KUALA LUMPUR: The Trans Pacific Partnership (TPP) pact will lift Malaysia's competitiveness and further promote the country's trade and investment agenda in the coming decades.

After more than five years of negotiations, Malaysia has come away with flexibilities such as transition periods, threshold, Bumiputera policies as well as exclusions for state governments.

The text of the agreement between Malaysia and 11 other Pacific Rim countries, which was concluded in Atlanta a month ago, was released by New Zealand yesterday.

Full details are available on the International Trade and Industry Ministry website at http://fta.miti.gov.my/index.php/pages/view/tppa.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the TPP would inject competitiveness into the system, pushing Malaysians to be more aggressive both locally and in the markets of other TPP countries.

Apart from Malaysia, the TPP founding members are Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

UEM Group, Petroliam Nasional Bhd, Sime Darby Bhd, AirAsia Bhd, Malaysia Airports Holdings Bhd, Genting Group, YTL Corp and Khazanah Nasional Bhd already have investing interest in the TPP countries.

The foreign investment stock, especially from the TPP grouping, has remained large, with a total of 330 US companies and 680 Japanese companies.

With the TPP, Malaysia can keep pace with international standards on matters such as labour and environment.

The impact on small and medium enterprises (SMEs), meanwhile, is small as these companies have been competing since market liberalisation under Asean and other free-trade agreement platforms.

There is zero import duty for more than 90 per cent of products entering Malaysia under the various agreements.

On Bumiputera flexibilities, suppliers and manufacturers will continue to enjoy the price preference for goods and services under government procurement, while state-owned enterprises will have preferences up to 40 per cent (including SMEs and regional development) of their annual purchases.

Malaysia may maintain current policies and adopt new policies on Bumiputera through new and additional licences and permits in investment and services.

In the area of government procurement, Malaysia will enjoy exclusions, some permanent and some for specific entities.

The TPP provides exclusions for procurement activities in goods (rice, electrical energy and natural water), services (such as financial services, plasma fractionation services and hotel and restaurant services) and construction services (dredging services and slope works).

Government procurement is conducted in a more transparent manner under the TPP, which provides predictability to suppliers on the whole procurement process and reduces the risk of doing business.

Malaysian suppliers in other TPP countries will also be accorded with investment protection under the investor state dispute settlement for government procurement contracts awarded to them by other TPP countries.

In the area of market access, one of the key provisions of the TPP is that Malaysia and Vietnam will be allowed to maintain export taxes and charges in the TPP region.

Key issues

STATE-OWNED ENTERPRISES

l Flexibilities include non-conformity by independent pension funds, sovereign wealth funds and non-commercial assistance.

l Malaysia has requested for preferences for purchase by state-owned enterprises (SOEs) of up to 40 per cent in pursuance of the Bumiputera affirmative action, small and medium enterprises as well as Sabah and Sarawak.

l Felda Global Ventures Holdings Bhd has preference to purchase goods from Felda members for commercial sale.

l Petronas will get preference for local suppliers of up to 40 per cent of its annual budget for upstream businesses and receive non-commercial assistance for specific projects.

l State investment arm Khazanah Nasional Bhd will not be subjected to dispute settlement mechanism for two years.

l Development financial institutions and SOEs with annual revenue of RM2.98 billion will be given flexibility.

IMPORT DUTY ELIMINATION

l Malaysian companies will benefit from preferential access where most import duties will be eliminated in new free-trade agreement markets such as the United States, Canada, Mexico and Peru.

l Local manufacturers will gain competitive advantage over regional peers by enjoying preferred import duty when exporting to TPP region and saving imports cost for raw materials from TPP region. Malaysia will also be reducing or eliminating its import tariff.

l Import duty will be eliminated for highly-sensitive products, such as alcoholic beverages and tobacco products, within 15 years. However, Malaysia is allowed to maintain or adjust excise duties for these products.

l Import duty for rice will be eliminated within 10 years although Malaysia reserves its rights to maintain the current importation and distribution system.

l Import duty of 30 per cent for sensitive automotive products, such as completely built-up vehicles, will be eliminated within 12 years.

l Other automotive products will be eliminated in between five and 10 years.

l Import duties for Asean member countries has been eliminated and will be eliminated for Japan and Australia next year.

l Import duty for sensitive iron and steel products will also be eliminated within 10 years. Other products under the market access chapter will be eliminated between five and seven years.

BUMIPUTERA FLEXIBILITIES

l Thirty per cent of government procurement be set aside for Bumiputera contractors for construction services.

l Bumiputera suppliers and manufacturers will continue to enjoy the price preference for goods and services while central contract on existing items will continue.

l Malaysia may maintain current policies and adopt new ones via creation of new and additional licences or permits in investment and services. However, such policies should not affect the rights of other TPP investors.

l Malaysia also has the right to provide subsidies or advantages for the supply of any financial service deemed necessary for the development of micro, small and medium enterprises.

l It also has the right to regulate and safeguard its national interest while states are able to regulate sectors under its list.

INTERNET AND DIGITAL ECONOMY

l The TPP parties have committed to ensuring a free flow of information and data.

l They agreed not to require TPP
companies to build data centres
as a condition for operating in a TPP market.

l The TPP prohibits the imposition of Customs duties on electronic transmissions and prevents TPP parties from favouring national producers or suppliers of such products through discriminatory measures or outright blocking.

l TPP parties agree to adopt and maintain consumer protection laws related to fraudulent and deceptive commercial activities online and to ensure that privacy and other consumer protections can be enforced in TPP markets.

l The parties also agreed to cooperate to help small and medium businesses take advantage of electronic commerce while encouraging cooperation on policies regarding personal information protection, online consumer protection, cybersecurity threats and cybersecurity capacity. Rupa Damodaran and Zarina Zakariah

Highlights

THE following are the highlights of the final text of the Trans-Pacific Partnership (TPP) agreement. The TPP text will be debated in Parliament in January or early February next year.

l Government has agreed to extend data protection to biologics products, so as to provide non-discriminatory treatment. Biologics refer to non-chemical drugs produced using biotechnology processes;

l Malaysia will have the rights to control the entry of foreign labour based on the needs of the industry, prioritising on employment opportunities for local workers;

l Under TPP, products and suppliers of other TPP countries will receive the same treatment as local products and suppliers;

l Likewise, Malaysian products and suppliers will be accorded the same treatment when they participate in government procurement of other TPP countries;

l State-owned enterprises to have flexibility to give preferences to Bumi suppliers and small and medium enterprises for up to 40 per cent of their annual purchases;

l SMEs to have access to a more liberalised market under the TPP for their exports;

l TPP to provide preferential access for goods and services from Malaysia into four "new" free trade agreement markets, namely the United States Canada, Mexico, and Peru;

l SMEs to benefit through participation in the regional supply chain as more inputs will be sourced from TPP members to meet the rules of origin requirement;

l Malaysia to gain competitive advantage over regional competitors in exporting products; i.e. electrical and electronics, chemical products and palm oil products;

l Malaysia to eliminate import duties for almost 85 per cent of products imported from TPP countries upon entry into force of the agreement;

l For Malaysia, the investor-state dispute settlement (ISDS) mechanism will not apply for a three-year period after entry into force for government procurement projects below specified thresholds. Bernama