Malaysia – Trade Policy
Policy Review :-
a) Overview :-
economic policies are aimed at bringing Malaysia closer towards its goal of
becoming a high-income nation that is both inclusive and sustainable by 2020.
This would require higher levels of quality investments and boosting private
investment in higher value-added industries. Over the period under review, the
Government remains committed to ensuring the nation's economic growth continues
to flourish despite uncertainties and challenges in the global economy.
Malaysian economy recorded an average GDP growth of 6.1% for the period of 2010
to 2012. Real gross domestic product (GDP) growth was 7.4% in 2010, decreased
to 5.1% in 2011 and increased to 5.6% in 2012. For the first half of 2013, the
growth of GDP was recorded at 4.3%. For the third quarter of 2013, it was
recorded at 5.0%. By the end of 2013, real GDP growth is expected to be 4.7%.
In the third quarter, the higher growth is supported by private investment and
consumption at 15.2% and 8.2% respectively. The construction sector is expected
to increase 10.6% followed by the services sector at 5.5%.
inflation rate in 2010 was 1.7% due to economic stability. Inflation, however,
increased to 3.2% in 2011 due to higher global commodity prices, partly
attributable to the political instability in the Middle East and North Africa
(MENA) regions; disruption in domestic food supplies; and upward adjustments to
administered prices. In 2012, the inflation rate remained at 1.6%. Between January to October 2013,
inflation was recorded at 1.9%.
labour force increased from 12.3 million in 2010 to 13.1 million in 2012.
Unemployment rate remained at a relatively low level of 3.0%, with gains in
employment coming from mining and quarrying sector followed by services sector.
services sector registered average growth of 7.0 % for the period of 2010 to
2012. The services sector continued to account for the largest share of GDP,
accounting for 54.6% of the GDP in 2012 compared to 54.1% in the previous year.
The sector remains on track to meet the targeted goal of 61.0% contribution to
GDP by end of Tenth Malaysia Plan (10MP) 2011-2015.
overall performance of the manufacturing sector improved significantly in 2010
registering growth of 11.9% compared to a decline of 9.0% in 2009. However in
2011, Malaysia faced several challenges where manufacturing output of
electrical and electronics (E&E) continued to decline, dragged down by
weaker performance of computers and semiconductors production. In addition, the
consumer-related cluster was also affected by the disruption in the automotive
supply chain following natural disasters in both Japan and Thailand. This
resulted in modest GDP growth of 4.7%. The manufacturing sector grew by 2012 at
agriculture sector recorded growth of 2.4% in 2010 then expanded to 5.8% in
2011. This is attributed by higher palm oil output, livestock and other
agriculture products. In 2012, the sector recorded marginal growth of 1.0% due
to price fluctuation of palm oil and rubber.
construction sector registered a growth of 11.4% in 2010. The sector growth
decreased to 4.7% in 2011 due to the contraction in the civil engineering
segment. The sector however recorded growth of 18.1% in 2012 driven by
construction projects such as the second Penang Bridge, KLIA 2, Sabah-Sarawak
gas pipeline and the Melaka regasification terminal.
mining sector registered negative growth in 2010 and 2011 of 0.3% and 5.5%,
respectively. In 2012, the sector grew by 1.4%.
investments for the period of 2009 to 2012 grew by 59.6%. Private investments
grew by 47.7% in 2012 compared to 2008. The net foreign direct investment (FDI)
grew by 30% in 2012 compared to 2008.
final consumption expenditure grew at 7.1% per annum for the period from 2010
to 2012. The contributing factors to this expansion were the healthy labour
market, favourable income, low inflation, governmental assistance to low and
middle income households, supportive financing conditions and improved consumer
National Savings (GNS) remained high, averaging 34.8% of Gross National Product
(GNP) in 2010-2012, enabling Malaysia to finance its economic activities from
continued to record a current account surplus with the reserves position
remaining strong. At the time of the last Trade Policy Review, the levels of
reserves amounted to RM 265.3 billion or US$70.2 billion and as of 15 November
2013, the reserves position has risen to RM 445.1billion (equivalent to
US$136.7billion), sufficient to finance 9.7 months of retained imports and is
3.7 times the short-term external debt.
sustained rates of growth over the past five years have resulted in the growth
in per capita income from RM 24,879 in 2009 to RM 26,968 in 2010, RM 29,784 in
2011 and RM 30,856 in 2012 representing an average annual increase of 7.5%.2
Between January to September 2013, the GNI per capita was recorded at RM
b) New Economic Model :-
achieving Vision 2020, the Government on 30 March 2010 launched the New
Economic Model (NEM) comprising four key pillars namely Economic Transformation
Programme (ETP), Government Transformation Programme (GTP), "1Malaysia,
People First, Performance Now" concept, and the 10th Malaysia Plan 2011-2015.
The four pillars of national transformation aims to propel Malaysia to become a
high income nation which is both inclusiveness and sustainable.
Following are the 4 pillars of National Transformation (Vision 2020) :-
Preservation & enhancement of Unity in
Diversity – People first, performance now.
Effective Delivery of Government services.
New Economic Model – A high income, inclusive
& sustainable nation.
Smooth implementation of Government’s
was introduced in April 2009. It is an ambitious, broad-based programme of
change to fundamentally transform the Government into an efficient and
people-centred institution. The GTP identified seven National Key Results Areas
(NKRAs) to spearhead the Government's transformation namely i.e. reducing
crime, fighting corruption, improving student outcomes, raising living
standards of low-income households, improving rural development, improving
urban public transport and addressing cost of living.
the initiatives to improve accountability and the fight against corruption, the
Government has legislated the Whistle-blowers Protection Act 2010 and
undertaken other reform initiatives including Public Service Reforms, the
convicted Corruption Offenders Database, Integrity Pact and Corporate Integrity
Pledge. The continuous effort by the Government in combatting corruption
enabled Malaysia to improve its ranking in the Corruption Perception Index to
54th position in 2012 from, 60th position in 2011.
