Trans Pacific Partnership Agreement: A good deal for Malaysia?

Malaysia has always been a trading nation. Melaka in the 15^th century was the main trading hub in South-East Asia and as we are situated at the crossroads of Asia; our trading nature if a given.

Melaka remains of interest to me because for a 15^th Century economic system, it very progressive and forward-looking. Melaka was a diverse trading powerhouse and its openness facilitated diversity and resulted in in monetary and cultural wealth. At its peak, over 80 languages were spoken in Melaka with Malay being the lingua franca and traders came from China, Gujerat, South India, Bengal, the Arab Peninsula and of course from the Malay Archipelago. Despite all the competition, the local traders of Melaka also thrived as they had a bigger market for their goods especially spices.

Fast forward to 2013, there is a national debate on whether Malaysia should be part of the Trans Pacific Partnership Agreement (TPPA); I take the view that it is only natural for Malaysia to be part of the TPPA because it would burnish our credentials as a trading nation and also grant excess to a market of some 800 million with a combined gross domestic product (GDP) of US$ 28 trillion, Malaysia stands to gain as we will be able to expand our horizons and also compete internationally as we are currently constrained by our limited domestic market of 29.5 million people and a GDP of US$ 300 billion.

We must not fear competition

Malaysia must confront is apathy to competition. Most of our businesses enjoy a high level of protection especially the steel and automotive sector which has contributed to a degree of inefficiency. As such, if we wish to stand at par with our peers in the region and around the world we must be ready to compete with them and in the process we must also out-innovate and out-smart them. The TPPA will level the playing field and in the process we will have to make a conscious effort in investing in research and development (R&D) to ensure we produce better. In 2010, Malaysia’s spending on R&D was a meagre 0.64% of GDP which was lower than Japan at 3.4%, Singapore at 2.52% and Korea at 3.36%. Despite the various research grants given out by the government, our R&D investment remains low due to the protectionist measures afforded to Malaysian companies. They have blossomed in their comfort zones without seeing the need to invest in making their products better or more attractive. The TPPA will bring forth a wave of creative destruction that Malaysia desperately needs to ensure it climbs the economic ladder and becomes not only a high-income nation by 2020 but also a nation that is at the forefront of technological innovation and sophistication.

The Malaysian Consumer

The debate on the TPPA has been dominated by interest groups and mostly those who fear the competition. But nothing much has been said about the Malaysian consumer i.e. you and me. How do we gain from the TPPA? We will have access greater choice of food products, clothing, footwear, automobiles, branded goods and other products that the increasingly “consumerist” Malaysian consumer enjoys. Also, a lot of these goods will be duty-free as Malaysia will be part of the free trade area and with the stringent quality requirements that will be part of the agreement, Malaysians can be assured of not only a wide variety of products but products with quality. Hence, the average Malaysian consumer must also be heard in this debate and not have his or her voice drowned out by those who fear competition and efficiency.

TPPA and the Asean Economic Community (AEC)

The AEC is the goal of regional economic integration by 2015. It will be fashioned loosely on the European Union (EU) which also started off as a free trade area that morphed into an economic community, with the harmonisation of economic policy The EU is now fully-fledged customs union and a supra-national entity. The EU member states have all readily ceded powers and the EU authorities are able to introduce common policies on the economy, health, security and policing, and the environment. As the AEC moves in that direction, Malaysia must accept the reality that we will be part of an economic community, with a free trade area, either sooner or later. As such, the TPPA will serve as a good cushion for Malaysia to adjust to a rapidly evolving and sophisticated AEC post-2015 and once again Malaysians will have to accept competition from our peers in the region. For example, Singaporean companies will have greater access to Malaysian companies sooner or later as such we must brace ourselves for this change and the TPPA will serve as a transitionary purpose and ensure that when the AEC takes off, Malaysia will be better prepared to adjust to that new and challenging economic reality.

National Security and Interests

I agree with the calls to ensure that the TPPA does not compromise on our national security and stated national interests. I believe no government will readily compromise on this and Malaysia has been at the forefront of ensuring this during the TPPA negotiations. In a discussion with the Minister of International Trade and Industry (MITI), Datuk Seri Mustapa Mohamed recently, all of us in attendance we assured of this and the Minister’s zeal in ensuring that our national interests, especially the Bumiputera agenda is not compromised was comforting. For example in defence, Malaysia already purchases weapons and armoury from a number of potential TPPA member states as such we do not need to be overly anxious on the impact the TPPA will have on the defence industry. In fact, the TPPA will likely spur smart partnerships between Malaysian defence firms and that of other TPPA potential member states which will be a boon for our defence industry that is currently lagging.

The Bumiputera agenda remains a concern and the government must ensure that is not compromised in any way. While the larger tales of foreign colonisation are a stretch in my opinion, the Minister assured us that there will be large carve outs in the field of government procurement to ensure that the interests of the Bumiputera community are well guarded. At the same time, the TPPA will also allow local Bumiputera firms to compete for projects in other TPPA member states. The government must also develop a strategy to cushion the effects the TPPA will have on Malaysian business which includes a staggered approach on dismantling the protectionist policies to ensure that Malaysian businesses are not adversely affected.

Conclusion

Malaysia must return to its Melaka roots and not fear openness and diversity. In fact we have always thrived in it. In any free trade agreement there are bound to be concerns but yet again we have come out stronger economically from every trade agreement we have signed despite the concerns raised during the negotiation stage. Our FTAs with China, India, Japan, South Korea, Australia, New Zealand and others has given us access to their markets so we can sell our good and services unencumbered but at the same time Malaysian consumers have gained from cheaper products with a superior quality from these countries.

The fears of unbridled competition that will cripple local industry have proven to be untrue, in fact we are constantly growing and improving and this can be witnessed by an annual increase in industrial production.

Malaysia also has much to gain by being part of the TPPA negotiations as we are able to construct the rules of game. If Malaysia withdraws now, we will be isolated and we will suffer economically as our main competitors like Singapore and Vietnam are part of the TPPA. They will be able to sell their goods and products at a cheaper price to our main markets like the United States and Japan. Eventually, reality will compel us to be part of the TPPA but we will then have to play by the rules that we written without our input. Also, Malaysia already has direct FTAs with 6 potential TPPA member states.

I accept that real concerns have been expressed on the impact of the TPPA from the price of medicines and other essential items however, the government should be given the chance to explain their position and I personally benefited from the discussion with our MITI Minister and I do hope more will too and finally see the benefits of greater trade and not be constrained by parochial concerns that will only ensure we are left behind once again. I believe the TPPA is a good deal for Malaysia and do hope Malaysians will agree with me.

 Ivanpal S. Grewal

Source: The Malaysian Insider