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http://www.theedgemarkets.com/article/special-report-malaysia-no-rush-sign-ftas
Source: The Edge Markets
Stories By Kamarul Azhar

 
SLOWER global economic growth, a trade war between China and the US and a RM1 trillion debt — these are just some of the issues the Pakatan Harapan government faced after it assumed control of Putrajaya. As Minister of International Trade and Industry, Datuk Darell Leiking has to grapple with these problems amid high voter expectations. So, how does he plan to bring foreign investors back to Malaysia and reinvigorate the country’s trade?
Find out from our interview with the minister.
The Edge: When we talk about high technology, the fourth industrial revolution or Industry 4.0 keeps coming up. But how realistic is this for Malaysian industries?
Datuk Darell Leiking: Not all industries will be able to implement Industry 4.0 because each sector is different. We are focusing on it in manufacturing, the automation of the sector. We want it to become a high-tech industry so that we can produce at high speed in order to meet global demand. So, speed is of the essence today and, fortunately, Industry 4.0 has revolutionised this. But there are industries where there is no room yet for Industry 4.0. They will survive by continuing to do their own thing. But when we get to bring in Industry 4.0 — the automation of things, including robotics and Internet of Things (IoT) — the government will focus on these industries and enhance them so that we are on a par with, if not better than, others.
 
As the minister of international trade and industry, is there any local industry that you champion?
We are a trading nation. We want to make sure that we are able to supply to the world what they want, what they demand. We are already producing electrical and electronic goods, chemicals from oil and gas, a lot of things that the world demands. I would like Malaysia to become the hub for all these supplies to the world. We want to get good investments, such as that by Micron [Technology]. It has committed to invest RM1.5 billion over the next five years and also to build a centre of excellence here. You also have Dyson in Johor. This shows their commitment to Malaysia and how they will invest even more money in the country. Meanwhile, Microsoft (Malaysia) and MIMOS (Bhd) have announced a collaboration in IoT and artificial intelligence.
At the same time, we cannot forget our traditional industries like agriculture. We have moved away from agriculture but there is high demand for food security today, where people want to be ensured that there is enough food and other necessities. These are the kind of industries that we already have in Malaysia, and we should enhance them. We would also like to export our services where required.
 
How about the RCEP and the CPTPP? When the PH parties were in the opposition, they were against the TPPA. Now that the US is no longer part of it and PH is the new government, will it support CPTPP?
First and foremost, there is no rigidity on free trade agreements (FTAs), whether multilateral or bilateral, because each country has its own preferences and requirements. As we go towards multilateral agreements such as the CPTPP, we must make sure that whatever is agreed upon does not compromise our people and sovereignty. Even if those who had negotiated it had done their best, we should be given the chance, as a new government, to look at whether it fits our policies.
Tun Mahathir has explained this very well. He, with his Cabinet, will only decide to ratify the agreement once he is satisfied that our interests are secure and protected. We have managed to find out a few things with regard to the trade agreement in the last few months. I don’t think I should divulge anything now but we found out a lot of things that have made us think of various possibilities.
Hindsight is always 20:20. I don’t see why we must rush it. Some people say we must hurry or risk being left out by the countries that are already members of the CPTPP, but each country is different. For example, Malaysia has only 32 million people and depends quite a lot on foreign labour. We are working to reduce this dependency by moving into automation, and at the same time, upskilling our people. Vietnam, with a population of more than 90 million, has no dependency on foreign labour. It has different practices, different labour and skill set arrangements and different wage systems. Malaysia is different and our productivity is also different. Our manufacturing industry is different and our drive is also different. That is what we have been telling the people: do not let other countries become the gauge for what we should do. We should be confident that we have a way forward. The question is more about the tariffs, whether or not they benefit countries that are signatories to the CPTPP. As for those countries that are not Asean members, we can deal with them in another way.
The beautiful thing about the RCEP is that we are continuously working within Asean and, of course, there are hiccups here and there. But that is normal where each country wants to ensure it is not losing out in the whole scheme of things when it signs the RCEP. So, this is what Malaysia is doing as well. One of the biggest disputes is about the ISDS (Investor-State Dispute Settlement mechanism) and other tariffs. The ISDS is one and Malaysia has an opinion about how to deal with it.
 