Government's transformation plan helps to improve the public and investors'
perception towards Malaysia particularly in the area of transparency and
competitiveness. Malaysia's ranking on the Trading Across Borders has improved
from 29th to 12th in the World Bank Doing Business Report 2012. In 2013,
Malaysia has further improved competitiveness ranking in Trading Across Borders
from number 12th to 11th.
was ranked at sixth position from 12th among 189 economies in the ease of doing
business, according to the latest World Bank Ease of Doing Business Report
2014. With that recent achievement, Malaysia is now placed in the same league
as Singapore, Hong Kong, New Zealand, the United States and Denmark.
was launched on 25 September 2010 as a two-component approach with the first component
being the National Key Economic Areas (NKEAs) and the second component the
Strategic Reform Initiatives (SRIs). The 12 National NKEAs are represent
sectors where growth will be focused and these sectors were identified based on
their potential GNI contribution and their multiplier effects across the
economy. The 12 NKEAs are: i. greater
Kuala Lumpur/Klang Valley; ii. oil, gas energy; iii. palm oil and rubber; iv.
wholesale & retail; v. financial services; vi. tourism; vii. electronics
& electrical; viii.business services; ix. communication content &
infrastructure; x. education; xi. agriculture; and xii. Healthcare.
ETP also identified six SRIs made up of supportive policies namely in the areas
of: i. competition, standards and liberalization; ii. public finance reform;
iii. public service delivery; iv. narrowing disparity; v. government's role in
business; and vi. human capital development.
main thrust of the SRIs is to create an efficient, competitive and
business-friendly environment in Malaysia that will drive Malaysia's global
competitiveness and attract valuable foreign investment.
Tenth Malaysia Plan (10th MP) with the theme "Towards Economic Prosperity
and Social Justice" contains the new policy directions, strategies and programmes
for the period between 2011 and 2015. The Plan allocates a total of RM 230
billion for development expenditure for the five-year period that would enable
Malaysia to emerge as a high income nation. The Plan outlined five key
strategic thrusts as follows: i. transforming Government to transform Malaysia.
The role of government will evolve to become an effective facilitator in the
transformation of the economy and provide quality services to the rakyat
(people); ii. create a conducive environment for unleashing economic growth;
iii. move towards inclusive socio-economic development; iv. develop and retain
a first-world talent base; and v. build an environment that enhances quality of
The government has formulated the
principles of "1Malaysia, People First, Performance Now" concept as a
way to overcome the various challenges in achieving Vision 2020, through
collaboration with the rakyat (people). The concept outlined three main
elements which include: i. ensuring fairness to all as the basis of 1Malaysia;
ii. putting people first by focusing on what they most want and need; and iii.
ensuring performance now through transparency and accountability.
2) Trade Policy Developments :-
a) Overview :-
Malaysia's trade policy continues
to focus on greater integration into the world economy and enhancing its global
position as a trading nation. Malaysia's trade policy is focused on efforts
towards creating a more liberalised and fair international trading environment.
While Malaysia continues to accord high priority to the rules-based
multilateral trading system under the World Trade Organisation (WTO), Malaysia
is also pursuing regional and bilateral trading arrangements to complement the
multilateral approach. Trade policies are focused on both internal and external
improvements to ensure that exports continue to grow. Domestically, policies
are geared towards developing high quality and innovative products, creating
brand awareness and consumer recognition. Another major step is to diversify
the product range to reduce over-reliance on electrical and electronic
Bilateral Trade Agreements are seen as
providing the means to achieve quicker and higher levels of liberalisation that
would create effective market access to and with trading partners. Many of the
bilateral trade agreements are confined to trade in goods, trade in services
and investment matters.
To ensure export growth remains
robust, trade policies are also focused on strengthening Malaysia's presence in
traditional markets as well as diversifying into non-traditional export
markets. Malaysia is actively promoting trade in new and emerging markets, such
as China, India, Middle East, Africa and the new EU members. With the current
focus on promoting the development of the services sector, promotional efforts
have been intensified for the export of services.
Trade volume recorded RM 1.31 trillion
(US$423.9 billion) in 2012, an increase of 3.0% compared with RM 1.27 trillion
(US$415.6 billion) 2011. Between January to September 2013, trade volume was
recorded at RM 1.01 trillion (US$320.9 billion), which was an increase of 2.4%
compared to the same corresponding period in 2012.
Despite the challenges faced in 2011,
exports increased to a new high of RM 702.6 billion (US$227.5 billion) from RM
697.7 billion (US$228.1 billion) in the previous year, while imports reached RM
606.7 billion (US$196.4 billion) from RM 573.6 billion (US$187.5 billion). For
the third quarter of 2013, export decreased by 0.2% to RM 524.8 billion
(US$167.3 billion) while imports increased by 5.5% to RM 481.5 billion
Malaysia trade balance increased by
12.9% in 2011, but in 2012 the trade balance registered a decrease of 22.8%. In
the third quarter of 2013, the trade balance showed further reduction by 37.4%
from the same corresponding period in 2012.
b) Innitaitives to Facilitate
has been active in implementing trade facilitation initiatives. Among the
initiatives put in place are: National Policy for Development and
Implementation of Regulations
Malaysia Productivity Corporation (MPC) has introduced the National Policy for
Development and Implementation of Regulations on July 2013. This policy will
address the gaps in the national-regulatory infrastructure to position Malaysia
to meet international best practices in regulations or Good Regulatory
Practices (GRP). Malaysia launched the policy and handbook on GRP, in 2013, as
an effort to enhance transparency and predictability of regulatory actions and
to create a more conducive business climate. Moving forward, efforts to promote
Regulatory Impact Assessment (RIA) among Ministries and Agencies are done
through pilot projects.
of International Trade and Industry (MITI), National Water Services Commission
(SPAN) and Federal Agricultural Marketing Authority (FAMA) are currently
participating in the pilot project. They have been given specific training and
guidance to carry out the RIA process. Results from these RIA pilot projects
will be used as case studies to provide benchmarks, best practices and feedback
to improve the best practice regulation handbook and RIA application process.
modernisation process was carried out through a broad strategy with the aim to
improve the effectiveness, efficiency, transparency and predictability of the
customs administration and operation. Three main focus areas had been
identified namely, capacity building, system development and output/outcome
is currently engaging on a new project to improve her Customs transformation
initiative in order to realise its vision to be a world class Customs
administration by the year 2015. This will result in catering the latest
development on global trading trend as well as improving declaration via the
Self-certification mechanism, to balance both trade facilitation and compliance
in line with the National Single Window (NSW) and ASEAN Single Window (ASW)
aspiration. This project is called u-Customs.
