Politics aside–TPPA is Good for Malaysia


January 16, 2016

Politics aside–TPPA is Good for Malaysia

by Tan Sri Dr. Munir Majid

http://www.thestar.com.my

 

The Trans-Pacific Partnership Agreement (TPPA) is a huge commitment and it is unsurprising it has engaged enormous public interest. The debate over it, however, will only serve the nation well if is not excitable and emotional, not just alarmist without suggesting means of enhancing Malaysia’s capability, and not purely academic or self-serving.

tan_sri_dr_munir_majid

The excitable and emotional arguments are largely political in nature, another stick with which to beat the government. Too many important national interests are involved for the TPPA to be political football. Statements like exiting the TPPA would bankrupt Malaysia are an alchemy just to stop Malaysia signing it, not a considered argument on the cost and benefit of being a member of the TPP.

Tun Dr Mahathir, who made this remark, has associated Malaysia and bankruptcy all too often that one worries if this is what he wishes on a Najib Malaysia. But Malaysia is not Najib. We are a nation that must make itself compete and survive well into the future beyond the politicians that had led, or now lead us.

It has been asserted also that the TPPA would cause Malaysia to lose its sovereignty. Malaysia alone among the 12 set to sign it? Lose sovereignty to whom? The US? All 11 surrendering their sovereignty just like that? Vietnam, after over two generations spilling blood for its freedom and still now struggling against Chinese over the South China Sea claims? Singapore, so jealously guarding its sovereignty in the last 50 years after separation from Malaysia?

What utter nonsense this assertion is. It is in the exercise of its sovereignty that Malaysia is entering into this agreement, with obligations and privileges, challenges and opportunities, and associations in a bloc which represents 40% of the world economy.

The study by the Institute of Strategic and International Studies (I must declare my interest as a director, but I had absolutely no involvement in the study) concludes the Malaysian national interest is served by signing the TPPA which underpins the great openness of the Malaysian economy and underlines Malaysia’s continued commitment to that openness. It would be worthwhile for sovereignty-phobic critics of the TPPA to read the report on the International Trade and Industry Ministry (Miti) web-site.

I would expand to say the TPPA makes geopolitical sense for Malaysia as it introduces an American presence of balance in the region, not against, but with China. It is never any good for small countries when one major power dominates. They should be adept at engaging both powers in a positive sum relationship, as Singapore does so well.

PKR President Dr Wan Azizah Wan Ismail said last Tuesday the opposition party would not support the TPPA because it is geopolitical. Yes, it is also geopolitical. What about it? How does the PKR want Malaysia to sit between China and the US? What exactly does the opposition want?

I am reminded of an old dictum about opposition in parliament: to propose nothing, oppose everything and to turn out the government. However, as I said, the TPPA is a great event. It is too important for the country to be a play-thing of party politics.

There had been grave concerns expressed about how the TPPA would wipe out national policies on bumiputras and SMEs, state-owned enterprises and government procurement – part of what the PWC cost-benefit study commissioned by Miti calls the “”thematic issues” – but after these concerns were well (some say too well) managed through higher threshold levels and extensions of time, the aim moved to the fact the TPPA has overwhelmingly more chapters on issues not related to trade.

This is very true. It covers qualities, standards and principles of good governance, transparency, accountability and incorruptibility in extenso. What is the problem? Do we want bad governance, opaque and unaccountable systems, and corruption? It cannot but be a good thing that associated countries are being moved in the direction of higher standards and better quality rule.

Then, comes the question why do we have to rely on an “external” regime to improve ourselves and, sometimes in the same breath, the assertion the TPPA cannot solve all Malaysia’s governance issues in any case.

So, which and what is it? It has never been the contention that the TPPA is a one-shot panacea for Malaysia’s political, social and economic problems. But it is a jolly good start and boost. And it is, furthermore, freely sought by Malaysia, in the exercise of its sovereign right. The TPPA will assist in the injection of higher disciplines and standards of governance as well as of justice – such as for workers through acceptance of International Labour Organisation requirements (not unknown in this country as the electrical and electronic industry already conform but not extensively enough practised in other sectors).

