By Zarul Effendi Razali
KUALA LUMPUR, May 6 (NNN-Bernama) — Malaysia can continue to bank on its strong bilateral trade and investment linkages, especially within ASEAN, to boost its trade as well as take advantage of various trade pacts such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Dr Munir Majid, chairman of CIMB ASEAN Research Institute (CARI) ASEAN Research and Advocacy, said the country must also not be afraid of opportunities such as those offered by the CPTPP.
He said the greater intra-regional trade and investment is already happening as a result of the trade and tech war the United States (US) has declared against China, as well as the result of regional and other free trade groupings such as the Regional Comprehensive Economic Partnership (RCEP) and CPTPP.
“The Prime Minister (Anwar Ibrahim) wants to up the ante. It could be improved (intra-ASEAN trade remains at just around 25 per cent). The International Monetary Fund (IMF) estimates the decoupling between the US and China could cause a contraction in world GDP by as much as 7.0 per cent in the most extreme case.
“We have to increase trade in and attract investment from regional partners to part compensate for this,” he told Bernama.
PM’s visit to China
Federation of Malaysian Manufacturers (FMM) president Soh Thian Lai said Malaysia has done a great job so far towards strengthening bilateral trade and investment linkages with regional trade partners including China during the series of visits by Anwar.
“China has remained Malaysia’s largest trading partner for 14 consecutive years, with total trade of RM488 billion (US$109.8 billion) in 2022, and is our biggest foreign direct investor with investments amounting to RM55.16 billion (US$12.4 billion).
“Following the official visit to China in March, we note that both countries have agreed to further boost trade relations and economic cooperation under the Belt and Road Initiative, including expediting the East Coast Rail Link project in addition to enhancing and exploring new areas of cooperation such as TVET (technical and vocational education and training), digitalisation and further development in the halal industry,” he said.
During the visit, Soh said, Malaysia secured RM2.44 billion (US$549 million) in potential exports and a record investment commitment of RM170 billion (US$38.3 billion) from China, namely in the manufacturing sector including new-generation car manufacturing, petrochemicals and vaccines.
By making Malaysia their regional hub, he said, these high-quality investments will contribute to the country’s economic growth by helping to create spillover effects for local small and medium enterprises that will benefit from technology transfers in production, distribution and industrial upgrading in addition to building new capabilities, developing key industries, and creating high-paying jobs for Malaysians.
Soh said the International Monetary Fund (IMF) in its World Economic Outlook Update in January 2023 has emphasised the need to strengthen multilateral cooperation which includes strengthening global trade to address the risks stemming from the current geopolitical fragmentations.
“In this regard, the FMM notes that free trade agreements (FTAs) were central in the discussions between the two leaders from Malaysia and China with emphasis on leveraging the benefits of the ASEAN China Free Trade Agreement (ACFTA) and RCEP to deepen trade and investment ties between both countries,” he said.
Talk on AMF timely
Meanwhile, Munir said that the talk on the Asian Monetary Fund (AMF), which was mooted by the Prime Minister recently, is timely as a process of uncoupling is taking place in the world economy, “a bifurcation occasioned by US efforts to contain China.”
“The greater use of counterparty currencies, avoiding the intermediate dollar, is also happening, such as ruble-rupee in Russia-India trade or riyal-yuan in Saudi-China trade, not petrodollars.
“The US dollar is becoming less important, and states in the international system want to be less exposed to outcomes of US monetary and fiscal policies on their currencies and economies,” he said.
According to Munir, there is also a structure that was introduced in 2000 after the Asian financial crisis that could be used as a foundation such as the Chiang Mai Initiative Multilateralisation (CMIM), which involves the ASEAN+3 countries (China, Japan and South Korea).
He said this mechanism is intended to assist involved parties that may be facing short-term balance of payments and liquidity problems.
“There is also AMRO (ASEAN+3 Macroeconomic Research Office) to monitor economic policies to ensure those that might request liquidity assistance do not get into trouble because of reckless fiscal and monetary policies. So there is already a kind of regional IMF in place,” he noted.
However, he said, developing it into the AMF requires consensus-building on the parameters of fiscal and monetary policies, as well as identification of what might be last resort currencies that would be acceptable in a crisis.
“Which currency will play the dollar role? The yuan? Will not other economies and currencies be similarly exposed to China’s fiscal and monetary policy, as they are currently to the US dollar? Could there just be a formula for special drawing rights instead of dependence on just one or two currencies?
“There are plenty of details to be worked out. The basic structure is there and can be developed. It is timely to do so as US policies are driving nations from the dollar, and it is Asia that is going to be the centre of economic activity and growth,” he added.
Opportunities in markets outside the region
Munir said there are still good extra-regional markets such as Mexico and Canada.
“The European Union (EU) should not be forgotten. Even the US, Mexico and Canada, as there is an FTA among the three.
“Now that the United Kingdom (UK) is joining the CPTPP, we should see how to improve trade and investment with them. Granted, all those economies are going through a tough time, but we should bear in mind the RCEP, for instance, is still just 30 per cent of the world economy,” he said.
He stressed that despite concentrating on the region, the government must not vacate trade and investment relationships with the others.
“Please also take note of the decision by ASEAN finance ministers and central bank governors in Bali at the end of last month to expand the use of local currencies in trade settlement instead of using the dollar,” he said.
Meanwhile, Soh said that to further complement the efforts made by the Prime Minister in supporting expansion of export opportunities for Malaysian industries and reinvigorating investments, the FMM firmly believes that FTAs are critical in positioning Malaysia as a pro-industry, pro-trade and pro-investment country.
“Thus FMM has been advocating for Malaysia through the Ministry of Investment, Trade and Industry to resume negotiations on the Malaysia-EU FTA (MEUFTA), launched back in 2010 but put on hold after several rounds of negotiations in 2012.
“We also urge the government to sign preferential trade agreements with emerging countries such as Bangladesh and Middle East countries (especially the United Arab Emirates), as Malaysia exported close to RM50 billion (US$11.3 billion) to these markets in 2021,” he said.
— NNN-BERNAMA