Authorised Economic Operator or AEO Programme is an initiative referring to
companies that have fulfilled the criteria set-forth by the Royal Malaysian
Customs Authority, which was adopted from the WCO's AEO standard criteria.
Should an operator is accredited as AEO, they are entitled to enjoy substantial
benefits from the AEO programme such as direct release from Customs control for
importation, exportation and movement of goods, self-assessed declaration on
import, export, and movement of goods periodically and deferred payment of
duties/taxes via EFT. To date, 42 operators have been accredited as AEO and
benefited from the AEO programme in Malaysia.
External Trade Development Corporation (MATRADE) is an agency under MITI that
continues to focus on facilitating the export promotion activities of the local
business sector through international trade fairs, trade missions, specialised
marketing missions and business-matching programmes. MATRADE is also actively
involved in assisting foreign companies to source for suppliers of Malaysian
products and services, and is represented worldwide at 40 locations in major
formulating its export promotion strategy, MATRADE took into consideration
various factors including the global and domestic macroeconomic trends, as well
as meeting requirements of the national economic agenda. MATRADE also consulted
industry players to create programmes that synergise with their strategies, in
particular the selection of markets, sectors and trade promotion tools.
of investments for manufacturing and services sectors
Malaysian Investment Development Authority (MIDA) is the principal agency to
oversee and drive investment into the manufacturing and services sectors in
Malaysia. The wide range of services provided by MIDA includes providing
information on the opportunities for investments, as well as facilitating
companies which are looking for joint venture partners. On 18 August 2011, MIDA
Act was amended in line with an expansion in its role which includes
coordination of all investment promotion related activities of all
agencies/other entities, and enhancement of its function as a one-stop centre
for potential investors.
promoting free trade and business incentives, the government has established
five economic growth corridors to further develop Malaysia's strategic
investments regions. Malaysia's five corridors had their very own clear and
concise visions, focus and own authority to oversee the developments in their
specified region. The five economic regions are: i. Iskandar Malaysia in
Southern Johor (IRDA); ii. Northern Corridor Economic Region (NCER); iii. East
Coast Economic Region (ECER); iv. Sabah Development Corridor (SDC); and v.
Sarawak Corridor of Renewable Energy (SCORE).
and Medium Enterprises (SMEs) constitute 97.3% of total business establishments
in Malaysia; the majority are in the services sector (90%), followed by
manufacturing (5.9%), construction (3%), agriculture (1%) and mining and
quarrying (0.1%). On 12 July 2012, the SME Masterplan 2012-2020 was launched.
The Masterplan will adopt a new approach to SME development in accelerating SME
growth through innovation and productivity through its various initiatives.
implementation of this Masterplan is expected to contribute to the increase in
SMEs' contribution to GDP to 41% (2010: 32%); employment to 62% (2010: 59%);
and exports to 25% (2010: 19%) by 2020.
of the services sector
Malaysian Services Development Council (MSDC) was established on 16 January
2007 under the chairmanship of the Minister of International Trade and Industry
to transform the services sector into a globally competitive industry and
spearhead the country's economic development. Since the services sector cuts
across various Ministries, the MSDC functions as a platform to monitor, review,
discuss and resolve issues impacting the development of the services sector,
with the involvement of stakeholders from both government and industry.
progressive liberalisation of the services sector, MSDC's task has expanded to
include monitoring the implementation of the liberalised sectors with regard to
regulatory coherence and mitigation of implementation problems that hinder the
liberalisation process. Apart from that, the MSDC also provides strategic
direction and advises on capacity building initiatives for service providers,
as well as promotional programmes for exports and investments in the services
Committee Meeting (ICM) established in October 2010 is co-chaired by the
Minister of MITI and CEO of PEMANDU. The Committee's main focus are to promote
and facilitate overall investment in achieving the RM 160.3 billion annual
investment targets as set out in the ETP. Apart from that, the ICM has been
tasked to monitor and ensure the economic growth target of 6% and private
investment of 12.8% are achieved.
Management & Delivery Unit (PEMANDU) was formally established on the 16
September 2009 and is a unit under the Prime Minister's Department. PEMANDU's
main role and objective is to oversee the implementation, assess the progress,
facilitate as well as support the delivery and drive the progress of the
Government Transformation Programme (GTP) and the Economic Transformation
responsibility for end-to-end delivery of National Key Results Areas (NKRAs)
and Ministerial Key Results Areas (MKRAs) outcomes rests with the respective
ministries, and the success of the National Key Economic Areas (NKEAs) rests
with the private sector. PEMANDU has been mandated to catalyse bold changes in
public and private sector delivery, support the ministries in the delivery
planning process and provide an independent view of performance and progress to
the PM and ministers.
relation to the ETP, PEMANDU has been tasked with facilitating the
implementation of the Entry Point Projects (EPPs) and Business Opportunities
(BOs) that have been identified to ensure that Malaysia is transformed into a
high-income nation by 2020. To allow PEMANDU to carry out its responsibilities
effectively, it combines the best talent from both the civil service and
c) Multi-Lateral Trading System
trading nation, Malaysia is dependent on international trade and foreign
investment and places great emphasis on the role of the WTO in ensuring that
the multilateral trade system continues to contribute towards growth and
development. Malaysia continues to participate actively at the WTO in ensuring
that trade regulations and measures do not hamper trade and are not unduly
burdensome and restrictive. Malaysia firmly believes that a rules-based
multilateral trading system under the WTO is necessary to safeguard the
interests of developing countries, as well as ensuring that world trade is
conducted in an orderly manner.
will continue to push for the early conclusion of the Doha Round of
negotiations as it offers vast benefits not only to the global trading
community at large, but also in enhancing trade among developing countries.
d) Development in FTAs :-
the last review, Malaysia has signed and implemented 6 FTAs, in which 4 are
bilateral and 2 are regional.