There are a number of obligations Malaysia has undertaken, especially through the United Nations system, which it has not always fulfilled, like with the Universal Declaration of Human Rights. With the TPPA, Malaysia will not easily escape obligations it has made – another good discipline.

However, depending on the extent and complexity of the obligations, it can also expose Malaysia to means of legal redress that could be overwhelming. There is therefore merit in the fear expressed that the TPPA, through Chapter 9 on Investment, could place Malaysia at risk under the Investor State Dispute Settlement (ISDS) provisions in the second section of that chapter.

It would be wrong nevertheless to say Malaysia would be taken to the cleaners each time, based on a historical analysis of how big business have been hauling governments to court or arbitration – and winning big.

The score for governments winning is 37% of the time, which may not be too comforting. While there is a point to be made about governments keeping to their legal commitments and not moving goalposts, as happens all too frequently with Latin American governments which have lost substantially in frequently cited cases, there is the feeling that big business, particularly Americans, are testing and bending the rules, if not the arbitrators.

Miti has argued there are sufficient provisions in the TPPA to limit and inhibit big business alacrity for legal redress, as in time accorded for other means of settlement to be used and as in provision for the TPP Commission under Chapter 27 to interpret the agreement. However, given the risk factor, it would be a good idea for Miti to organise a small caucus of legal experts, business leaders and government officials to go through the whole gamut of dispute settlement provisions and interpretation under the TPPA with an emphasis on the ISDS.

The PWC cost-benefit study notes in consultant fashion the ISDS “may increase cost to the Government” which includes I would suggest direct loss, professional and proceedings cost and also administrative preparedness. It is the last, I would venture, that the government should give a lot of attention to as Malaysia has to improve legal administrative capability.

We have been caught short many a time on details and record-keeping which has lost us a number of international cases. If we add to this English language capability which has deteriorated, the ISDS exposure could become larger than it already is. So government and administration have to improve. And thus so many fears because we feel we are so inferior and not prepared.

We are not that inferior but we must be better prepared. This applies of course particularly in the competition for markets which the TPPA opens up.

Here economists are having a merry old time arguing about what exactly are the real economic benefits of the TPPA. This is not unknown among economists, only one of whom in my knowledge, predicted the 2008 financial market crash and subsequent economic crisis. Indeed the Queen of England, when opening the New Academic Building of the London School of Economics in November 2008, had asked all those many economists there why none of them saw the crash coming. (They were lost for words and the Queen was not amused: worth at that time about £320mil, the Queen had lost £25mil in a personal investment portfolio).

So on to economists and their little battles over what they never get right. There is the contention now that the PWC cost-benefit study was wrong to base its TPPA economic benefits conclusions on the CGE (Computable General Equilibrium) model which is wanting and inaccurate. There is a Tufts university study based on a UN model which contends the economic benefits of the TPPA are very small, with a very interesting finding of negative effects on growth, employment and income distribution in the U.S. – the usual suspect and prime mover of the TPPA.

The PWC study on the other hand finds the net gains to the overall Malaysian economy of the TPPA are a higher GDP by US$107bil-US$211bil in the period 2018-2027 and additional investment of US$136bil-US$239bil. It reports a narrower trade surplus impact in 2027 of 4.3%-5.2%.

The study however underlines there will be adjustment costs to firms from increased competition and cross-sectoral TPPA obligations. In other words, a lot depends on what firms do in open markets: there are opportunities and challenges. There are details of course on which sectors are likely to benefit the most and which will be under threat. The study has also been made available on the MITI web-site.

