Business Times
MALAYSIA has finally signed what is essentially its first Free Trade Agreement after having dragged its feet for the last few years. Earlier this month, Malaysia and Japan agreed to remove or cut tariffs on practically all goods flowing between them within 10 years under the landmark Japan-Malaysia Economic Partnership Agreement. The agreement is significant as Japan is Malaysia's third largest trading partner, after the US and Singapore, with total trade exceeding RM110 billion.
In sealing the agreement, Malaysia has joined a growing number of countries in creating a web of FTAs to help boost bilateral trade. For instance, Singapore has signed FTAs with nine major trading partners that include the US, Australia, New Zealand, Japan and South Korea. Bilateral FTAs are necessary as trade negotiations under the World Trade Organization move at a glacial pace. WTO talks achieved only modest progress at its last meeting in Hong Kong recently due to perennial differences over farm subsidies.
Malaysia could also embrace the US - its biggest trading partner – following success in the pact with Japan. Malaysia and the US are still drafting an FTA framework. While FTAs will help boost Malaysia's position as one of the top 20 trading nations in the world, not all Malaysian businessmen are jumping with joy. Malaysian automakers are seen to be resisting the change as it would entail the imports of cheaper Japanese cars.
According to a report, national carmaker Proton Holdings has appealed to the government to defer the pact with Japan. But Malaysia should not cave in to the auto lobby. KL must send a strong signal that FTA gains outweigh the costs. The most significant aspect of its maiden FTA is that the KL government cannot afford to shield local businesses permanently from global competition.
Many Malaysian businesses have long survived on patronage and high import barriers. For instance, Malaysia imposed high import duties of up to a staggering 300 per cent to help protect Proton in the last two decades. Freeing up trade flows will spur Malaysian companies to improve their products, and think of new businesses.
Indeed, there is no need to be overly protective of Malaysia's business community. Some companies have been stepping up their presence in the international arena in the last few years. One prime example is state-owned oil major Petroliam Nasional, which has operations in more than 30 countries.
Other Malaysian companies that are spreading their wings in the region include Telekom Malaysia, Malayan Banking and plantation group IOI. Incidentally, they have made their presence felt in the more mature market of Singapore. Telekom Malaysia recently emerged as a substantial shareholder of Singapore telco MobileOne; Maybank has become one of the most innovative lenders in Singapore; while IOI almost clinched the coveted Orchard Turn site.
To encourage companies to venture overseas, KL must find ways to free up trade. Malaysian goods and services must become competitive. Giving permanent crutches to its homegrown companies helps no one.
MALAYSIA has finally signed what is essentially its first Free Trade Agreement after having dragged its feet for the last few years. Earlier this month, Malaysia and Japan agreed to remove or cut tariffs on practically all goods flowing between them within 10 years under the landmark Japan-Malaysia Economic Partnership Agreement. The agreement is significant as Japan is Malaysia's third largest trading partner, after the US and Singapore, with total trade exceeding RM110 billion.
In sealing the agreement, Malaysia has joined a growing number of countries in creating a web of FTAs to help boost bilateral trade. For instance, Singapore has signed FTAs with nine major trading partners that include the US, Australia, New Zealand, Japan and South Korea. Bilateral FTAs are necessary as trade negotiations under the World Trade Organization move at a glacial pace. WTO talks achieved only modest progress at its last meeting in Hong Kong recently due to perennial differences over farm subsidies.
Malaysia could also embrace the US - its biggest trading partner – following success in the pact with Japan. Malaysia and the US are still drafting an FTA framework. While FTAs will help boost Malaysia's position as one of the top 20 trading nations in the world, not all Malaysian businessmen are jumping with joy. Malaysian automakers are seen to be resisting the change as it would entail the imports of cheaper Japanese cars.
According to a report, national carmaker Proton Holdings has appealed to the government to defer the pact with Japan. But Malaysia should not cave in to the auto lobby. KL must send a strong signal that FTA gains outweigh the costs. The most significant aspect of its maiden FTA is that the KL government cannot afford to shield local businesses permanently from global competition.
Many Malaysian businesses have long survived on patronage and high import barriers. For instance, Malaysia imposed high import duties of up to a staggering 300 per cent to help protect Proton in the last two decades. Freeing up trade flows will spur Malaysian companies to improve their products, and think of new businesses.
Indeed, there is no need to be overly protective of Malaysia's business community. Some companies have been stepping up their presence in the international arena in the last few years. One prime example is state-owned oil major Petroliam Nasional, which has operations in more than 30 countries.
Other Malaysian companies that are spreading their wings in the region include Telekom Malaysia, Malayan Banking and plantation group IOI. Incidentally, they have made their presence felt in the more mature market of Singapore. Telekom Malaysia recently emerged as a substantial shareholder of Singapore telco MobileOne; Maybank has become one of the most innovative lenders in Singapore; while IOI almost clinched the coveted Orchard Turn site.
To encourage companies to venture overseas, KL must find ways to free up trade. Malaysian goods and services must become competitive. Giving permanent crutches to its homegrown companies helps no one.
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