Malaysia-Chile Free Trade Agreement (MCFTA) entered into force on 25 February
2012. Under the MCFTA, which is Malaysia's first FTA with a Latin American
country, Malaysia and Chile undertook the first tranche of tariff reduction or
elimination at 89% and 90% of the tariff lines respectively upon entry into force
of the Agreement with two more tranches scheduled for 2014 and 2016
respectively. By 1 January 2016, duties on 98% of tariff lines will be
eliminated by Chile; and for Malaysia, 98% of the tariff lines will be
eliminated while tariff for 525 tariff lines (representing 5% from the total
lines) will be reduced and capped at 5% duty by 1 January 2016.
and Australia concluded negotiations on the Malaysia-Australia Free Trade
Agreement (MAFTA) on 30 March 2012. MAFTA is a comprehensive agreement comprising
21 chapters encompassing trade in goods, services and investment as well as
economic cooperation. It also covers intellectual property rights, e-commerce
and competition policy. MAFTA marks another important milestone in
Malaysia-Australia economic relations, complementing the already established
ASEAN-Australia-New Zealand FTA (AANZFTA). Under MAFTA, Australia eliminated
100% of its import tariffs upon entry into force of the agreement on 1 January
2013, while Malaysia will progressively reduce or eliminate import tariffs on
99% of its tariff lines by 2020.
and India established the Malaysia-India Comprehensive Economic Cooperation
Agreement (MICECA) on 24 September 2010 and subsequently the agreement came
into force on 1 July 2011. MICECA is a comprehensive agreement that covers
trade in goods, trade in services, investments and movement of natural persons.
Both the MICECA on Goods and Services have gone through the examination process
under the Committee on Trade and Development on 16 September 2013 and Committee
on Regional Trade Agreements (CRTA) of the WTO on 16 and 17 September 2013
and New Zealand concluded a bilateral FTA (MNZFTA) on 30 May 2009. The
agreement was signed on 26 October 2009 and entered into force on 1 August
2010. MNZFTA is a comprehensive agreement covering trade in goods, services,
investment and economic cooperation. Under the agreement, New Zealand will
liberalise all of its 7,288 tariff lines (100% of total tariff lines) via full
elimination by 2016 while Malaysia offers to progressively reduce and eliminate
tariff on 10,293 tariff lines (or 98.8% of total tariff lines) by 2016. MNZFTA
also addresses non-tariff measures, in particular technical barriers, including
stringent SPS measures. The MNZFTA has gone through the examination process of
the CRTA of the WTO on 10 September 2012.
is also in the midst of negotiating the Malaysia-Turkey Free Trade Agreement
(MTFTA) and Malaysia-European Free Trade Agreement (MEUFTA). The MTFTA negotiations
were launched on 31 May 2010 and cover market access and cooperation chapters.
The MEUFTA negotiations which commenced on 6 Dec 2010 is a comprehensive FTA
covering 13 working groups which include market access for goods, services,
investment, competition policy, intellectual property rights, government
procurement as well as sustainable development issues covering labour and
continued to benefit from its membership in the Association of South East Asian
Nations (ASEAN). The ASEAN Free Trade Area (AFTA) is now in place with ASEAN
Member States reducing and eliminating intra-regional tariffs through the
Common Effective Preferential Tariff (CEPT) Scheme for AFTA. The CEPT Agreement
has been superseded by the ASEAN Trade in Goods Agreement (ATIGA) which entered
into force on 17 May 2010.
new Agreement sets out strict disciplines in implementing the commitments and
obligations in ASEAN towards elimination and reduction of import duties and
removal of Non-Tariff Barriers (NTBs). The Agreement also provides for enhanced
transparency in the concessions granted and a strong legal framework that will
enable ASEAN to realise the free flow of goods in the region, with a view to
establishing a single market and production base by 2015.
the external front ASEAN has been strengthening ties with all its FTA partners
namely the US, Russian Federation, the EU, Korea and China. Work is on-going to
review the ASEAN-Korea FTA and ASEAN-China FTA to take into consideration
acceleration of tariff reduction and elimination on products placed in the
relations between ASEAN and the EU were further intensified and strengthened
with the launch of ASEAN-EU FTA in May 2007. A Joint Committee comprising senior
officials was established to work on the modalities, work programme and
timelines for the FTA. Six Expert Groups were set up for Services and
Establishment/ Investment, Rules of Origin, Sanitary and Phytosanitary (SPS)
Measures, Technical Barriers to Trade (TBT), Customs and Trade Facilitation,
and Dispute Settlement.
Zealand (AANZFTA) came into force on 1 January 2010 to enhance awareness among
the business communities of the two regions. It is a comprehensive and
single-understanding economic agreement that opens up and creates new
opportunities for the 600 million people of ASEAN, Australia and New Zealand
which have a combined economic output of US$2.65 trillion via a platform of a
more liberal, facilitative and transparent market access and investment
policies among the signatories to the Agreement.
and The People's Republic of China (PRC) signed the Second Protocol to Amend
the Agreement on Trade in Goods of the Framework Agreement on Comprehensive
Economic Cooperation between ASEAN and China at the 17th ASEAN Summit in
October 2010. Many Capacity-building initiatives were implemented under the
ASEAN-China Cooperation Fund such as the Forum on SME Development. ASEAN and
the PRC are working towards simplifying customs procedures, and enhanced
cooperation in inspection and quarantine technical standards.
13th ASEAN-Korea Summit in Hanoi in October 2010 adopted the new Plan of Action
to Implement ASEAN-Korea Strategic Partnership for Peace and Prosperity
2011–2015. The Summit also renewed its commitment to increase the two-way trade
to US$150 billion by 2015 with full implementation of the ASEAN-Korea FTA
(AKFTA) in 2010. An MoU between the Government of Malaysia (MITI) and ROK
(Korea Customs Service) on Governing Mutual Administrative Assistance and
Cooperation in Origin Certification and Verification under the Agreement on
Trade in Goods was signed on 15 November 2010.
