Ratification of CPTPP can help Malaysia be more competitive, says IDEAS
08 Oct 2020
The ratification of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) presents an opportunity for Malaysia to enhance its competitive position, as the country’s competitiveness in the region will be important for achieving sustainable growth.
In a latest report entitled Policy IDEAS No. 65, “Malaysia, Taiwan and CPTPP: Economic Impact Assessment”, the Institute for Democracy and Economic Affairs (IDEAS) said as Malaysia develops its economic recovery strategy, the CPTPP represents an option to stimulate growth, without creating further fiscal pressure.
“These are reflected by IDEAS estimates of the aggregate economic impact of Malaysia ratifying the CPTPP.
The year 2020 presented a slew of hurdles for most of those in the agriculture and farming industry. They faced the ultimate conundrum: On the one hand, they needed to continue producing fresh produce for the many households that had started cooking again because of the Movement Control Order (MCO).
“IDEAS estimates that ratifying and implementing CPTPP would boost Malaysia’s Gross Domestic Product (GDP) by an additional 1.0%, driven by an expansion in trade. This would result in new employment opportunities equivalent to 140,000 additional people in work,” it said.
Malaysia has signed the CPTPP but the government has made no final decision on whether to ratify and implement the agreement while Taiwan, which is not currently a member of the CPTPP, has formally expressed its interest to join.
In the context of the Covid-19 pandemic, the report stated that ratification of the CPTPP can contribute to Malaysia’s recovery in a number of ways.
“First, through supporting the economic recovery by stimulating trade and investment, since ratification of the CPTPP is one of the few levers available to stimulate growth without creating additional fiscal pressure.
“Second, by enhancing Malaysia’s competitiveness in regional and global value chains, at a time when many firms are restructuring their supply chains to be more resilient against future shocks. And third, by accelerating digitalisation of industry in Malaysia through transition to 4IR, which will be an essential component of the “new normal” in the wake of the pandemic,” it said.
IDEAS chief executive officer Tricia Yeoh said as Malaysia grapples with economic recovery and the long term challenge of enhancing economic competitiveness, ratification of the CPTPP is a quick win.
“Malaysia’s negotiators struck a good deal, which can now be ratified and implemented. Furthermore, as the CPTPP continues to grow it will only become more important that Malaysia is part of the deal,” she said.
The report also stated that the CPTPP is also expected to grow, with several potential partners expressing an interest to join — including Thailand, the UK and Taiwan.
“Taiwan is consistently among Malaysia’s top 10 trading partners despite there being no formal trade agreement in place.
“As a result, Taiwan’s accession to the CPTPP is expected to reduce import costs, boost productivity and create new export opportunities — key ingredients for Malaysia’s recovery. Taiwan is also at the forefront of IR4.0 with great success in creating home-grown champions that are competitive globally.
“If Taiwan also join the CPTPP, IDEAS estimates that the boost to Malaysia’s GDP would increase by a further 0.15%, as a result of more trade, which in turn, would boost the employment impact to create an additional 20,000 jobs.
“Malaysian manufacturers, especially small and medium enterprises (SMEs), will benefit greatly not only from cheaper imported machines and other intermediate input, but also creating synergies to move our domestic manufacturing base up the value chain,” it said.
Yeoh added that Taiwan’s CPTPP accession can also accelerate Malaysia’s digital transformation effort and create new impetus for Malaysia’s growth, particularly in IR4.0 focused sectors such as medical devices, chemicals, electronics, and machinery
“If Taiwan joins the CPTPP, the potential benefits to Malaysia would increase substantially, given the strong industrial links that already exist and the significant opportunities for further growth,” she said.