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Malaysia To Gain US$200bil By Joining TPPA

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PETALING JAYA: Malaysia stands to reap up to US$200bil in economic gains over nine years by joining the Trans-Pacific Partnership Agreement (TPPA), aided by faster investment growth and greater market accesss.

A PricewaterhouseCoopers (PwC) study revealed that export-oriented industries, namely, electrical and electronics (E&E), textiles and automotive manufacturers would gain the most.

The TPPA is a free trade agreement initiative involving 12 countries – Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, Vietnam and Japan.

The TPPA presents “net economic benefits to Malaysia,” said PwC in a report released yesterday, but warned that there would be adjustment costs to firms from increased competition and cross-sectoral TPPA obligations.

“Malaysia’s participation in the TPPA is projected to deliver net economic gains, with gross domestic product (GDP) to increase by US$107bil to US$211bil over 2018-2027,” PwC said in its report entitled Study on Potential Economic Impact of TPPA on the Malaysian Economy and Selected Key Economic Sectors.

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On the contrary, PwC said Malaysia’s non-participation in the TPPA was projected to result in “a decline in GDP by US$9bil-US$16bil over 2018-2027, resulting in a slight moderation in GDP growth by 0.03 percentage points in 2027. Investment is also projected to decline by a cumulative of US$7bil-US$13bil over the 10-year period”.

Taking consideration of the potential GDP gains foregone from the TPPA participation of US$107bil-US$211bil, the total opportunity cost of not participating in the TPPA, in GDP terms, would amount to US$116bil to US$227bil over 2018-2027.

PwC said non-participation in the TPPA would limit the market access of Malaysian firms to the TPPA countries, particularly in terms of non-tariff measures.

This could potentially reduce the competitiveness of several economic sectors, such as E&E and textiles, relative to the other TPPA countries such as Vietnam.

In addition, the extensive safeguards secured from participating in negotiations to formulate the TPPA, particularly for bumiputra businesses, small-medium enterprises and state-owned enterprises, would be foregone in the event of Malaysia’s non-participation. These safeguards and carve-outs may not be achieved in the event Malaysia forgoes the opportunity now to be among the founding members and only attempts to secure its desired safeguards in the future.

PwC also highlighted that the amount of investments was projected to increase by an additional US$136bil-US$239bil over 2018-2027 following Malaysia’s participation in the TPPA.

“The textile sector will register the largest increase in investment growth in 2027, followed by the construction and distributive trade sectors,” it said.

In contrast, Malaysia’s non-participation in the TPPA could result in a diversion of foreign investment away from Malaysia. Should Malaysia not joint the TPPA, the amount of investments is projected to decline by US$7bil-US$13bil over 2018-2027.

It said post-TPPA, the rise in import growth would outpace the increase in export growth. Export growth is projected to rise by 0.54 to 0.90 percentage points in 2027, attributable mainly to higher manufacturing exports.

In 2027, the trade balance is projected to remain in surplus following Malaysia’s participation in the TPPA.

“The size of the trade surplus will be smaller at US$29.7bil to US$35.1bil, compared to the baseline scenario of US$41.9bil where the TPPA does not exist. The 2027 surplus position post-TPPA participation will remain larger than the 2014 surplus position of US$26.1bil,” it said.

Meanwhile, the Institute of Strategic and International Studies (ISIS) said Malaysia’s participation in the TPPA was in its national interest and is projected to deliver net economic gains to the country.

“Non-participation places the country’s policy of close and friendly relations with countries at risk,” according to ISIS’ national interest analysis (NIA) of Malaysia’s participation in the TPPA. ISIS said the Government had secured numerous exclusions and exemptions to safeguard the nation’s and stakeholders’ interests.

“This has been possible because Malaysia was an early participant in TPP negotiations. These might not be uniformly viewed as favourable or sufficient, but nonetheless, they are more favourable to Malaysia than originally expected. This NIA concludes that the TPP should still set into motion significant structural changes that will result in net positive outcomes,” it said.

Concerns that the participation of Malaysia in the TPPA would result in the loss of the country’s sovereignty and equality were not without basis but might have been over-amplified, ISIS said.

“Malaysia’s security is built on a foreign policy of close and friendly relations with countries. Given the slow progress at the multilateral level and the threat of rising protectionism, Malaysia needs multiple and diversified institutional arrangements with its main economic partners. Currently, Malaysia does not have any with Trans-Pacific countries except Chile,” it said.

“TPPA participation is consistent with Malaysia’s New Economic Model and ambitions to become a high income economy. Malaysia will have fewer tariff restrictions in four new markets – the United States (90%), Canada (95%), Mexico (77%) and Peru (81% ) of all tariff lines,” ISIS said, adding that Malaysian exporters would gain a competitive advantage in market access compared with competitors who are not party to the TPPA

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