By

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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.

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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).

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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 1.65

1.40 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

Ho

ng

Ko

ng

Sin

gap

ore

Malaysia

Vie

t Nam

Taip

ei, C

hin

a

Th

ailand

So

uth

Ko

rea

Ph

ilipp

ine

s

Ch

ina

Ind

on

esia

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

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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?

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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

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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).

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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

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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?

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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.

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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

Note: 1 Excl. Brunei, Myanmar & Singapore

Source: IMF, WTO, UNCTAD, World Bank

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

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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

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• 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.

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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

FPT Viet Nam

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.

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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

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“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.

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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!

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• 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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