CPTPP: An Opportunity Lost In 2021

By Sharifah Hunaini Syed Ismail KUALA LUMPUR, Dec 20 (Bernama) -- Malaysia, which has gradually loosened the economic shackles of the COVID-19 pandemic, is now on the recovery path with trade flourishing on pent-up demand, albeit not without hiccups due to supply chain disruptions both locally and globally that may well spill over into 2022. For the first 10 months of 2021, trade expanded by 23.5 per cent year-on-year to US$427 billion (RM1.805 trillion, US$1 = RM4.22), the Ministry of International Trade and Industry (MITI) announced. Exports surpassed RM1 trillion in just 10 months, increasing by 25 per cent to RM1.004 trillion and exceeded overall exports in 2020, it said. Additionally, exports surpassed the highest annual value ever recorded in 2018. Imports rose by 21.8 per cent to RM801.17 billion and trade surplus surged by 39.2 per cent to RM202.58 billion. Trade, exports, imports and trade surplus registered the highest value for the period. Bilateral and multilateral trade deals have been a major contributor to the recovery. Trade with free trade agreement (FTA) partners during the first 10 months of 2021, which made up 66.7 per cent of Malaysia’s total trade, grew by 24 per cent to RM1.203 trillion compared to the same period of 2020. Exports to these partners increased by 22.9 per cent to RM670.74 billion while imports expanded by 25.3 per cent to RM532.3 billion. Opportunity loss due to delayed CPTPP ratification Things could have been even better for Malaysia if it had ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Senior minister and MITI minister Mohamed Azmin Ali was quoted as saying Malaysia is expected to ratify the trade pact by the middle of next year. The CPTPP was signed by 11 nations, including Malaysia, in 2018. The agreement has entered into force in Australia, Canada, Japan, New Zealand, Mexico, Peru, Singapore and Vietnam; and until the ratification process is fulfilled, Malaysia is accorded observer status and does not have any right to block any decision made with regards to enforcement of the agreement. Besides tariffs, the CPTPP will also address non-tariff barriers through the inclusion of dedicated disciplines aimed at enhancing transparency. The senior minister said due to the pandemic, the cost-benefit analysis (CBA) had to be re-conducted again by MITI. On Nov 9, he said the CBA is expected to be submitted to the Cabinet for approval by the end of this year. The delay in ratifying the CPTPP has resulted in an opportunity loss for the nation, according to Mohamed Azmin. “Almost five years have passed since the implementation of the CPTPP, where Malaysia lost the opportunity to benefit from the agreement owing to the ratification which has yet to be completed,” he said in Parliament on November. Mohamed Azmin said that among the benefits are access to a wider market, which is expected to grow with the United Kingdom, China and Taiwan seeking to become members of the trade pact. And because Malaysia has not ratified the agreement, he added, Malaysian goods are presently not entitled to preferential treatment if exported to Canada, Mexico and Peru. He cited Vietnam as an ASEAN nation that has benefited from the CPTPP. “Vietnam saw exports increase by eight per cent or US$34.3 billion (RM144.4 billion) in 2019 compared to the year before. Vietnam also saw US$9.2 billion (RM38.7 billion) in direct investments from CPTPP nations or 24 per cent of the nation’s foreign investment for 2019,” he said. China filed its formal application to join the CPTPP on Sept 16 while the UK is optimistic that it will be able to join the trade pact by end of 2022. The UK has formally applied to join the CPTPP on Feb 1 this year, while its accession process began on June 2. Considered as a gold standard FTA, together these countries have a combined gross domestic product (GDP) of US$13.5 trillion (RM56.8 trillion) and a population of over 500 million people. The agreement was signed in March 2018 and took effect at the end of that year. Any new entry in the CPTPP requires the unanimous support of all the trade bloc's members. Domestically, there have been very strong and vocal calls from the private sector for the government to speed up the ratification process of the trade pact. During a recent webinar on “How can Malaysian industries possibly benefit from CPTPP?”, Institute for Democracy and Economic Affairs (IDEAS) chief executive officer Tricia Yeoh said a research by the institute suggests that ratifying the CPTPP would boost Malaysia’s GDP by over RM14 billion, or a one per cent increase. This, said Yeoh, would provide a valuable low-hanging fruit for an economy battered by the pandemic. Panelist Amir Bukhairi Bakhtiar from MITI’s Strategic Negotiations Division said as of now, only three signatories to the CPTPP are pending ratification, including Malaysia, Chile, and Brunei. Without ratification, these countries are unable to enjoy the preferential tariff rates offered under the agreement, and are also unable to block any consensus made by the other parties in all CPTPP meetings. Amir Bukhairi stated that amendments to Malaysia’s laws in order to meet the obligations of the agreement are progressing well, with six out of the identified 14 Acts having already been amended accordingly. He also expressed that Malaysia is on track to ratify the CPTPP by the third quarter of 2022. RCEP ratification also in the works The Regional Comprehensive Economic Partnership (RCEP) is another major trade pact that involves Malaysia. On RCEP, Mohamed Azmin said Malaysia is currently working on amending a few Acts before ratifying the agreement. The RCEP ratification process requires amendments to three Acts under the purview of the Ministry of Domestic Trade and Consumer Affairs, namely the Patents Act, Copyright Act and Trademarks Act. On Nov 25, he said the draft amendments to the Acts are being refined by the Attorney General’s Chambers and after the amendments have been approved, Malaysia will submit the instrument of ratification (IOR) to the ASEAN secretariat. He said as stipulated in Paragraph 3 of Article 20.6 of the RCEP agreement, 60 days after the IOR is sent to the ASEAN secretariat, the RCEP agreement will take effect on Malaysia. The minister said based on the assessment of the Malaysia External Trade Development Corporation (MATRADE), the value of the country’s exports is expected to increase by RM44 billion a year when the RCEP comes into force. According to a notice issued on Nov 3, 2021, by the ASEAN Secretariat, the depositary body of the RCEP, the minimum number of instruments of ratification/acceptance has been achieved and therefore the agreement will enter into force on Jan 1, 2022. This was after Australia and New Zealand became the latest member states to ratify the agreement. Other countries that have ratified RCEP include Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, China, and Japan. On the ASEAN front, the ASEAN Economic Ministers (AEMs) and their dialogue partners have renewed regional economic diplomacy, committing to intensify global efforts to ensure vibrant growth and resilient recovery against the COVID-19 pandemic. Mohamed Azmin said the commitment was made at the ASEAN annual consultations with dialogue partners, East Asia Summit member countries as well as various business councils held between Sept 13 and 15, 2021. The dialogue partners are China, South Korea, Switzerland, the United States, Hong Kong, China, India, the European Union (EU), Russia, Australia, New Zealand, Japan and the United Kingdom. "The overarching theme of the discussion was on efforts to expedite the rejuvenation of the economy from the pandemic, with all AEMs and dialogue partners reiterating the imperative of continuous global cooperation, ensuring equitable access, as well as safe and effective distribution of vaccines. "We also reprised commitments to keep markets open and ensure the continued, smooth, and sustainable flow of essential goods and services as well as supply chain, while making certain that ASEAN centrality remains at the forefront," he added. Despite the pandemic, Malaysia has recorded positive growth of RM12.8 billion worth of net foreign direct investment (FDI) in the third quarter of 2021, compared to RM8.2 billion in the second quarter, an increase of 56 percent. Prime Minister Ismail Sabri Yaakob said FDI rose for first nine months of the year to more than RM30 billion, an increase of 300 per cent compared with the same period of 2020. -- BERNAMA