Second ASEAN-Russia Summit adopted the Joint Statement in October 2010 to
deepen and strengthen the dialogue mechanism between ASEAN and Russia. The
Leaders have tasked the ASEAN and Russian Economic Ministers and officials with
developing a comprehensive economic cooperation roadmap to enhance ASEAN-Russia
cooperation in industry, SME development, R&D and private sector
of the key initiatives pursued in 2010 was the ASEAN Economic Ministers mission
to Seattle and Washington, USA from 3 to 8 May 2010. The mission was successful
in raising the profile of the region among political and business leaders and
research institutions in the USA. ASEAN Ministers met with several key leaders
including the United States Trade Representative. Several areas of
collaboration were identified including trade facilitation, trade and finance,
collaboration between EXIM Banks in ASEAN and the USA, and a
Government-business dialogue. Besides the mission to the USA, the ASEAN
Economic Ministers also met with business leaders from U.S.-ASEAN Business
Council in Danang, Viet Nam in August 2010. The Export and Import Bank of the
United States signed a co-operation MoU with the chambers of commerce and
industry of Malaysia, the Philippines and Singapore.
ASEAN and India Services Agreement and ASEAN India Investment Agreement have
been concluded and will enter into force on 1 July 2014. However, negotiations
are still on-going to complete the ASEAN-JAPAN Services and Investments
chapters for incorporation into the ASEAN-Japan Comprehensive Economic
for Regional Comprehensive Economic Partnership (RCEP) were held on May and
September 2013. Three Working Groups on Goods, Services and Investments have
been finalised with the third meeting is to be held in Malaysia on January 2014
to discuss on ROO, IPR, competition policy and other sub-working groups on
Customs, SPS and TBT.
is among the 12 negotiating countries involved in the Trans-Pacific Partnership
(TPP) negotiations. The other 11 countries are Australia, Brunei Darussalam,
Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore, United States and
Viet Nam. Malaysia joined the negotiations at the 3rd round on 5 October 2010.
Government views TPP as an important initiative to expand market access
opportunities, enhance Malaysia's competitive advantage, build investors'
confidence through providing predictable and transparent investment regime to
foreign investments and build capacity through the Agreement. The TPP will also
allow Malaysia to be an integral part of the deepening economic integration
taking place within the Asia Pacific region that would enable Malaysia to
engage in a more concrete way with trading partners such as the United States,
Canada, Mexico and Peru, with which Malaysia have yet to have any structured
framework of trade agreements.
long run, the TPP will bring benefits of lower cost of goods and more efficient
production by taking advantage of the competition and economies of scale. The
successful conclusion of the TPP will form an unprecedented market of 793
million people, with a combined GDP of US$27.5 trillion. This far surpasses the
limited domestic market of 29.5 million people and a GDP of US$300 billion in
Malaysia. With the TPP, Malaysia aims to open up new market opportunities and
horizons for Malaysians to go on the offensive and take advantage of the
international market place.
e) ASEAN :-
Economic Community (AEC)
regional integration, the priority for Malaysia and the other ASEAN Member
States has been to continue with the implementation of the ASEAN Economic Community
(AEC) Blueprint measures aimed at creating a highly integrated and competitive
region. Since its implementation in 2008 up to July 2013, ASEAN has
collectively implemented 79.5% of the AEC measures. Over the same period,
Malaysia has achieved an implementation rate of 88% of the 331 AEC measures.
ASEAN member States are exerting efforts to implement all the measures by 2015.
key challenges faced in implementing the outstanding AEC measures are the
timely ratification of ASEAN agreements/protocols which affect their entry into
force, alignment of regional initiatives to domestic laws and regulations and
domestic constraints in the implementation of regional and country-specific
will Chair the ASEAN Summit in 2015, the year the AEC will be realised. Hence,
Malaysia's Chairmanship is critical in ensuring the priority initiatives for
the AEC are in place and that economic integration will be seamlessly continued
beyond 2015. Towards this end, ASEAN has recently commissioned two studies, one
jointly by East Asia Economic Research Institute (ERIA) and Rajaratnam School
of International Studies (RSIS) and another from Institute of South East Asian
Studies (ISEAS) to propose potential frameworks for deepening integration in
the future. The recommendations will build upon current deliverables in the AEC
has been in the forefront in advocating that ASEAN expedite work towards
identifying and removing NTBs. The initiatives taken include re-alignment of
the ASEAN NTMs database with the new UNCTAD classification and the
establishment of an interagency body at the national level in each ASEAN Member
removing NTBs related to trade in goods, ASEAN is also working towards removing
barriers and restrictions in trade in services. This liberalisation initiative
is undertaken progressively under the ASEAN Framework Agreement in Services
(AFAS) in ten packages starting from the First Package in 1995. The
liberalisation covers 128 services sub-sectors, which includes air transport,
financial services, transport and logistics, business sector, construction,
tourism, recreational facilities, hotels theme parks, restaurants, retail and
wholesale distributive trade, healthcare, private hospitals and medical care
and consulting services. So far, ASEAN has implemented eight packages
altogether, and the last two packages to be completed by 2013 and 2015
respectively. Under the 8th AFAS Package, signed by ASEAN Economic Ministers in
October 2010, Malaysia has offered 96 sub-sectors. In addition, ASEAN has also
signed 7 mutual recognition arrangements in engineering, accountancy,
architect, surveying, dental, nursing and medical care to complement the
liberalisation initiative by further facilitating the movement of professionals
in the services sector.
together with other ASEAN members, has been continuously exerting efforts to
operationalize the ASEAN Single Window (ASW) for speedier Customs clearance.
Malaysia together with 6 other ASEAN countries have successfully tested the ASW
Gateway connectivity for the exchange of ATIGA Form D and ACDD using test data
and progress are made to establish the legal framework for implementation of
f) Asia Pacific Economic
continues to participate actively in APEC activities in order to strengthen its
trade and investment linkages, as well as technical and economic cooperation.