Another independent recent study by the World Bank also found positive economic benefits for Malaysia from being involved in the TPPA. Importantly, the FMM reports that 62% of export growth is because of reduced trade barriers (The PWC study sees over 90% of economic gains are driven by reduction on non-tariff measures by 25%-50%).

Whatever the models and assumptions, how much Malaysia benefits economically from the TPPA depends on what our firms do. They have a good export growth track record. And there are four new export markets in countries with whom Malaysia has no FTA that will be opened up, three of them really sizeable markets: the US, Mexico and Canada. However Malaysian firms also have to adjust domestically against imports.

The economists and writers, some ideologised against big business, can pontificate and go on about this and that model, but it is the doers that matter. Malaysian firms and the Malaysian people have to step up the challenge.

In such a detailed and comprehensive as well as a demanding and complex agreement such as the TPPA, there will be fear and trepidation. But remember, everyone is bound by it, including the U.S. (where there also exist so many fears and doubts which would not arise if it were all for America)

It is not just the TPPA that demands we are agile and competitive. There is already the AEC. The RCEP is slotted to be in place by the end of this year. ASEAN countries are negotiating a free trade agreement with the EU. The FTAAP (Free Trade Area of the Asia Pacific) will come.

It is the fear of competition which is mainly driving criticism of the TPPA. But there is really no where to hide. As one of the world’s most open economies, Malaysia is already in the mix. We can and must compete.

Tan Sri Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.

 

10 thoughts on “Politics aside–TPPA is Good for Malaysia

  1. Sigh.. another Tan Sri Melayu Indonesia elite, chairman of another Special interest bank protected under TPPA to perpetuate special interests of the richest modern day royalty. Islamic bank.. sorry what is the difference with regular banking again? If it is real profit sharing, there would be no poor Malays. No Riba? No high interest? Can international banks get the same treatment?

  2. TTPA: ‘The ultimate coup de grâce of the ultimate coup d’état’

    ‘The real end game in this new age of “free” trade (or otherwise put, corporate protectionism) is becoming clearer and clearer… these new agreements have little to do with actual “trade,” and everything to do with expanding the rights and powers of large corporations.’

    ‘The new generation of trade treaties ultimately seek to transfer what little remains of our national sovereignty to the headquarters of the world’s largest multinational conglomerates. In short, it is the ultimate coup de grâce of the ultimate coup d’état.’

    Excerpts from
    http://www.nakedcapitalism.com/2013/11/the-global-corporatocracy-is-almost-fully-operational.html

  3. ‘Backers of the TPP pact would have you believe that it is a trade agreement. Nile Bowie in an OpEd, TPP: From corporation personhood to corporate nationhood, has it correct:

    “Although proponents of the TPP may claim that its focus is to help the economies of signatory countries create comprehensive market access, eliminate barriers to trade, improve labor rights and encourage environmental protection, every indication suggests that the wide-ranging agreement intends to maximize dramatically corporate revenues at the expense of public health and safety, civil liberties and national sovereignty.”’

    ‘The real objective of TPP is to codify in law and treaty the special treatment that favored industries or well-connected interests exert upon the global economy. ‘

    See more at: http://www.batr.org/corporatocracy/112013.html#sthash.6djaIaW4.dpuf

  4. Has this writer actually read the document? All we are saying is let us, for God’s sake take a close look and discuss and debate before we sign up,

    “All … countries surrendering their sovereignty just like that?” Yes, sir… please read about the EU… that is exactly what has happened to Europe.

  5. Does he mean it’s good to ‘bodek’ UMNO Government? May be aspiring to be next in line for a cabinet post.

    Has this guy, being an economist, ever spoken of Najib’s misdeeds of our country’s financial woes after all the writings on the wall? What is he talking of politics and TPPA? Are they not inter-related? No end to snakes coming out of bewilderment.

    Good luck Munir!

  6. Finally, someone talking unemotionally, without politicking and talking sense.

    Funny, TPPA is a non issue in Singapore. Wonder why is that so?

