executive director malaysian institute of economic research · malaysian institute of economic...

Malaysian Institute of Economic Research

Emeritus Professor Dr Zakariah Abdul Rashid

Executive Director



Outline

Introduction

ASEAN Economic Community (AEC)

ASEAN as a Single Market & Production Base

Trade Agreement and ASEAN

Malaysia as ASEAN’s Investment Hub


Introduction

ASEAN is a potentially large region

Consists of 10 member states

ASEAN is a market with a population of 6 billion people

(i.e. about 9% of global population)

ASEAN covers 4.46 million Km2 over 3% of total land

area on earth


ASEAN: Some Indicators

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1990 2000 2012

760

1,172

3,748

GDP per Capita (US$)

0

500

1000

1500

2000

2500

3000

1990 2000 2012

334

606

2,311

GDP (US$ Billion)



0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

1990 2000 2012

12.8 21.8

110.3

FDI Inflows (US$ Billion)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1990 2000 2012

306

759

2,476

Total Trade (US$ Billion)



0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1990 2000 2012

45.0

33.0

15.0

Poverty Rate (%) of population living below US$ 1.25 PPP/capita/day

0

100

200

300

400

500

600

700

800

900

1000

1990 2000 2012

317

517

617

Population (Million)


World & ASEAN FDIs

2.00

3.00

4.00

5.00

6.00

7.00

8.00

0.00

5.00

10.00

15.00

20.00

25.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US

D b

illi

on

s

Year

ASEAN FDI (USD billions) World FDI (USD billions) Share of ASEAN FDI to World FDI (%)

% Share


Value of FDI in ASEAN

(EU, ASEAN & USA)

-

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

2006 2007 2008 2009 2010 2011 2012 2013

US

$ m

illi

on

Year European Union (EU) ASEAN USA


Value of FDI Inflows

Japan, China, Hong Kong, Korea & Taiwan

-

2,500.0

5,000.0

7,500.0

10,000.0

12,500.0

15,000.0

17,500.0

20,000.0

22,500.0

25,000.0

2006 2007 2008 2009 2010 2011 2012 2013

US

$ m

illi

on

Year

Japan

China

Hong Kong

Republic of Korea

Taiwan, Province of China


Value of FDI Inflows

Australia & India

(3,000.0)

(2,000.0)

(1,000.0)

-

1,000.0

2,000.0

3,000.0

4,000.0

2006 2007 2008 2009 2010 2011 2012 2013

US

$ m

illi

on

Year Australia India


ASEAN Economic Community (AEC)

Single Market and Production Base

Competitive Economic Region

Equitable Economic Development

Integration into the Global Economy


AEC and Investment

Impact of FDI flows:

1. ASEAN Comprehensive Agreement on Investment (ACIA)

is a comprehensive framework that will increase investment

into ASEAN

2. Establishment of AEC and improvement of trade flows will

raise level of FDI in region

3. Larger market will attract more foreign MNCs

4. Regional agreements (i.e. EU, NAFTA) have positive

impact on FDI


Investment, ACIA and its Benefits

ACIA has many benefits that it will bring to investment flows into ASEAN

They are as follows:

Adopting international best practices that help protect investors and their

investments and providing increased protections

Following recent trends in international investment practices that encourage

less restrictive investment regimes

Including portfolio investment and intellectual property as well as broader

definitions of investors and investments

Allowing third-country nationals to benefits from the ACIA

Encouraging a higher level of transparency in investment rulemaking

Adopting Investor-State Dispute Settlement mechanisms (ISDS) and

promoting alternative dispute resolution methods.


Investment, ACIA and its Benefits...

ACIA will help the ASEAN region through:

Create the necessary environment to promote all forms of investment and new

growth areas in ASEAN

Promote intra-ASEAN investment, particularly investments from ASEAN-6

(Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) into the

less developed ASEAN countries

Nurture the growth and development of Small and Medium Enterprises

Promote joint investment initiatives focusing on regional clusters and production

networks


Trade Agreements and ASEAN


Trans-Pacific Partnership (TPP)

Arising out of agreement between New Zealand,

Brunei, Singapore & Chile in 2005

Seen as being led by the U.S.

