FSI hopes tariff reduction favours Sabah
KOTA KINABALU: The Federation of Sabah Industries (FSI) welcomes Malaysia's decision to pursue the Regional Comprehensive Economic Partnership (RCEP) agreement to its conclusion after the government's signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) this month to further complement developing BIMP-EAGA potential.
The RCEP is targeted for signing before the end of 2018.
FSI intends to hold the Sabah International Expo 2019 early next year with the participation of more international participants.
The RCEP involves the 10 Asean countries and Australia, New Zealand, China, India, Japan and South Korea, representing a combined Gross Domestic Product (GDP) of US$21.4 trillion or 30 per cent of the global GDP and a market of 3.4 billion people.
The CPTPP brings together Malaysia, Singapore, Brunei, Vietnam, Australia, New Zealand, Japan, Canada, Mexico, Chile and Peru, accounting for a market of 476 million people.
The combined GDP of the 11 countries is US$11 trillion or 13 per cent of the global GDP. Sabah can benefit with more direct shipment between Vietnam ports and here.
As Sapangar Port can be a transhipment hub between East Asia and Australasia, FSI President Datuk Mohd Basri Abd Gafar noted, "Sabah can benefit as RCEP will eliminate 90 per cent of tariff lines as it is geared more towards enhancing trade and investment-related activities with the ultimate purpose of minimising development gaps among member countries."
"Tariffs in Asia are still high in some countries," Basri noted.
He recalled that when countries open themselves up to trade, they see their domestic economy becomes more prosperous. This happened in Japan in the 1950s, South Korea in the 1960s, Vietnam in the 1990s and China since 2001.
The RCEP agreement would also allow for back-to-back shipment of goods as well as third-party invoicing of goods.
Malaysian exporters would reap the benefits, particularly those exporting to India, where many tariff lines would be eliminated, Basri explained, adding that history had shown that nations experienced improvements in their economies when they embraced the open market that would result in the raising of living standards from innovativeness and improved productivity.
The agreement covers, among other things, the exchange of goods and services, intellectual property rights and issues of government procurement and labour standards.
He noted that the agreement would also allow for back-toback shipment of goods as well as third-party invoicing of goods.
Basri said Malaysian exporters could scale up their domestic businesses out of profits gained from the expansion of their market share.
He added that this could lead to the creation of new jobs not only in the local companies, but also the foreign companies that might be attracted to set up business in Malaysia.
Hence, he opined that Malaysia stands to gain from the revised Trans-Pacific Partnership (TPP) agreement, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as the deal opens access to new markets.
Moody's Investors Service, in its recent report, said that Malaysia would benefit from export access into markets such as Canada, Peru and Mexico.
This will boost the country's produce such as palm oil, rubber (that Sabah produces) and electronic products.
Without the US, the 11 remaining members of TPP, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, signed the CPTPP which is a revised TPP in Santiago, Chile, on March 8.
The CPTPP retains most of the existing terms of the TPP, with some key exceptions, as it provides member countries greater flexibility to consider domestic market conditions, before deciding what policies they should retain or remove.
The CPTPP will account for 13.5 per cent of the global gross domestic product (GDP) or about US$28 trillion.
It will have a market of 500 million compared with the defunct TPP, which would have covered 40 per cent of the global economy and 800 million people.
CPTPP may expand its membership to include other large Asian economies, like Indonesia, South Korea, the Philippines, Taiwan and Thailand, which have expressed interest in joining the trade deal.
According to Moody's, an analysis by the Peterson Institute for International Economics (PIIE) showed that inclusion of the five Asian countries, would result in real income gains of US$486 billion for members.
The benefits would be even greater if China and European countries seek membership in future, it said.
It was reported that the CPTPP has already attracted interest from the United Kingdom, Basri noted.
Canada and Mexico, two members of the North American Free Trade Agreement (Nafta), would be able to attract more investments from CPTPP members, particularly those Southeast Asian exporters looking for greater access to the US market.
The failed TPP, signed earlier on Feb 4, 2016 in Auckland, New Zealand, has been dubbed as the most ambitious trade deal in history.
In the past, the government has affirmed its commitment to the TPP as long as Malaysia's concerns can be accommodated.
Basri noted that International Trade and Industry Minister Mustapa Mohamed considered the signing of the CPTPP as timely, indicating Malaysia's commitment towards an open and liberal trading system.
He said the world needed more trade and investment flows and not restricted markets.