  7. Once AI kicks in all these trade restrictions will be competing with Uber Model Businesses. Goods will move from nation to nation at the click of the mouse. The delivery and payment system will change making it difficult to monitor movement of goods. Yes the bulk movements will be detected but the smaller high value items will go under the radar. It is expected that 2016 will see the advent of these technologies which is going to see a sea change in the manner in which business will be conducted. Just like the Lori Hantu detection is going to be very difficult.

  8. The,

    Perhaps, this could be a reason.
    http://sgforums.com/forums/10/topics/75118

    In any case, Singapore would likely to gain from ability to join a bigger market economy and at the same time be able to compete with the big boys in USA.
    In Malaysia’s case, it is unclear. It is up to Najib to figure how he wants to play this. TPPA may be the reason he got a bailout from China government. But, it could also be the reason he would not be able to get the bailout. Perhaps, he is just playing with fire. Perhaps, it is the same game Singapore is doing also.
    What does ordinary rakyat like me know.

  9. Singapore has no issues with or without TPPA due to its strict, no-nonsense governance. ZERO tolerance for corruption.
    Can Malaysia vouch the same?
    The only issue as presumed once TPPA fully in force, the corrupt practices here becomes BIGGER! There a many ways to skin a cat.

  10. Politics aside, this piece is also an emotional response to the ongoing debate about TPP.

    First, as Lim Teck Ghee asserts, “The TPPA is neither a poison pill nor a panacea”, but more crucially he also cautions that “[the] TPPA is also not the ultimate game changer for the country’s economic fortunes and future.”

    Second, Dr Munir’s rhetorical, “Lose sovereignty to whom?” exposes himself to the charge of viewing sovereignty in a very narrow restrictive sense. It is not as if by joining TPPA Malaysia’s sovereignty will be compromised in the manner that military aircraft from foreign countries could fly into Malaysian airspace without advance notice and with impunity—it is much less than that. For the lack of a better expression, loss of sovereignty is taken to mean a challenge by a private commercial entity to any government in a court process where such a right had not existed before. Allowing for the fact that any loopholes could be exploited by a foreign party, both private or a sovereign government—and given that foreign parties have practically unlimited funds to push through to the courts—and that because of scale and lack of technical expertise, few Malaysian enterprises or our government will be able to do the same, say against the United States or Australia. One example why some opponents of the TPPA in Australia have been vocal is as given below:
    “. . .George Kahale III . . . chairman of the world’s leading legal arbitration firm – Curtis,
    Mallet-Prevost, Colt & Mosle LLP—his core business is to defend governments being sued by
    foreign investors under ISDS— . . . says the trade minister’s critics are right: ‘There are significant
    improvements in this treaty, but they do not immunise Australia from any of these
    claims. If the trade minister is saying, ‘We’re not at risk for regulating environmental matters’,
    then the trade minister is wrong . . . . an MFN clause in the TPP was a “major mistake”,
    Kahale argues, and another reason Australia is still wide open to being sued for
    legislating to protect the environment
    .”

    [from: TPP’s clauses that let Australia be sued are weapons of legal destruction, says lawyer: http://www.theguardian.com/business/2015/nov/10/tpps-clauses-that-let-australia-be-sued-are-weapons-of-legal-destruction-says-lawyer ]

    Dr Munir admits, “The score for governments winning is 37% of the time, which may not be too comforting.” So it is in this sense that loss of sovereignty should be viewed, however much a hint of exaggeration is implied in the expression.