In 2012, APEC accounted for 76.3% of Malaysia's total trade. 77% of Malaysia's
total exports went to APEC economies and 75.5% of Malaysia's total imports were
from APEC economies. In terms of FDI contribution, APEC contributed 51.3% of
Malaysia's FDI. In the manufacturing sector alone, FDI from APEC economies
amounted to RM 9.9 billion or 47.4% of total investments in 2012.
collaboration with APEC economies, Malaysia seeks to facilitate trade,
investment and reduce the cost of doing business. Among the measures adopted
are reduction in tariffs and NTBs, simplifying business regulations, making
information on measures affecting business operations in services trade more
easily accessible through business-friendly databases, further enhancing
business travellers' mobility through the APEC Business Travel Card (ABTC)
scheme, as well as enhancing supply chain connectivity across the border by
improving logistics and transport networks. Key initiatives in the area of
trade facilitation to address supply chain issues include the
operationalization of the Authorised Economic Operator (AEO) and undertaking
Time Release Study (TRS) to improve the performance of the logistics supply
further improve the business environment, APEC has identified priority areas
for regulatory reforms based on the World Bank Ease of Doing Business
indicators. These include starting a business, access to credit, trading across
borders, enforcing contracts and dealing with permits. Malaysia also
participated actively in the finalization of the Environmental Goods List and
is committed to implementing the commitment by 2015. In addition, in 2013,
Malaysia participated actively to improve the investment climate and facilitate
public-private partnerships in infrastructure development and investment in the
3). Sectoral Policies :-
a) Manufacturing Sector :-
the review period, the manufacturing sector continued to remain as one of the
major contributors to economic growth. However, after decades of being
Malaysia's primary growth engine, the manufacturing sector is undergoing
transformation and restructuring. The country is moving from resource-based
economy to high technology, knowledge-based and capital-intensive industries
such as medical devices and green technologies. ETP has identified
manufacturing-related NKEAs that require focused development and support. It
aims to build up higher value-added subsectors such as LED lighting, solar
panels and generic drug manufacturing.
The external environment continued to
be affected by global economic uncertainty in 2012, dampening demand for
manufacturing products. Factors such as the sovereign debt crisis in Europe,
the US fiscal cliff and the stagnant economy in Japan had an impact on the
export performance of manufactured goods. Despite these challenges, the
manufacturing sector grew steadily at 4.8% in 2012, a significant increase from
0.8% in 2008. Manufacturing contributed 24.9% to GDP growth in 2012, making it
the second largest contributor after services.
Malaysia transforms itself into a high income nation, focus is on promoting
quality investments. Due to global uncertainty in 2012, most sub-sectors
registered a decrease in investments, particularly transport equipment,
chemicals and chemical products and petrochemical products. MIDA approved a
total of 804 manufacturing projects valued at RM 41 billion in 2012 compared
with 919 manufacturing projects with investments of RM 62.8 billion in 2008. Of
this total, RM 20.8 billion were from foreign investments, while RM 20.2
billion were investments from domestic sources. Malaysia's manufacturing sector
growth is projected to reach 4.9% in 2013 as global demands pick up. Emphasis
will be given to promoting both domestic and foreign investment.
Government is committed to transform the automotive industry in Malaysia to
become the production hub in the ASEAN region by 2020. A review of the National
Automotive Policy (NAP) is being undertaken to enhance the policies and
measures in meeting the objectives set in the NAP 2006 and NAP Review 2009 as
well as to prepare the local industry towards meeting the latest challenges and
requirement of the global automotive industry.
b) Agriculture Sector :-
has identified agriculture sector as one of NKEA under ETP. This sector
emphasises on providing rural employment, uplifting rural incomes and ensuring
national food security.
this programme, the Government envisions a transformation of agriculture sector
from fragmented and small scale farms to integrated, clustered and large scale
agribusiness, production centric to market driven and low to higher value add
products by 2020. In 2012, the agriculture sector contributed 7.3% or RM 54.8
billion to GDP.
10 year National Agrofood Policy was approved by the Malaysian Cabinet on 28
September 2011 and was launched on 14 January 2012. It focuses on improving the
efficiency of agro-food industries along the value chain. There are 7
strategies outlined under the NAP: i. ensuring national food security; ii.
increase the contribution of agro food industry; iii. completing the value
chain; iv. empowering human capital; v. strengthen the activities of R&D,
innovation and the use of technology; vi. creating the environment for private
sectors led businesses; and vii. strengthening the delivery system.
NAP also emphasised on food safety and nutrition by implementing Good Agricultural
Practices (GAP), Good Manufacturing Practices (GMP), Hazard Analysis and
Critical Control Points (HACCP). This implementation will be gradually expanded
to all Permanent Food Production Parks and Aquaculture Industrial Zone before
extending to other commercial farms.
Malaysian Quarantine Inspection Services (MAQIS) was established in 2011 under
the Ministry of Agriculture and Agro-Based Industry as a Department to provide
integrated services relating to quarantine, inspection and enforcement at entry
points, quarantine station, quarantine premises and certification for the
import and export of plants, animals, carcasses, fish, agricultural produce,
soil and microorganism including inspection of and enforcement relating to food
and for matters related to it. MAQIS aims to: i. ensure that the Nation
agriculture industry is free from pest, diseases and contaminations towards
plants, animals, and fish by quarantine activities, inspection and a more
effective enforcement; ii. ensure that plants, animals, carcasses, fish,
agricultural products, soils, microorganism and food that are imported to and
exported from Malaysia comply with the health aspects of human, animals, plants
and fish and food safety by written enforcement laws that are related to entry
points, quarantine stations and quarantine premises; iii. assist exporters in
issues pertaining to market access and to comply with the requirements of the
importing country through integrated services; and iv. improve the delivery
service to customers by using more efficient and integrated sources.
