Business

Wednesday October 28, 2009

M’sia-NZ FTA deepening its collaboration

Comment by David Kersey


THE Malaysia-New Zealand free trade agreement (FTA) will further strengthen the long-standing friendly relationship between New Zealand and Malaysia. Together with the Asean-Australia-New Zealand FTA (AANZFTA) signed earlier this year, the Malaysia-New Zealand bilateral FTA provides a framework for closer economic cooperation and partnership between both countries’ business communities.

It is a further tangible expression of New Zealand’s commitment to relations with Malaysia and other countries in this rapidly integrating region. The significance of the agreement can be understood in the context of the robust and growing trade between the two countries.

Malaysia is New Zealand’s second-largest trading partner in Asean and its eighth-largest export destination. Two-way merchandise trade between Malaysia and New Zealand reached an estimated NZ$3bil/RM7.6bil in 2008.

The FTA provides both countries improved market access, greater transparency and security for goods and services providers in a range of value-added sectors.

The various measures are further bolstered through the reciprocal MFN (most favoured nation) provision where both countries have “future proofed” key investment and services interests – which means, for example, that New Zealand interests in key areas are protected, in relation to competitors, when Malaysia concludes FTAs with other partners, and vice versa.

Not only does the agreement seek to improve exchange of traditional goods, but it looks at facilitating trade in new products, knowledge intensive services, and investments, as well as cooperation in areas of mutual interest such as the environment and human resource development.

Liberalising trade in goods

Over the last four years, New Zealand’s goods exports to Malaysia grew by over 80%.

The export profiles of the two economies are complementary.

New Zealand’s exports to Malaysia are generally dominated by primary sector goods, with dairy products featuring significantly in the export profile. On the import side, electronic goods, other machinery, oils and fuel make up the bulk of the trade. Import duties into Malaysia range from zero to as high as 30%.

The agreement will eliminate tariffs on cross border goods trade by 2016 and improve the time frames for elimination of tariffs agreed on earlier under the AANZFTA.

Under the bilateral agreement, Malaysia will eliminate 99.5% of its tariffs on New Zealand exports, while New Zealand will eliminate tariffs on 100% of Malaysia’s exports within seven years of entry into force – five years earlier than provided for under the AANZFTA.

While tariffs on many Malaysian exports will be eliminated on entry-into-force, there is a longer transition period for some sensitive goods such as margarine, clothing, steel products and wooden furniture.

Once implemented, Malaysian consumers will have access to a wider range of New Zealand products and providers, as well as enjoy lower costs for popular New Zealand food and agricultural products such as kiwifruit, dairy, meat, fish and forestry products.

Faster, cheaper access to New Zealand markets will enable New Zealand consumers and businesses to obtain a wider range of Malaysian products at better prices.

Beyond goods … focusing on services

While the services trade between Malaysia and New Zealand has increased significantly, there is plenty of room for growth.

The Malaysian government’s commitment to the further development of the services sector, as one of the pillars in moving the economy up the value chain, will propel services trade to a new level.

The FTA paves the way for expanding trade in knowledge intensive services and new products by providing improved market access for services providers.

New Zealand is eager to collaborate and share its strong capabilities in key areas identified by Malaysia’s strategic plans, including information and communications technology (ICT), tourism, education and training, biotechnology, multimedia and professional services.

New Zealand ICT services providers will work together with Malaysian companies to enhance the ICT sector focusing on telecommunications, utilities, healthcare, payments and security.

Education and training play a huge role in the development of the services sector. This is a major focus for Malaysia with a substantial budget allocation.

New Zealand is already one of the preferred destinations in the area of higher education for a growing number of Malaysian students – the number of Malaysian international students in New Zealand has increased by over 70% since 2003.

In addition to several thousand undergraduates, there are currently 240 Malaysian PhD candidates studying in New Zealand.

The FTA is expected to facilitate greater educational linkages with the intent of developing university programmes and software, e-learning solutions, professional development programmes for teachers and knowledge sharing.

A good example of such collaboration is the development of e-learning solutions for Malaysia’s Smart Schools programme.

Both countries will also establish a mechanism for assessing qualifications equivalency. This will, for example, make it easier for New Zealand professionals – education consultants, engineers, architects and accountants – to share knowledge and deliver services in Malaysia.

Boosting cross-border investments

Investment ties between New Zealand and Malaysia have grown rapidly in the last few years – New Zealand investments in Malaysia have seen an annual average growth over the past five years of 77%.

Cross-border investments will continue to grow, as the agreement provides greater predictability and transparency for New Zealand investments and investors in Malaysia.

Greater ease of movement of business persons between Malaysia and New Zealand will help ensure that business people are in a position to make the most of the agreement’s trade and investment opportunities.

Green solutions and developing human capital

The environment and labour agreements, which have been concluded in conjunction with the FTA negotiations, are a first for Malaysia in the context of a bilateral treaty.

Sustainable development is important to both countries economic agenda and future growth.

The Malaysian Government envisages green technology as one of the emerging drivers to accelerate the national economy while conserving the environment and resources, and minimising human impact.

The environment agreement provides a framework for more effective discussion and cooperation in areas such as environmental technology and natural resource management. The provisions in the labour agreement are aimed at developing best practices in employment relations, fostering work place productivity, improving occupational safety and health, and the development of human capital.

New Zealand and Malaysia are deepening their collaboration to leverage opportunities presented by a rapidly evolving and integrating Asia Pacific region.

In strategic terms, the FTA demonstrates that both New Zealand and Malaysia consider an open market policy a better way to promote sustainable development and ride out the challenging economic times.

l David Kersey is New Zealand’s High Commissioner to Malaysia.

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