APEC members encouraged to join; also open to non-

AEC members

ASEAN participants: Brunei, Malaysia, Singapore, Vietnam

High-level, stringent conditions, comprehensive


Regional Comprehensive

Economic Partnership (RCEP)

Led by ASEAN

Reduce noodle-bowl effect

Arising from ASEAN+1 FTAs with China, India, Japan,

South Korea, Australia and New Zealand

RCEP includes trade liberalisation in goods, services,

and investment, technical cooperation, IPR and

dispute settlement

Emphasises ASEAN centrality and flexible


RCEP

Open accession clause

Any ASEAN FTA partner can choose not to participate immediately

Participation of any other external economic partner

In addition to AEC’s 5 priority service sectors

Air transport

E-ASEAN

Healthcare

Tourism &

Logistic services

RCEP’s other foci are:

Transportation

Distribution

Telecommunication, &

Financial services


RCEP

RCEP would accept the priorities set by the AEC for free

flow of goods:

Elimination of tariffs

Elimination of non-tariff barriers

Put in place rules of origin responsive to new challenges

Simple, harmonised trade facilitation

Achieve customs integration

ASEAN Single Window


RCEP

3 kinds of connectivity:

physical

Institutional, and

People-to-people

Liberalisation of services such as to contribute to formation and development of regional production and distribution networks

Strengthen links with global production chains

In sum: RCEP to promote economic cooperation

To be business-friendly

To promote SME growth


Malaysia as ASEAN’s Investment Hub

Malaysia is a balanced economy

Malaysia has a strong institutional and regulatory

framework since post-colonial times

Malaysia has a tradition of liberalisation


Malaysia: Investment Hub

Malaysia in preparation for RCEP and TPP

All ASEAN states may not be interested in TPP

Preparation for TPP will give Malaysia an

advantage in ASEAN

With RCEP and TPP, Malaysia will have the best

of both worlds and it will be linked to the most

powerful economies in the world



Malaysia has accomplished many achievements:

National Single Window

Standards & Conformance

Trade Facilitation

Good score on non-trade measure

Investment Liberalisation

Investment Facilitation



Key agencies facilitating investment:

1. MIDA

2. Pemudah



MIDA

To promote foreign and local investments in the manufacturing and services sectors

To undertake planning for industrial development in Malaysia

To recommend policies and strategies on industrial promotion and development to the Minister of

International Trade and Industry

To evaluate applications for manufacturing licences and expatriate posts; tax incentives for

manufacturing activities, tourism, R&D, training institutions and software development; and duty

exemptions on raw materials and components; and duty exemptions on machinery and equipment for

agricultural sector and selected services sector

Issuance of confirmation letter for the application of import duty and/or sales tax exemption on

machinery, equipment, spare parts, consumables, prime movers and container trailers for

manufacturers in the principal customs area (PCA), companies engaged in a hotel business and

haulage operators under the self-declaration mechanism, effective 2nd May 2014

To assist companies in the implementation and operation of their projects, and offer assistance

through direct consultation and co-operation with the relevant authorities at both the federal and state

levels

To facilitate the exchange of information and co-ordination among institutions engaged in or connected

with industrial development

To further enhance MIDA's role of assisting investors, senior representatives from key agencies are

stationed at MIDA's headquarters in Kuala Lumpur to advise investors on government policies and

procedures. These representatives include officials from the Ministry of Human Resources,

Immigration Department, Royal Customs Malaysia, Department of Environment, Tenaga Nasional

Berhad and Telekom Malaysia Berhad.



PEMUDAH

To review the status of the public services delivery system in terms of processes, procedures, legislation and human resource and to propose new policies for improvements;

To benchmark best practices to improve the ease of doing business;

To enhance collaboration among public and private sector agencies to improve Malaysia’s competitiveness;

To monitor the implementation of policies, strategies and procedure that would improve the efficiency and effectiveness of the public and private sector delivery system; and

To take appropriate action to address issues in line with the National philosophy of 1Malaysia, People First, Performance Now.


Conclusion

ASEAN is a vibrant economic region

Growth and investment opportunities in ASEAN will

increase in the decade to come

AEC and ACIA will make ASEAN more attractive for FDI

Malaysia is a potential investment hub for ASEAN

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