CPTPP ratification can help Malaysia’s recovery

The implementation would result in new employment opportunities for about 140,000 people

by NUR HANANI AZMAN / pic by TMR FILE

THE ratification of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) can contribute to Malaysia’s economic recovery by stimulating trade and investment.

Institute for Democracy and Economic Affairs (IDEAS) CEO Tricia Yeoh said the ratification of the trade deal is one of the few levers available to stimulate growth without creating additional fiscal pressure.

IDEAS’ latest paper titled “Malaysia, Taiwan and CPTPP: Economic Impact Assessment” stated the implementation of the CPTPP would boost Malaysia’s GDP by an additional 1%, driven by an expansion in trade.

Yeoh said this would result in new employment opportunities for an equivalent of 140,000 additional people.

“As Malaysia grapples with economic recovery and the long-term challenge of enhancing economic competitiveness, the ratification of CPTPP is a quick win. Malaysia’s negotiators struck a good deal, which can now be ratified and implemented. Furthermore, as the CPTPP continues to grow, it will only become more important that Malaysia is part of the deal,” Yeoh said in a statement.

Malaysia signed the CPTPP in March 2018, but Putrajaya has not made any definitive decision on whether to ratify or implement the agreement. The CPTPP entered into force on Dec 30, 2018, for seven of the 11 participating countries.

The CPTPP is expected to grow, with several potential partners expressing an interest to join — including Thailand, the UK and Taiwan.

Taiwan is among Malaysia’s Top 10 trading partners despite there being no formal trade agreement in place.

Taiwan’s accession to CPTPP is expected to reduce import costs, boost productivity and create new export opportunities for Malaysia.

“If Taiwan joins CPTPP, Malaysia’s GDP would further increase by over RM2 billion and 20,000 additional jobs would be created.

“Malaysian manufacturers, especially small and medium enterprises, will benefit greatly not only from cheaper imported machines and other intermediate input, but also from creating synergies to move our domestic manufacturing base up the value chain,” Yeoh said.

Taiwan’s CPTPP accession can also accelerate Malaysia’s digital transformation effort and create new impetus for Malaysia’s growth, particularly in IR4.0-focused sectors such as medical devices, chemicals, electronics and machinery.

According to IDEAS, Taiwan’s investment in Malaysia focused mainly on manufacturing, electronics, biotechnology and high-technology related sectors.

Recent examples of these include Taiwanese electronic firm Hotayi Electronic (M) Sdn Bhd reinvesting US$250 million into a new facility in Penang, and Eternal Materials Co Ltd investment of US$70 million to manufacture facilities at Tanjung Langsat Industrial Complex, Johor.

At least 18 Taiwanese-owned companies are listed on Bursa Malaysia, with a combined market capitalisation of RM6.84 billion, including Uchi Technologies Bhd, CSC Steel Holdings Bhd, White Horse Bhd, YSP Southeast Asia Holding Bhd and Superlon Holdings Bhd.

IDEAS said tariffs were the issues most consistently raised by businesses both in Taiwan and Malaysia as the factor increasing the cost of trade. The reduction of nearly all tariffs will only have a positive impact.