Malaysia is one of Asia's biggest employers of foreign labour. But recently, cases of deaths, abuse and forced labour have come to light. What is going on? Who is protecting these migrant workers?
It is important therefore that there should be balance in the views expressed and to understand that we have so much to gain than to lose in signing this FTA with our largest trade partner, the USA.
<P>The average tariff of our two countries is generally low and therefore
with or without an FTA, trade will continue to grow.</P><P>Whilst this is true,
however there are products from Malaysia which attract high duties when entering
the US like textiles(up to 14.7% duty) and apparel( up to 28% ), shoes (up to
48%) and ceramic tableware (up to 25%).</P><P><B>Expand RM1 trillion trade threshold
and employment</B></P><P>In addition, Malaysian products currently cannot enter
their government procurement programmes as Malaysia is not a signatory to the
WTO Government Procurement Agreement nor do we have an FTA with the US. This means
that even in products that we are competitive in, such as electronic products,
wooden furniture and rubber gloves; we are excluded from the US$250 billion government
procurement market. An FTA will allow us to participate in this market.</P><P>Furthermore,
our textile & garment industries are currently exporting RM3 billion a year
to the US. With an FTA, duty free access is expected to double to RM6 billion
and in doing so, will create an estimated 20,000 new jobs. If other competitive
products are included, Malaysia would be creating more jobs and expanding national
economic activities, exports and incomes.</P><P><B>FTA will give Malaysia regional
advantage in investments</B></P><P>The export expansion and job creation will
not end here. Many other textiles and garments manufacturers from other countries
may wish to re-locate to Malaysia to take advantage of this zero duty, leading
to further employment opportunities.</P><P>In the whole of Asia, the only country
having an FTA with US is Singapore whose industrial structure is very different
from ours. Over time it will not only be factory workers, but executives, managers
and even fashion designers from our local institutions of higher learning, who
will benefit from the growth of just this one sector.</P><P>In addition, in terms
of Foreign Direct Investments (F.D.I), an FTA will certainly prompt additional
US factories to re-locate here to take advantage of our lower costs to re-export
products back to the US free of duty, or for export to ASEAN countries and other
countries with which we have signed FTAs like China & Japan.</P><P>For an
American company that is looking at re-locating its operations in Asia, the first
port of call will be a country where there is a Free Trade Agreement as it provides
certainty in terms of tariff, as well as certainty in the rules and security of
investments.</P><P>Generally, foreign trade and investments tend to increase after
an FTA is signed. This has been Malaysia’s experience with the signing of
the Economic Partnership Agreement with Japan in 2006, as already evident in the
five-fold jump in FDI in the last six months of 2006. In tandem with higher investment,
employment and other economic opportunities will increase.</P><P>So a successful
conclusion of an FTA would lead to faster growth in trade and investments for
Malaysia and provide the nation a three to five year lead-time ahead of our neighbours
with respect to free market access into the US.</P><P><B>FTA will not hurt Malaysian
padi farmers</B></P><P>Some fears have been expressed that an FTA would lead to
cheap subsidised US rice entering the country which would hurt our padi farmers.
The reality is the US prices for long grained rice are much higher than that of
their competitors like Thailand and Vietnam. In any case, we are already an importer
of rice to supplement our own production.</P><P>Malaysia is not self sufficient
in rice and there no clear advantages in being self-sufficient if we can buy cheaper
rice from other countries. In fact, our production of rice has fallen from 88%
of requirements in 1980 to the present 60-65% as more competitive suppliers are
available. The general population benefits from cheaper imported rice and current
rice imports have not adversely affected our farmers.</P><P>Malaysian negotiators
have considerable expertise and would be able to ensure that the interests of
our farming community are taken care of; having handled similar negotiations on
other trade agreements, including with China, Japan, AFTA, and the WTO.</P><P><B>An
FTA will not stop production of generic drugs</B></P><P>There was also an expressed
fear that generic drugs will no longer be available after the signing of the FTA.