Industry Development Corporation (HDC) which was set up on 18 September 2006
has been tasked to further boost the Halal agenda in terms of standards
development, branding enhancement as well as commercial and industry
development. The Department of Islamic Development Malaysia (JAKIM) has
developed the Malaysian Protocol for the Halal Meat and Poultry Productions as
a clear guidance in the production of halal meat and poultry. The protocol is
intended to support the implementation of Malaysia's requirements for halal
meat, poultry and their products. This protocol is applicable to all
establishments producing halal meat, poultry and their products including those
intending to export to Malaysia under the Animal Act 1953 (reviewed 2006).
c) Service Sector :-
During the period under review, the
services sector continued to be the main contributor to the GDP. In 2010, the
services sector remained the largest contributor to Gross Domestic Product
(GDP) with a share of 53.2%. Non-government services contributed 46% to GDP,
while government services contributed 7.2%. Total investment in the services
sector was valued at RM 36.74 billion for 2010 while trade in services was
recorded at RM 207.2 billion. The GDP share for services sector in 2011 and
2012 were 54.1% and 54.6% respectively. In 2013, the GDP for services sector
was 54.9% (Jan-Jun). Total investment in the services sector was valued at RM
70.40 billion in 2011 and RM 122.91 billion in 2012 while in 2013 (Jan-Jun), it
was valued at RM 58.1 billion. Trade in services was recorded at RM 227.5
billion (2011), RM 248.0 (2012) and RM 127.7 (Jan-Jun 2013).
On 7 October 2011, in the 2012
Budget Speech, the Government announced further liberalisation of 18 service
sub-sectors in 2012, with the aim of attracting foreign investment. This
initiative is an addition to the 27 services sub-sectors that were autonomously
liberalised in 2009 and reported in the previous review. These 18 sub-sectors
included courier services, technical and vocational secondary education
services, technical and vocational secondary education services for students
with special needs, skills training services, departmental stores and
speciality stores, incineration services and accounting and taxation services.
These services sub-sectors were identified as having high economic impact that
support and serve as enablers to Malaysia's Economic Transformation Programme.
Additionally, this initiative
would also contribute to creating a dynamic and competitive business
environment, particularly for services sub-sectors that act as the main
enablers for a sustained economic growth. With the liberalisation of this
second tranche of services sectors, the Government envisages stronger growth in
the key sectors through expansion or collaboration between local and foreign
services suppliers. This will in turn promote a competitive and conducive
environment for local service providers to gain knowledge and expertise while
tapping into the latest technological development and know-how through exposure
and synergistic collaboration with their foreign partners or service suppliers.
To complement the liberalisation
initiatives, the Government undertook reviews of domestic laws and regulations
governing the sub-sectors such that they are coherent and streamlined and
contribute towards smooth implementation of the liberalisation objective. The
government also conducted regular, capacity building programmes for services
providers, as well as export and investment information sharing sessions to
stakeholders and undertook continuous improvements on services data collection
and insurance sector :-
Malaysian financial sector continues to remain resilient with domestic
financial stability preserved since the last review. The introduction of the
Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013
(IFSA) which came into force in June 2013 together with related amendments made
to the Central Bank of Malaysia Act 2009 in 2013 have further strengthened the
regulatory and supervisory framework for the financial system in Malaysia. The
new legislations also provide greater clarity and transparency in the
implementation and administration of the law; a clear focus on Shariah
compliance and governance in the Islamic financial sector, strengthened
business conduct and consumer protection requirements as well as strengthened
provisions for effective and early supervisory intervention.
Financial Sector Bluerprint 2011-2020 (Blueprint) builds on the achievement of
the previous Financial Sector Master Plan (FSMP), where the Blueprint moves
beyond the sector-based approach in the FSMP, to a more integrated approach
that reflects a financial sector that has increasing linkages between the
various sub-sectors in the financial system. The Blueprint envisages a more
significant role of the participants in the financial system towards realizing
the vision of a more competitive, dynamic, inclusive, diversified and
integrated financial system. There are nine focus areas under the Blueprint to
further advance financial sector development while ensuring financial stability
is preserved at all times; (i) effective intermediation for a high value-added,
high income economy; (ii) development of deep and dynamic financial markets;
(iii) financial inclusion for greater shared prosperity; (iv) strengthening
regional and international financial integration; (v) internationalization of
Islamic finance; (vi) enhancing regulatory and supervisory regime to safeguard
the stability of the financial system; (vii) electronic payments for greater
economic efficiency; (viii) empowering consumers; and (ix) talent development
for the financial sector.
the last review, progressive liberalisation of the domestic financial sector
has also contributed to the further diversification of the financial system,
with growing foreign presence in the banking , insurance and takaful sector. As
of October 2013, out of 43 commercial banks (both conventional and Islamic), 25
banks are fully foreign-owned. In the insurance and takaful sector, 22 out of
55 institutions are foreign owned. Moving forward, as outlined in the Blueprint
and as legislated in the FSA 2013 and IFSA 2013, policies on foreign
investments in the financial sector through the issuance of new licenses or the
acquisition of equity interests in Malaysia will be guided by two key
considerations, namely prudential criteria and the "best interest of
market sector :-
by the first Capital Market Masterplan (CMP 1), Malaysia has liberalised its
capital market over the past decade through facilitating international
fund-raising, listings, participation, access and investments abroad. Under the
Capital Market Masterplan 2 (CMP 2) which was launched in April 2011, the
future growth of Malaysia's capital market will increasingly be shaped by
internationalisation strategies aimed at maximising international participation
and strengthening the ability to build scale and take advantage of business
2 forms part of the collective and coordinated efforts to invigorate the
Malaysian economy through expanding the role of the capital market in financing
the country's development. The growth strategies as outlined in CMP 2 are
intended to create a conducive environment to foster a more diverse and
innovative intermediation environment and to nurture new growth opportunities.
CMP 2 also outlines governance strategies to ensure robust regulatory oversight
and active shareholder participation to enhance confidence in the integrity and
soundness of Malaysia's capital market. In tandem with the growth objectives,
CMP 2 provides equal emphasis to achieving governance objectives to ensure
Malaysia's capital market continues to be well-regulated with participants
strengthening their capabilities and professional standards and exercising a
strong sense of responsibility towards the interest of their customers.
