As TPPA ne­go­ti­a­tions fin­ish up, Malaysia has some tough de­ci­sions

The China Post - - COMMENTARY - BY MARTIN KHOR

It’s been a very long race, but the fin­ish­ing line is now fast ap­proach­ing.

The Trans-Pa­cific Part­ner­ship Agree­ment (TPPA) ne­go­ti­a­tions are com­ing to an end, with the min­is­ters meet­ing in Hawaii last week to wrap up out­stand­ing is­sues.

It is un­likely that there is fi­nal clo­sure, as not all the con­tentious is­sues can be set­tled in de­tail.

But the re­main­ing ne­go­ti­a­tions must be fin­ished very soon, in a mat­ter of days or within a few weeks, to meet the tight dead­line of the United States’ po­lit­i­cal process.

Malaysia is one of the coun­tries mak­ing the tough­est de­ci­sions.

We are one of the coun­tries re­sist­ing the U.S.’ push for very strong in­tel­lec­tual prop­erty clauses that will af­fect the prices of and ac­cess to medicines.

But we also have se­ri­ous reser­va­tions on two prob­lem­atic chap­ters — state-owned en­ter­prises and gov­ern­ment pro­cure­ment.

The rules in these chap­ters will af­fect some of the core poli­cies of the coun­try as well as its eco­nomic and so­cial struc­ture and makeup.

In gov­ern­ment pro­cure­ment, Malaysia has al­ways given pref­er­ence to lo­cal com­pa­nies when the gov­ern­ment buys ma­te­ri­als or ser­vices or im­ple­ments con­struc­tion projects.

Un­der the TPPA, the other coun­tries’ firms have the right to be treated at least as well as lo­cals when bid­ding for gov­ern­ment projects and con­tracts.

Thus, lo­cal firms can­not be guar­an­teed their big­gest source of busi­ness any­more.

This will be a big blow to the af­fected com­pa­nies, which now have to com­pete on equal terms with the big­ger for­eign com­pa­nies.

How­ever, in U. S. free- trade agree­ments, small projects are usu­ally ex­empted if the value of the projects is be­low about US$200,000 for goods and ser­vices and about US$8 mil­lion for con­struc­tion projects.

Malaysia has been re­quest­ing spe­cial treat­ment — a higher thresh­old for con­struc­tion projects, many times more than the usual US$8 mil­lion.

Ac­cord­ing to news re­ports, the U.S. can con­sider a higher thresh­old for Malaysia, but only for a tran­si­tion pe­riod.

The ques­tions are: how much higher will the thresh­old be, how long the tran­si­tion pe­riod, will other coun­tries all agree, and whether this will be good enough for Malaysia, since the level of re­lief may be in­ad­e­quate and is only tem­po­rary.

On the state-owned en­ter­prises (SOEs), Malaysia also faces quite a dras­tic change in poli­cies if it joins the TPPA, which seeks to break the tight con­nec­tion be­tween the gov­ern­ment and its agen­cies and en­ter­prises.

SOEs ( or gov­ern­ment- linked com­pa­nies, in our lo­cal jar­gon) play very im­por­tant roles in our econ­omy, and so­ci­ety.

Ma­jor banks, es­tates, oil and min­ing com­pa­nies, and a range of man­u­fac­tur­ing, agri­cul­tural and ser­vice en­ter­prises are sta­te­owned or gov­ern­ment-linked.

They in­clude Petronas, Khaz­anah Na­sional Bhd, Per­modalan Na­sional Ber­had, Pro­ton, May­bank, CIMB, gov­ern­ment and pri­vate hos­pi­tals, phar­ma­ceu­ti­cal drug com­pa­nies, steel plants, aqua­cul­ture projects, Malaysia Air­lines, as well as com­pa­nies in telecom­mu­ni­ca­tions, energy, trans­port and wa­ter sup­ply.

It is true there has been mis­use of the sup­port to SOEs, and there should be ur­gent re­forms un­der­taken to curb abuses.

But this is not a good rea­son to join a bind­ing agree­ment like the TPPA if it dras­ti­cally erodes the vi­a­bil­ity of a whole range of public en­ter­prises and agen­cies.

The ad­verse ef­fects could in­clude rais­ing the prices of es­sen­tial goods and ser­vices; mak­ing some goods or ser­vices un­avail­able be­cause it is not prof­itable to pro­duce them; and en­abling for­eign com­pa­nies to take over the mar­ket share of lo­cal com­pa­nies.

Be­sides these two is­sues, other con­tentious TPPA top­ics in­clude how giv­ing more rights to for­eign com­pa­nies that own patents will lead to higher prices of medicines, and how the in­vest­ment chap­ter with the right given to for­eign com­pa­nies to sue the gov­ern­ment in an in­ter­na­tional tri­bunal will af­fect the mak­ing of public pol­icy can over­ride na­tional laws and courts.

Malaysia may ben­e­fit from hav­ing ac­cess to mar­kets of other TPPA coun­tries; on the other hand they too have greater ac­cess to our mar­ket as the tar­iffs will be elim­i­nated and the lo­cal pro­duc­ers face stiff com­pe­ti­tion.

Since Malaysia’s tar­iffs are on av­er­age higher than those of the U.S., we could ex­pect to open up rel­a­tively more, where the U.S. is con­cerned; and sim­i­larly with re­gard to Sin­ga­pore.

The time for mak­ing a de­ci­sion whether to join the TPPA is fast ap­proach­ing.

It’s now a mat­ter of days, as the TPPA must be now be con­cluded to suit the U.S. po­lit­i­cal cal­en­dar.

The prob­lems that will emerge have to be as­sessed against the ben­e­fits. Many of the for­mer are real; while the ben­e­fits are po­ten­tial or gen­eral rather than spe­cific.

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