Chamber hopes for revival of EU-Malaysia free trade deal

This article first appeared in The Edge Financial Daily, on July 17, 2018.
Chamber hopes for revival of EU-Malaysia free trade deal
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KUALA LUMPUR: The EU-Malaysia Chamber of Commerce and Industry (EUMCCI) is hopeful that the new Pakatan Harapan government will resume talks on the EU-Malaysia free trade agreement (FTA), which has taken a back seat for several years amid developments over the larger Trans-Pacific Partnership Agreement (TPP) in recent years.

Ambassador and head of EU delegation to Malaysia Maria Castillo Fernandez said the EU business community is still keen to resume talks on the FTA as part of the building block for the larger, Asean-EU FTA in the long run.

“We hope the new government can relaunch the free trade negotiations very soon … [It] will most certainly be a key pillar of our broader EU-Asean FTA,” Fernandez told a press conference after the launch of the “EUMCCI Trade Issues & Recommendations” 2018 report yesterday.

The EU delegation, she said, has started discussing with several Malaysian ministers on the matter.

“I will have a meeting next week with the ministry of international trade and industry in order to see how we can quickly re-engage and relaunch the [EU-Malaysia FTA],” she added.

EUMCCI chairperson Tan Sri Dr Rebecca Sta Maria said the “ultimate aim” of the EU is to establish an Asean-EU FTA, which has been talked about since as early as 10 years ago.

Pointing to the success stories of other bilateral FTAs done by the EU, Maria said: “The South Korea-EU FTA has increased trade [volume between the two parties] by 31% in five years.

“The important point to consider is the consequences of not being part of the eventual Asean-EU FTA. This [EU-Malaysia FTA] is a building block [for that], and the pertinent question is what if we are not there.

“But the new government is [looking into it], consolidating its position, they are looking at the data, and [the FTAs] done [between] the EU [and other Asean countries]. That will give the government of Malaysia a perspective on how they want to proceed,” she added.

Malaysia had been in talks for the now-defunct TPP following the exit of the US — the world's number one economy — from the 12-country agreement.

It was reported in January that Malaysia, under the previous Barisan Nasional administration, was interested to participate in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which included all participants left from the TPP.

The EU is the third largest Malaysian partner in terms of trade volume. Exports in 2017 to the continent rose 15.3% year-on-year (y-o-y) to a record RM79.75 billion, while imports rose 19.4% y-o-y to another record RM95.29 billion.

Total Malaysia-EU trade increased 25.1% on-year in April 2018 to RM16.15 billion, accounting for 10.4% of Malaysia's total trade in the period.

With 2,000 companies residing in Malaysia, the EU is also the second largest foreign direct investor here, and the second largest recipient of Malaysian investment.

For the first quarter of 2018, the EU recorded total foreign direct investment (FDI) of RM107 billion into Malaysia, while Malaysia invested RM59 billion in the EU.

Meanwhile, EUMCCI chief executive officer Roberto Benetello shared that the EUMCCI 2018 recommendations report was submitted by a delegation to Finance Minister Lim Guan Eng on June 21.

The key messages include a proposal for a fair rate on sales tax for imported goods, request to simplify processes to apply import permits and free zones, the doubling down on human capital development particularly for skilled workers, and curbing of counterfeits.

“We also had a consultation last week at the finance ministry for the [Malaysian] Budget 2019, and we submitted comprehensive, well-detailed documents with all our issues and recommendations,” said Benetello.