Security Commission (SC) is continuously working to strengthen cross-border
transactions with other jurisdictions. Amongst others, several key initiatives
have been undertaken under the ASEAN Capital Markets Forum (ACMF) as part of
the regional capital market integration plan, which was endorsed by the ASEAN
Finance Ministers in 2009.
equity participation in the capital market continues to be further liberalised
under CMP 2. In 2011, the SC had fully liberalised restriction on foreign
ownership in stockbroking companies. With this latest liberalisation measure,
all existing foreign equity restrictions in the capital market have been lifted
with the exception of unit trust management companies which remained at 70% and
credit rating agencies at 49%.
the 1997 financial crisis, corporate governance reform has been a priority and
continues to be a priority for Malaysia. This is evidenced by the fact that
corporate governance continues to feature prominently in CMP 2, as it forms part
of the governance strategies that were outlined therein. The CMP 2 recommends
that the effectiveness of corporate governance regulation be strengthened
through broad-based approaches to promote greater stewardship, more active
shareholder participation and strengthen gate-keeping accountabilities.
SC released the Corporate Governance Blueprint (Blueprint), a five-year plan
which seeks to further improve corporate governance standards in Malaysia. The
Blueprint is aimed at strengthening self and market discipline, and promoting
the internalisation of corporate governance culture. Subsequently, the
Malaysian Code on Corporate Governance 2012 was introduced, which marked the
first major deliverable following the Blueprint.
the Corporate Governance Watch 2012 Report, Malaysia has improved its ranking
in the Asia-Pacific region by advancing to the fourth spot, two notches up from
the sixth position it held in 2010. The Report is the result of a survey
undertaken by the Asian Corporate Governance Association in collaboration with
CLSA Asia-Pacific Markets (ACGA-CLSA). The biennial Corporate Governance Watch
reports on the corporate governance landscape of 11 Asian nations since 2000.
report attributed Malaysia's improvement in corporate governance ranking to
amongst others, the publication of the 5-year Malaysian Corporate Governance
Blueprint 2011 and the fact that Malaysia is one of the few markets in Asia
that undertook a major overhaul of its code of corporate governance, bringing
the standards expected of boards of directors in line with international
standards. The report also marked an improvement in terms of corporate
governance culture in Malaysia, and observed that companies seem to be taking
more interest in improving corporate governance practices, and in contrast to
two years ago (2010), it is companies rather than the government that seem to
be making more of a difference in the country's corporate governance landscape.
2 will continue to guide the development of Malaysia's capital market for the
next ten years following the conclusion of CMP 1 while addressing the
challenges of this decade and transforming the competitive dynamics of the
Other Domestic Policies :-
a) Competition Act 2010 :-
Competition Act 2010 (CA 2010) is in line with the Prime Minister's 2010
unveiling of the New Economic Model, which aims to double Malaysia's per capita
income by 2020 through the utilisation of eight Strategic Reform Initiatives
(SRIs), one of which being competition.
Competition Act 2010 is enforced by the Malaysia Competition Commission (MyCC)
and has been in force since 1 January 2012. The Act provides a regulatory
framework against market manipulation and cartel practices. The Act is intended
to promote a competitive environment and give foreign investors more confidence
in the country's business practices.
CA 2010 regulates commercial activities within or outside Malaysia, which have
an effect on competition in any market in Malaysia through the prohibition of
anti-competitive agreements and the prohibition of the abuse of a dominant
not covered by the Competition Act 2010 are : i. activities which involve an
exercise of governmental authority; ii. activities carried out pursuant to the
principle of solidarity; and iii. purchasing of goods or services not intended
for resale or re-supplying.
activities regulated under the Communications and Multimedia Act 1998 and the
Energy Commission Act 2001, however, is not subject to the Act.
found to have infringed the prohibitions of the CA 2010 may be subject to
financial penalties of up to 10% of the enterprise's worldwide turnover for the
period during which the infringement occurred.
b) Strategy Trade Act 2010 :-
Strategic Trade Act (STA) 2010 was approved in June 2010. The enactment of STA
is in tandem with Malaysia's commitment to implement the United Nations
Security Council Resolution 1540 (UNSCR 1540). The Act aims to curb the
proliferation of weapons of mass destruction (WMD) through control over
exports, transits, transhipments and brokering of strategic items. Malaysia is
the second country in ASEAN to have a comprehensive export control law in
Strategic Trade Secretariat (STS) was established in MITI as the focal point
for the implementation of the STA 2010. During the initial stage of its
implementation, the efforts were focused on conducting awareness programmes to
major exporters and industry associations through seminars, workshops,
briefings as well as via traditional mass media and internet. The programmes
are still on going and have now become more specific to assist traders in
understanding the applicability of the STA 2010 and to facilitate the industry
to comply with the Act.
on-line permit application system has been introduced to keep abreast with the
rapid charging business environment and to provide easier access and sharing of
data by the Royal Malaysian Customs via the Customs Information System. The
Secretariat also interacts and consults with the enforcement and other relevant
Government agencies frequently to ensure that the STA 2010 is implemented in a
consistent and transparent manner. It is a commitment of the Secretariat to
facilitate trade without compromising on the responsibility of the trading
community and the authorities to safe and secure trade.
Government of Malaysia will continue its commitment to give full efforts and
strength towards achieving a high-income advanced economy by 2020. This will be
translated by the strategic thrusts which have designated under the 10th MP to
realise the targets. In 2014, the Malaysian economy is expected to improve
supported by robust domestic demand and positive improvements in external
sector as the export products is expected to be more competitive. The
Government will continue to further strengthen the economic and trade
integration through liberalisation on the multilateral, regional and bilateral
levels, while the private sectors will continue to spearhead growth.
will also be encouraged to adopt and comply with international standards and
requirements on quality, safety and environment to improve market access for
their products and services.
strengthening the multilateral trading system and further liberalising trade
through multilateral negotiations, the Government of Malaysia is also actively
pursuing regional and bilateral trade policies to achieve additional trade
liberalisation through FTAs with its main trading partners. For those regional and
bilateral FTAs that are under negotiations, the Government will make best
effort to conclude them in due course as targeted by all parties.
taking into account the global and regional developments, the Government of
Malaysia will be undertaking the ecosystem approach to promote the development
of the services sector as the next engine of growth and accelerating the shift
to high value-added, high technology, knowledgeintensive and innovation-based
industry. The manufacturing sector will continue to remain as one of the
leading contributor to growth.