such as iron & steel, automotive, petrochemical, and rice and agriculture products.
SMEs are vulnerable to foreign acquisitions and mergers and are unable to compete with multinationals and imports that are coming in at competitive prices.
Affecting programs aimed at promoting development of Bumiputera entrepreneur community.
Impact on traditional arts & crafts industry.
FEARS OF AEC
Influx of foreign services suppliers and skilled workers replacing job opportunities for Malaysians. Highly paid jobs are perceived to be given to foreigners.
Displacement of business opportunities for local companies and services suppliers.
Projects are perceived to be given to companies with foreign interest.
Limits policy space for government to promote industrial development programme and social economic re-engineering.
BENEFITS OF INTEGRATION TO ASEAN
2000 2013
GDP (US$ Billion) 609.0 2,412.3
GDP per capita (US$) 1,172.4 3,748.4
Total Trade (US$ Billion) 812.7 2,472.3
Intra-Trade (US$ Billion) 181.8 612.4
FDI Inflows (US$ Billion) 22.7 111.3
FDI Inflows (% of Global Inflows) 1.6 8.2
Population (Million) 518 626
Poverty Rate1
(% Population Living Below US$1.25 PPP per capita per day)
25.4 14.9
Infant Mortality Rate (per 1,000 live births)
35.9 22.4
Market size more than 20 times: ASEAN accounts for 27% of Malaysia’s Global Trade, or US$115.9 billion of US$423.8 billion (2013).
Attractive investment location for Malaysian companies: US$5.8 billion (2013).
Huge economic opportunities based on ASEAN’s growth and increasing middle income population.
Abundant natural resources i.e. oil and gas, timber, minerals, palm oil and rubber.
Opportunities for Malaysia to participate in infrastructure development projects.
Job opportunities for Malaysian professionals and skilled workers.
BENEFITS OF AEC TO MALAYSIA
MALAYSIAN COMPANIES IN ASEAN
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Launched in 2001.
The group includes the short-haul carriers AirAsia Malaysia, AirAsia Thailand, AirAsia Indonesia, AirAsia Philippines, and AirAsia India; the long-haul carrier AirAsia X. All members of the group except for AirAsia Japan and AirAsia India are based in the ASEAN Region.
Has approximately 130 aircrafts and employs 10,000 people – Majority of workforce comprises of people from different ASEAN countries.
MALAYSIAN COMPANIES IN ASEAN
Has operations in 17 countries including Thailand, Indonesia, Cambodia and Singapore with total employees of 42,000.
Making cross-border banking transactions easier with real-time funds transfers and cash withdrawals through ATMs in countries in which CIMB operates.
MALAYSIAN COMPANIES IN ASEAN
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Maybank is among the top 5 banks in South East Asia with total assets of more than USD 150 billion. It has an international network of over 2,200 branches and offices in 20 countries, employing 46,000 employees who serve over 22 million customers.
In ASEAN, Maybank has branches in Brunei, Singapore, Thailand, Indonesia, Cambodia and the Philippines.
MALAYSIAN COMPANIES IN ASEAN
• Lifestyle cafe chain in Malaysia started in 1997 by Dato’ Steven Sim.
• Fastest growing lifestyle cakes and café chain in the region with over 300 café outlets to date in Malaysia, Singapore, The Philippines, Thailand and Brunei.
• Halal certification awarded by Department of Islamic Development Malaysia.
MALAYSIAN COMPANIES IN ASEAN
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• Established in 1981.
• The world’s largest Halal Quick Service Restaurant (QSR) brand originating from Asia.
• Restaurant chain in Malaysia, Indonesia and Myanmar.
• Pioneered a number of firsts in the quick-serve industry.
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MALAYSIAN COMPANIES IN ASEAN
PT Rajawali (Hotel)
Thai Summit Autoparts
ASEAN COMPANIES IN MALAYSIA
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TRANS PACIFIC PARTNERSHIP AGREEMENT (TPPA)
• TPPA had its origins from the (P4) free trade agreement signed by New Zealand, Singapore, Chile and Brunei in 2005 which entered into force in 2009.
• TPPA began with inclusion of the United States, Australia, Peru and Vietnam in March 2010. Scope expanded with inclusion of new issues.
• First TPPA round - Mac 2010. Malaysia became the 9th TPP member in October 2010.
• Membership in TPPA is voluntary.
Stakeholders Process
Negotiators Negotiators are constantly negotiating their respective chapters with various stakeholders
TPP Ministers TPP ministers have been meeting regularly to resolve key issues. They will meet next in early December
Engagement MITI has been continuously engaging with stakeholders and different interest groups to get their feedback
Cabinet Cabinet is constantly updated on the TPP process and provides the mandate to our negotiators
Parliament The finalized text will be debated in parliament TPPA : YES OR NO ?
TPPA PROCESS
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TPPA: SCOPE AND COVERAGE
21 WGs, covering 29 Chapters
Goods
Rules Of Origin
SPS
TBT
Customs
Trade Remedies
Services
Non-conforming Measures
Financial Services
Telecommunications
E-commerce
Temporary Entry
Investment
GP
Competition (SOE)
IPR
Labor
Environment
Capacity Building
Horizontal Issues
SME Development
Regulatory Coherence
Competiveness and Business Facilitation
Legal And Institutional
“Malaysia is a nation dependent on an open economy and is committed towards preserving free and fair trade”
“Malaysia has voiced its concern that the deadline to conclude the TPP negotiations by year end is not realistic”
“We will not sacrifice our national interests”
YAB Prime Minister
8th October 2013, Bali
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TPPA: OPPORTUNITIES FOR MALAYSIA
• Maintaining Malaysia’s position as a high value-added manufacturing hub and quality investment destination.
• Duty free trade with four new FTA partners - Canada, Mexico, Peru and the US.
• The successful conclusion of the TPP will form a huge duty free market of 800 million people with a combined GDP of US$27.5 trillion.
• Greater market access for Malaysian products and services and inflow of foreign investments will be a catalyst in driving Malaysia’s economic transformation agenda.
• As a member of TPPA, Malaysia will also be able to increase our participation in the regional supply and value chains and facilitate access for Malaysian products and services into bigger markets.
• Capacity building through technical cooperation, sharing information and best practices.
TPPA: MARKET ACCESS OPPORTUNITIES
• Expand market access through tariff elimination/reduction and elimination of non-tariff barriers.
• Example: US tariffs for Textile 2.6-32%, Shoes 45%, Palm Products 4.6%, Plywood 8%, Processed Vegetable Palm Oil 12.3 cents per kg or 8% and electrical &
electronic 2-18% .
• TPPA preferential rules mitigates loss of GSP in Canada (1/1/2015).
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TPPA: FEAR AND CHALLENGES
National sovereignty
Beyond traditional trade issues (Environment, Labour, GP, SOE)
US Factor…
Secrecy of the negotiations?
Bumiputera & SME companies?
Limits policy space?
Lead to higher cost of medicines?
High commitment under IPR Chapter?
Foreign companies be able to sue Government?
Lost of job opportunities?
Threat to local SMEs / Local businesses to shutdown?
Local farmers affected? Rice?
TPPA: FEAR AND CHALLENGES
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INTEREST OF THE NATION WILL BE PRESERVED
Parameters
Constitution of Malaysia
Rights of State Governments
Major National Policies
National Interest
‘Malaysia will negotiate TPP on our terms’
Nothing is agreed until everything is agreed!
• Yes we need to open up, but on our terms.
• On balance pros more than cons, must benefit the people.
CONCLUSION
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