Monday, October 12, 2015

TPPA – what’s in it for Malaysia?

THE Trans-Pacific Partnership Agreement (TPPA) negotiations have concluded and citizens of all 12 participating countries will be seeking clarity on how their respective nations will benefit from this historic agreement.

It is important to recognise that in an increasingly globalised world, we will see more nations working towards trade liberalisation, free markets that will ultimately benefit the participating nations. The 12 TPPA members make up 40% of global GDP and approximately a third of world trade – collectively representing a population in excess of 750 million people.

By reducing trade barriers, TPPA will provide Malaysian-owned businesses wider access to international markets and it will strengthen the country’s economic growth. The recently negotiated agreement will provide local businesses with the first ever Free-Trade Agreements between Malaysia and the US, Canada, Mexico and Peru, in addition to enhancing access to eight other markets.

Some of the sectors that will benefit quickly in Malaysia are textiles, apparel, commodities and the electronics industry.

According to the HSBC Small Business Confidence Monitor Survey, 42% of Malaysian small and medium-sized enterprises (SMEs) are involved in cross-border and international trade. Most SMEs establish themselves within the domestic market and then seek opportunities to expand their footprint across the region. With TPPA, Malaysian SMEs will have accelerated growth opportunities as the multilateral trade agreement will enable improved uniformity for selected regulations and harmonised standards in several areas.

Currently, Malaysia is the third largest recipient of foreign direct investment (FDI) in Asean and TPPA provides Malaysia a competitive edge among Asean countries to spur further investment.

There are concerns that the Investor State Dispute Settlement (ISDS) mechanism overpowers Malaysian laws but ISDS is not something new to Malaysia. It simply provides investors a level of assurance that affected parties have an avenue for recourse.

In fact, since 1963 Malaysia has signed and ratified 64 Investment Guarantee Agreements (IGAs) with countries including the US, Canada and Mexico, all of which have provisions on ISDS.

Amcham believes that enhanced protection for patents will strengthen Malaysia’s appeal as a destination for high-tech manufacturing, drive foreign investment and create jobs. The intellectual property rights (IPR) chapter calls for a level of protection on design, trademarks and patents across geographical boundaries, which in turn encourages Malaysian companies to embark on further research and development. This promotes an environment that recognises the societal benefit of innovation.

Pharmaceutical research and development leads to the discovery of future life-changing and life-saving medicines. After patents expire, generic versions of innovative drugs continue to be widely used for decades, generating enormous health benefits for consumers. Malaysia stands to benefit through increased investment from multinational companies in the areas of research and development and clinical trials, potentially helping to build a local industrial base, and encourage the entry of more innovative products to the domestic market.

The issue of government procurement has also been raised during negotiation. According to the World Trade Organisation, government procurement accounts for some 15% to 20% of GDP on average in TPPA-related countries. Many TPPA partner countries, including the United States, have government procurement set asides in their respective countries.

With the TPPA, Malaysian-owned businesses will have opportunities to participate in government procurement in TPPA member countries. This promotes competitive neutrality and a level playing field among TPPA members. We foresee that the final text of the TPPA will have some level of appropriate discretion for procurement with participating governments.

Malaysia has established strong foundations in technology, e-commerce and financial services. Together with the removal of digital customs duties, localisation barriers and forced technology transfers, these benefits of TPPA will boost Malaysia’s vision of becoming an e-commerce and high-tech hub within the region. These steps will catalyse the efforts of Malaysian SME’s to better participate in the global marketplace.

Likewise, easing of limitations on foreign firms’ participation in the financial sector empower Malaysian banks in TPPA markets as they expand and seek opportunities in the region and beyond.

The TPPA is a historic multi-lateral trade agreement and a significant milestone to US-Malaysia relations benefitting both nations and creating a wealth of opportunities for business and citizens of both countries.

Sanjeev Nanavati is the president of American Malaysian Chamber of Commerce (Amcham), an international non-profit, private-sector business association representing over 350 US-affiliated companies that maintains a close relationship with many government bodies and international associations in Malaysia in an effort to deepen relations between the two countries.

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