Drugs, which are already off patent, can continue to be produced generically and
be available. One area of contention is the Data Exclusivity (DE) period which
can extend beyond the patent term. Proprietary drug companies have contested the
use of their clinical data in the marketing approval of generic drugs by local
regulatory authorities.</P><P>Our FMM position is that originators of intellectual
properties know that there is a time limit of 20 years for them to be the sole
beneficiaries of their inventions. This period was deemed appropriate for innovators
to recoup the cost of R&D. In the determination and protection of public health,
the country should have recourse to compulsory license and government use order,
with or without an FTA.</P><P>However, it is a negotiating point as to whether
and how much time should be allowed for the delay in registration for marketing
approval, and whether modifications of the drug would be sufficient to trigger
an extension of the patent as a result of DE. An extension of patents would basically
mean that we may have to live with existing prices for a slightly longer period
of time.</P><P><B>Malaysians want greater transparency</B></P><P>Another issue
which has been raised by NGOs and others is the alleged loss of national “sovereignty”
if we were to accede to the US request for greater transparency in our government
procurement. It is rather surprising that NGOs should take this position whereas
all this while many NGOs and members of the public have been asking for more transparency
as demonstrated in the recent public pressure for details of the Malaysian water
privatisation contracts and expressway toll agreements. We should be prepared
to be transparent about the way we conduct business and not be hesitant to put
it into a trade agreement.</P><P>Transparency is NOT an affront to national sovereignty.
If we continue to resist, it is like saying “No transparency please, we’re
Malaysian”. For the long term good of the country, Malaysia should adopt
public policies which promote accepted standards of transparency in the way the
government calls for tenders and awards contracts, with or without an FTA. YAB
Prime Minister himself had advocated for a more competitive bidding process for
government procurement.</P><P><B>US has Margins of Preferences like Malaysia</B></P><P>As
to government procurement and preferences, the US government itself has a system
of preferences for small businesses. For contracts below a certain level, small
businesses are given a margin of preferences of 6% to 12% to assist them in tenders
over the larger companies.</P><P>Likewise, there are Malaysian Treasury Circulars,
which also lay out very clearly the margin of preferences, which a Bumiputra company
can enjoy for different levels of tenders. The US negotiators have stated that
they are prepared to work within a framework of preferences for the Bumiputra
community. However, this subject has not been negotiated because of strong misinformation
that the FTA is a tool for US to dismantle the Bumiputra preferences in its entirety.
A properly negotiated FTA will allow the affirmative action programme to continue
in a transparent manner.</P><P>It is FMM’s hope that there will be a move
to table our existing margins of preferences for the US to consider rather than
not to table anything at all.</P><P><B>Malaysia’s competition principles
already in place</B></P><P>Another contentious issue is the request for a Competition
Policy to be in place in the free trade agreement and our difficulty in tabling
that for negotiation by the Ministry concerned. We have been talking about competition
policy for Malaysia for the past 10 years and certain basic principles of competition
policy can be tabled.</P><P>These principles have already been incorporated through
the Malaysia Multimedia & Communications Act 1998 which amongst other things
promotes a freer competitive telecommunication industry and where no big player
can use its dominance in an anti competitive manner. It is partly because such
rules were enacted that Malaysia is having a more competitive telecommunications
sector. It is easy to see how the public is benefiting from all the hot deals
and special programmes that the various telephone companies are offering. This
is an example that competition is good for the public and like transparency, we
should welcome it.</P><P><B>GLCs must be included in competition policy</B></P><P>We
understand that one possible reason for the reluctance to table the competition
policy could be that the Government may want to exempt GLCs from a competition
policy. This position is not acceptable to the Malaysian private sector as the
GLCs are already big companies, a significant part of the corporate sector and
certainly do not merit this concession.</P><P>GLCs have implemented various transformation
plans to improve their performance, profitability and efficiency and many are
public companies which are already subject to listing and corporate governance
requirements. Greater transparency, competition and better procurement policies
will enhance not only their standings but also their performance and profitability.
