The Institute for Democracy and Economic Affairs has called on the Malaysian government to the ratification of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) in the immediate future to take advantage of investment opportunities, on the back of the release of the Bank Negara Malaysia’s Economic and Monetary Review 2021. In addition, it also urges the government to provide an update to the public on the status of its ratification, as well as the cost-benefit analysis that was commissioned and recently concluded.
According to the Economic and Monetary Review 2021 released by Bank Negara Malaysia in end-March, private investments into Malaysia are expected to grow by 5.3% year-on-year in 2022, up from 2.6% in 2021. They are expected to benefit from the continued expansion in global demand and the realisation of new and ongoing investments. Of significance, investment intentions remained high as reflected in the increase in approved investments since 2021, particularly in the manufacturing sector, despite the pandemic and lockdowns introduced.
In this sense, IDEAS says it is cautiously optimistic based on these figures but believes that ratifying the CPTPP would help attract more quality foreign direct investment (FDI) into Malaysia, thereby helping to facilitate the country’s post-pandemic recovery. The possible inclusion of economies like the UK, Taiwan, South Korea, China, and even Thailand into the mega free trade zone would create more opportunities for Malaysia’s private sector and bind economies closer together. Market access will be improved as more members ratify the agreement and this will boost FDI and trade activities for all partners in the medium to long term.
Ongoing efforts by the government to attract new quality investments and facilitate the implementation of projects such as the Project Acceleration and Coordination Unit (PACU) and One Stop Centre (OSC) for Business Travellers are also expected to accelerate investments in Malaysia, as should the implementation of key infrastructure projects such as the Malaysia Digital Economy Blueprint (MyDIGITAL), coupled with the incentives announced in the 2022 Budget.
While these measures will prove useful in attracting much-needed FDI, Malaysia should also consider ratifying the CPTPP in the immediate future. This would help spearhead medium to long-term FDI through the setting of standards, which would open Malaysia’s domestic market to foreign investors with minimum hindrance and barriers. Furthermore, the improvements in domestic governance brought about by reforms through the CPTPP commitments will help raise international investors’ confidence in Malaysia as a trade partner and FDI destination.
The think tank research has found that ratifying and implementing the CPTPP would ultimately boost Malaysia’s GDP by an additional 1.0%, as well as create new employment opportunities equivalent to 140,000 additional people in work. Thus, ratifying the CPTPP provides Malaysia with a low-hanging fruit in terms of its post-pandemic recovery.
Additionally, in light of the recent US-China trade war and the COVID-19 pandemic, the ongoing shift of supply chains away from China has taken place to a certain extent. Malaysia must take advantage of this opportunity to attract more investors from within and beyond the region who are looking to diversify production away from China through trade diversification measures. The CPTPP provides the necessary mechanism for this to happen in the medium to long-term.
