TRADE POLICY & SERVICES

LIBERALISATION IN MALAYSIA:

Opportunities for Taiwan

Shankaran Nambiar

Malaysian Institute of Economic Research

Taiwan

October 2013

OUTLINE

Service sector

Liberalisation initiatives

Preparatory work

Opportunities for Taiwan

Conclusion

1

THE SERVICES SECTOR: Some Trends

2

Services a Major Contributor to GDP, 2005-2012

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2005 2006 2007 2008 2009 2010 2011 2012

Services Manufacturing Agriculture Mining & Quarrying Construction

3

Services as a Major Contributor to Employment

0

1

2

3

4

5

6

7

8

9

2010 2011 2012

6.7

8.2

7.6

1.5 1.1

1.6 1.9 2.2 2.2

Services Agriculture Manufacturing

4

Contribution to GDP by Activity, 2012

Insurance 4.1

Distributive Trade 26.1

Government Services 14.7

Finance 13.1

Real Estate Business Services

10.1

Other Services 9.1

Information & Communication

7.0

Transportation & Storage

6.7

Utilities 4.6

Accommodation and Restaurants

4.5

5

Trade in Services on the up-trend

156.9 164.0

198.4 205.7

193.3

207.2

227.5

248.0

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2005 2006 2007 2008 2009 2010 2011 2013

6

Leads in Approved Investments

36.7

56.1

41.0

47.2

70.4

117.5

21.6

28.1

3.8 0.0

50.0

100.0

150.0

2010 2011 2012

Services Manufacturing Primary

7

Approved Investments in Services:

DDI and FDI

3.8 6.0 10.8

5.5 3.4 4.1

17.9 12.2

54.0 49.5

55.6

44.5

35.4 32.6

52.5

105.4

57.7 55.5

66.3

50.1

38.7 36.7

70.4

117.5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2005 2006 2007 2008 2009 2010 2011 2012

Foreign Investment Domestic Investment Total Investment

8

LIBERALISATION EFFORTS

9

Liberalisation of the Services Sector

2008

Services sector contributed 55% to GDP, of which 47.6 from non-

government services:

Accounted for 57% of total employment

Approved investments in services sector totalled RM50.1 billion

of which 11% foreign investments

Export services: RM 102.1 billion

Import services: RM 99.8 billion

Malaysia among 30 leading global exporters of services

10

Liberalisation of the Services Sector

2009

27 services sub-sectors liberalised:

Computer and related services

Health and social services

Tourism services

Transport services

Sporting and other recreational services

Business services

Rental/leasing

Supporting and auxilliary transport services

11

Liberalisation of the Services Sector

2011

17 services sub-sectors liberalised:

a) ICT

b) healthcare

c) education

d) professional

e) retail trade

12

Liberalisation of the Services Sector

Major steps

Elimination of 30% of Bumiputera requirement on 27 services sub-sectors (April 2009)

Deregulation of the Foreign Investment Committee (FIC) guidelines (June 2009)

FIC would no longer impose equity conditions or enforce Bumiputera participation

Under the Budget 2012, 100% foreign equity participation in:

Telco

Courier

Higher education

International schools

Technical and vocational services

Private hospitals

Dental

Professional and incineration services

13

Liberalisation under AFAS

ASEAN Framework Agreement on Services (AFAS) signed in

1995

To strengthen cooperation among service suppliers in ASEAN

To liberalise trade in services among ASEAN countries

AFAS adopts approach of General Agreement on Trade in

Services (GATS)

Full liberalisation to be undertaken by 2015 and logistics by

2013

9th Package of Commitments (2014) involving 24 sub-sectors

14

Liberalisation under AFAS

Equity targets and Parameters (Mode 3)

Year

Priority sectors

(ICT, tourism, healthcare,

air travel and logistics

%

Other sectors

(including professional services)

%

2008 51 49

2010 70 51

2013

(Logistics services)

70 70

15

Liberalisation in the WTO

Covered under the General Agreement on Trade in Services

(GATS) of the WTO

Malaysia wants progressive liberalisation of services sectors

Priority for opening sectors where there is an export interest

Liberalising 11 sectors and 85 sub-sectors

16

Malaysia – Australia FTA

MAFTA builds on ASEAN – Australia – New Zealand FTA (AANZFTA)

Malaysia and Australia cut tariffs on a wider range of goods and earlier MAFTA

(compared to AANZFTA)

Benefits to Australian service suppliers

Education services – 70% ownership in higher education services,

increasing to 100% in 2015

Financial services – 70% ownership in investment banking and direct

insurance services

Telecommunications – at least 70% ownership in all telecommunications

services

Professional services – 100% ownership in accounting, auditing an book

keeping services

Management consultant services – 51% in taxation services, tourism, R&D

and mining related services – majority ownership

17

Malaysia – Australia FTA

Other aspects of MAFTA that support trade in services:

Easier for Australian expatriates (senior managers and

executives) to work and stay for longer periods

Easier access to visas for spouses and dependents of

Australians working in Malaysia

Mutual recognition of qualifications

Stronger protection of Australian trademarks and copyright

Facilitation of of electronic commerce

Tourism, R&D and mining-related services – majority ownership

18

PREPARATION FOR

LIBERALISATION OF SERVICES

19

Preparation for Liberalisation of Services

Promoted activities

Regional establishment

Operational headquarters

International procurement centre

Regional distribution centre

Treasury management

Logistics management

Integrated logistics services

Supply chain activities

Education

Technical, vocational & science training institutions

International/private schools

20

Preparation for Liberalisation of Services

Tourism

Hotel

Tourist project

Recreational camp

Convention centre

Healthcare

Private hospitals

Ambulatory care centres

Environmental Management

Energy conservation

Energy generation, renewable energy sources

Recycling of agricultural waste

21

Preparation for Liberalisation of Services

Business & Other Support Services

R&D

Integrated market support services

Testing for mechanical devices

Eradication and gas sterilisation

Industrial design services

22

Preparation for Liberalisation of Services

National Key Economic Areas (NKEAs)

Oil, gas & energy

Education

Tourism

Wholesale & retail

Electronics & electrical

Healthcare

Palm oil

Communications content & infrastructure

Agriculture

Business services

Greater KL/Klang valley

Financial services

23

Preparation for Liberalisation of Services

Liberalise regulations

Identify issues that impede services exports

Review regulations that impede services exports

Propose incentives to assist industries become more

competitive

Undertake M&As to strengthen sectors

Pursue mutual recognition agreements (MRAs) with trading

countries

Explore market access opportunities abroad through

partnership

24

OPPORTUNITIES FOR TAIWAN

25

Opportunities for Taiwan

Economic cooperation Framework Agreement (ECFA) between People’s Republic of China and Republic of China

June 2010

Taiwan’s accession to ETO 2002

Jointed WTO under the name “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu”

i.e. the WTO model

Taiwan and Singapore have concluded negotiations for ASTEP (Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu)

Engagement wIth ASEAN useful

Taiwan – RCEP

Taiwan - Malaysia

26

Opportunities for Taiwan

Take advantage of services liberalisation in Malaysia:

Take advantage of promoted services sector

NKEAs

Telecommunications; healthcare & tourism; ICT; market support, engineering; logistics; environmental management, solar and renewable energy; education

Preparation:

Standards

Mutual recognition agreements

Liberalisation

Rules & regulations

27

CONCLUDING REMARKS

28

Concluding Remarks

Malaysia realises potential of services sector

Malaysia is liberalising the services sector

Taiwan has long-standing ties with Malaysia

Opportunities available for Taiwan to engage with Malaysia

29

30