With the transformation of GLCs, they will be in a better position to operate
in a competitive environment without any special concessions.</P><P><B>A more
competitive and vibrant services sector</B></P><P>There were also comments about
how our services sectors will be swamped with an FTA. Those services sectors that
have shown resilience are those which opened up earlier, for example in the accounting
profession, the big four in the world are already in Malaysia. Staffed and partnered
overwhelmingly by Malaysians some of whom has been posted overseas to high positions
they give world class service. In addition, other Malaysian accountants have set
up links with other accounting firm elsewhere and have also been successful. It
may be useful to point out that Malaysia is a signatory to the General Agreement
on Trade in Services (GATS).</P><P>The same can happen to our other services as
the nation begins to find its respective niches in a globalised environment. A
more competitive and vibrant service sector will have spin-off effects for the
rest of the economy. It is not possible to completely insulate the services sector
from competition forever. Just as the manufacturing sector had to contend with
duty free imports, the services sector has to compete with the world to give a
competitive edge to the rest of economy. In addition, Malaysians will benefit
from a more open and efficient services sector given a more competitive service
industry.</P><P><B>Adapt and adjust to reap economic benefits together</B></P><P>I
would like to relate a story in the late 90’s where MIDA approached FMM to
explore whether Malaysian industries could bring forward the starting date of
the ASEAN Free Trade Area (AFTA) by three years to 2000.</P><P>When we asked individual
industry groups then, their answer was “No, we needed longer protection”.
I suggested therefore to the then MIDA officer in charge, Datuk Jegathesan that
we call a meeting of all the industry groups together.</P><P>When the question
was asked whether we should bring forward AFTA, the Cement Manufacturers Association
immediately stood up and said “No. We need longer protection because if we
have a free trade area in ASEAN the Thai cement producers who are four times bigger
than us will be more competitive and will wipe us out”.</P><P>On hearing
this the Concrete Products Association which uses cement as raw materials stood
up to say “No. We should quickly open up the free trade area so that we would
be able to buy our cement from anywhere at the cheapest price for us to be competitive
against imports as well as for our exports”.</P><P>Then it was the turn of
the paper producers who stood up and said “We have just invested in a new
plant to make paper and we need further protection because we cannot compete with
the Indonesians who have a large and cheap supply of pulp and their plants are
already depreciated over many years”.</P><P>Immediately, the Cement Manufacturers
Association who spoke earlier, jumped up to protest “No. We need to open
up the paper market because the price of paper bags for cement is very high”.</P><P>At
that point, everyone burst out in laughter and realised then that the output of
one industry is the input of another. In a free trade agreement one must be prepared
to adapt to some adjustments in the immediate term to reap the benefits for the
rest of the economy as a whole.</P><P>Likewise, this awakening will happen in
the services sector. We are heartened to read from the statement of the secretary
of the Bar Council that they are considering opening up the legal services, having
found that five years into the FTA with the US the Singapore legal profession
has yet to be swamped by US lawyers. Similarly the lawyers in turn would be able
to have access to lower logistics and financial costs as the rest of the services
sector becomes more competitive.</P><P><B>The time pressure</B></P><P>The time
to act is now. The US Congress, being controlled by the Democrats is less likely
to sign an FTA with any country soon. If we miss this window of opportunity, Malaysia
would have lost an opportunity to gain access to the biggest economy in the world
over other countries.</P><P>An interesting view point from the global political
platform is that the US looks upon Malaysia as a well-managed and moderate Muslim-majority
country, which it is keen to collaborate with. YAB Prime Minister has already
built up a good relationship with the US Government and Malaysia’s standing
in the world and among Islamic nations would be further enhanced.</P><P>In short,
the successful conclusion of the FTA with US would be in line with Malaysia’s
national economic policies to further expand the economic cake and create wealth
for the country through an increase in FDIs, employment opportunities, tourism
and enhanced regional competitiveness. The successful conclusion of the Malaysia-US
FTA would expedite the country’s progress in achieving developed nation status
by 2020.</P><P>From:<BR><B>Datuk Yong Poh Kon,<BR>President FMM<BR>Federation
of Malaysian Manufacturers (FMM) Wisma FMM, No 3 Persiaran Dagang, PJU9 Bandar
Sri Damansara, 52200 Kuala Lumpur Tel: 03-62761211 Fax: 03-62741266 email: <A HREF="mailto:webmaster@fmm.org.my">webmaster@fmm.org.my</A></B></P><P><I>Source:
http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_460d6a2e-cb73c03a-13c550f0-dd0a6519</I>
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