Malaysia, Australia Sign FTA

By Editorial 24 May, 2012

On May 22 in Kuala Lumpur, as a complement to the existing regional agreement between Australia and the Association of Southeast Asian Nations (ASEAN), of which Malaysia was one of the original members, Australia's Trade Minister Craig Emerson and his Malaysian counterpart Mustapa Mohamed signed a comprehensive bilateral free trade agreement (FTA).

Negotiations on the FTA commenced in May 2005 but paused in 2006 to enable both countries to focus on the ASEAN-Australia-New Zealand agreement, and resumed only in August 2009. Negotiations were intensified following an undertaking in March last year by Australia’s Prime Minister Julia Gillard and Najib Tun Razak, the Malaysian Prime Minister, to complete negotiations within a year.

After 11 rounds of negotiations, the FTA was concluded on March 30, 2012. It encompasses the liberalization of trade in goods and services and the facilitation of investment, as well as the enhancement of bilateral economic cooperation.

Malaysia is Australia's 10th largest trading partner, with two-way trade worth almost AUD16bn (USD15.9bn) in the 2010-11 financial year.

Once it enters into force on January 1, 2013, the FTA will guarantee tariff-free entry for 97.6% of current goods exported from Australia to Malaysia, rising to 99% by 2017, while, for Malaysia, the FTA will allow the same tariff-free entry to Australia as is currently enjoyed by Singapore.

It is hoped that the agreement will further integrate the Australian economy with the fast-growing Asian region, benefiting Australian exporters, importers and consumers. Under the accord, Australia will be as well-positioned in the Malaysian market as Malaysia's closest trading partners in ASEAN, and in some cases better. In particular, Australian exporters of automotive parts, iron, steel and dairy products will benefit from improved market access under the FTA.

The FTA should also help to diversify the trading relationship by opening Malaysia's services sector to Australian companies. Malaysia has committed to allowing majority Australian ownership of service providers in a range of industries, including telecommunications, insurance, investment banking, education, tourism, research and development, accountancy and mining-related services, with a higher number of Australian expatriates with senior managerial and specialist skills being offered for the banking, insurance and capital market sub-sectors.

The Malaysian Trade Minister expressed his confidence that the new agreement will benefit both countries. “I am happy to note that Malaysia will benefit from this agreement, particularly in the area of goods where this is the first FTA Malaysia is signing that will grant our exporters duty free treatment for 100% of our goods as soon as it comes into force,” he said.

With this preferential tariff treatment, Malaysian producers and exporters should be in a better position to compete in the Australian market, especially for items such as iron and steel products, plastic products, apparel and clothing, and wood products.

The FTA also provides a framework to further facilitate cross-border investments between Malaysia and Australia through commitments on non-discrimination as well as the protection of investors and investments. This enabling environment should encourage further two-way investments between the two countries.

On leaving to sign the agreement, Emerson had commented that “the signing of this FTA will open a new chapter in Australia's relationship with Malaysia. The FTA builds on an already-solid commercial partnership by embracing services and investment, where Australian companies will increasingly engage with Asia in this, the Asian Century."

In addition, both countries have agreed to undertake economic and technical cooperation, with particular attention being given to the automotive sector, agriculture, tourism, clean coal technology and e-commerce.

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