Will the RCEP increase our dependence on China?
I do not see it that way. You must remember, Asean alone is a market of 650 million people. And with China, India and Asean plus, there are probably more than three billion people. I do not think there will be dependency but rather a new economic way where the Asean plus RCEP comes into play when dealing with other countries. We already became co-dependent when we signed the RCEP. We decided together, we agreed to the tax and tariff line together and we finalised terms that are of mutual benefit. So, I think the RCEP is more promising because it is more Asean.
Ultimately, it is about our relationship with other countries. Some may have firm agreements but they end up fighting each other after all. We saw how Nafta was promised to be really great, and now they have had to revise it. You notice that Nafta no longer talks about dispute resolution. We have seen how models have been changed just to fit the policy of the day. I think agreements are good; they clear up a lot of things. But they are not cast in stone.
While we have the chance to correct a lot of things and make them right, we want to ensure that the multilateral RCEP benefits everyone in the context and circumstance that we are in. It is true that China is part of the RCEP but that does not mean it controls the agreement. It is one of the RCEP’s proponents, as are we. Every Asean member is a proponent of the RCEP. We will have another round of negotiations in Thailand next year, in which we will find ways to conclude, if not finalise, the RCEP.
People have also asked me about the Malaysia-EU FTA. Yes, the government will engage. It was stopped by the previous government, so now we want to know what we can do with it. I feel it is not right if we don’t even think of finding ways to resume talks with the EU. But that does not mean we are going to rush to sign it. We heard Indonesia is going to sign it, we heard Singapore signed it a few months back. But each of us has a different economic context, need and strategy for the nation.
 
Since we are talking about trade with Europe, how do you plan to change its negative perception of palm oil?
I hope that Indonesia, before it signs an FTA with Europe, settles the issue of palm oil. I do not think it will compromise its palm oil industry. We also need to ensure that our palm oil is on the table when we discuss an FTA with the EU. How can other countries judge Malaysia when they themselves have gone through deforestation and created smog and pollution themselves? Anybody who says there is no deforestation, that no crime is committed when they illegally fell logs, is lying. We know there are some people who illegally felled trees and caused us huge problems. Some of them have been prosecuted but some have fled. So, what are we going to do with the land that they damaged? Are we just going to leave it empty? Obviously, we will have to think of ways to best utilise the land and oil palm is one of them.
People keep bringing up the orangutan but they do not realise that Malaysia, especially my state Sabah, has worked very hard to ensure that there are sanctuaries for the orangutan, and that we protect them. But why are people pinpointing palm oil? Is it because of the environment or is it because they want to promote other products that compete with palm oil? I have no answer to that, I can only speculate.
 
What actions will MITI take to promote palm oil and explain its real situation?
The Ministry of Primary Industries is looking into the matter, so we will not overlap with its role. What we can do is to work together. This is a shared Cabinet. As a Sabahan, I know a lot of people have invested in oil palm in the state. What are we going to do? Are we going to make them suffer because some European tells us we are wrong? They are judging us from a different level because they are already modernised. They have cut down their trees and done the damage. Now, they want to set things right by telling us what to do. Some Malaysians I meet keep telling me we should do this and that. Yah betul, the Western standards are good. But in our country, we are going through what they have already gone through and they have had hundreds of years to correct their wrongs. We are correcting our situation in the shortest period by making sure our oil palm industry is sustainable.
 
What is Malaysia doing about the current global trade situation, especially the trade war between the US and China?
We do not wish to take advantage of the conflict. In fact, we hope they will find a way to solve their problems because the dispute has huge implications for the world. So if we can encourage them to find a way to solve it quickly, why not? In fact, Trump announced in Argentina that there is a truce for now. Likewise, Xi Jinping. They are finding ways to settle the dispute.
At the same time, Malaysia may benefit from the fact that we are stable; we are a new government that has all the right ingredients. Products that are manufactured in Malaysia can enter China as well as America, and a lot of the people who had invested in other countries, taking their manufacturing to these countries, have come back or shown interest to come back because they know our certification and products have become more valuable to the world.
And we have the infrastructure, the people and the means. As far as China and America are concerned, we hope they will settle their matter quickly because if they do not, they have forgotten about the rest of the world. They are two large nations that buy and buy and buy. As for Malaysia, our infrastructure is ready should investors want to set up base here. But we should never take advantage of other people’s problems. Kita jangan ambil kesempatan dalam kesempitan. But we know people are coming here. So, we provide them with the infrastructure, ease of doing business and the facilities.
 
What about the automotive industry? Does the government see it as strategic to the country’s development?
Actually, we are a hub. Many of the assembly plants are here. We have Mercedes-Benz, even the Mini. The Minis are sent to Thailand, so Malaysia’s add-on is there. It is a Malaysian-produced car now. We also assemble and produce cars. As far as automotive is concerned, Malaysia may not have achieved what Japan has but we are already an automotive player. It is a matter of managing it now. I believe the prime minister has a vision of managing it. My role as the minister of trade is to ensure that there is proper accounting of vehicles that come here through the approved permits. So, that is where we will strike a balance between our local industry, the vendors and the international companies.
To me, Malaysia is already a hub, although people do not see it. We have other vendors; we produce a lot of parts for motor vehicles. Similarly for the aircraft industry, we are a hub for components. We have not reached the level of manufacturing planes but we are part of planes. We may not be a car manufacturer like Thailand but we produce the components, which are as important as the finished product. And within five years, you will surely see a lot of electric cars on Malaysia’s roads but without compromising other technology like hybrid vehicles. There will also be vehicles that are fully battery-operated. We have yet to fully realise an energy-efficient automotive industry but it is almost there.