    He goes on to say, “it would be a good idea for Miti to organise a small caucus of legal experts, business leaders and government officials to go through the whole gamut of dispute settlement provisions and interpretation under the TPPA with an emphasis on the ISDS.” Post facto review of the provisions? Query: Can existing provisions, rules, exceptions, etc contained in the 6000-page agreement be varied and amended by Malaysia at this late hour? Interestingly it is only within the last two days that the public has just been informed by MITI minister Dato Sri Mustapha that our TPPA negotiating teams included among others, Bank Negara officials and lawyers from the law department. So we were in good hands all along, I must assume. But wait, there is something even more pertinent, from Free Malaysia Today, 20 Jan 2016; it is a statement by Associated Chinese Chambers of Commerce and Industry Malaysia’s (ACCIM) deputy secretary general Michael Chai who said that, “Malaysia should follow in the footsteps of Japan by having a monitoring body on its free trade agreements.” He added, “It is the private sector that can provide feedback and the public sector will be able to make immediate policy adjustments.”

    Third, is the following believable?: “I would expand to say the TPPA makes geopolitical sense for Malaysia as it introduces an American presence of balance in the region, not against, but with China. . . should be adept at engaging both powers in a positive sum relationship, as Singapore does so well.”

    In my opinion it is not, and Obama’s pivot to Asia says as much, and “balance with China” has never been part of the grand scheme of things in American hegemonic dreams and strategies. Here, Obama is not even original because one Andy Marshall, now ninety-two years old and considered by many as the pre-eminent Pentagon futurist, was already highly regarded for “the depth and breadth of his influence on strategic affairs in the period since World War II.”

    Allow me to expand: “Marshall is no stranger to potential confrontation with China. In fact, he is the principal architect of the main U.S. battle plan for war with China in the Western Pacific. This classified plan, called ‘Air-Sea Battles,’ involves blinding China’s surveillance capabilities and precision missiles, followed up with massive air power and naval attacks.” This is not by any chance, a new reality for the Chinese, therefore any posturing to the effect that accommodation is the main game plan of the U.S. must be taken cum grano salis. That said, Marshall at a key conference in the Pentagon in 2012 was being briefed by financial experts on a new element towards winning a war— destroying the enemy’s wealth—“wealth destruction through a market attack can be more effective than sinking enemy ships, when it comes to disabling an opponent. Financial war is the future of warfare, and no one works harder to see the future than senior Defense Department official, Andy Marshall.” The “carefully selected group was there to discuss financial war”

    . . . . “That’s interesting,” Marshall said. What prompted his comment, after an hour of complete silence on his part, was our discussion of China’s stockpiling of gold and its possible use as a financial weapon in undermining the dollar’s exchange value.”

    “. . . . Marshall was not being briefed on kinetic weapons or air-sea tactics. He was hearing about sovereign wealth funds, stealth gold acquisitions, and potential threats to national security caused U.S. Federal Reserve policy. ¶ China has over $3 trillion of investments denominated in U.S. dollar, and every 10 percent devaluation in the dollar engineered by the Fed represents $300 million in real wealth transfer from China to the United States. It is not clear how long China will tolerate this raid on its accumulated wealth. If China were not able to defeat the United States in the air or on the sea, it could attack through capital markets.” [Pg 42-44 The Death of Money by James Rickards]

    The above captures the statement I made earlier here in this blog about ‘financial betrayal’ by the Fed; I should now amend it to ‘financial treachery’.

    Dr Munir, the establishment man who famously made a ‘day trip’ to London to settle urgent personal affairs is entitled to his opinion about positive sum relationship vis a vis the U.S., but I am less sanguine about this, as proved by the U.S. imposing new sanctions against Iran no sooner than the sanctions were lifted by the international community.

    Fourth, he says that, “Another independent recent study by the World Bank also found positive economic benefits for Malaysia from being involved in the TPPA.” Query: how sure is the World Bank about its findings? We have been beaten once:

    “[The War God’s Face Has Become Indistinct] . . . was written not long after the 1997 Asian financial crisis, which cascaded into the global financial panic of 1998. Much of the distress in Asia was caused by Western bankers suddenly pulling out hot money out of banks in emerging Asian markets; the distress was compounded by bad economic advice from the Western-dominated IMF. From an Asian perspective, the entire debacle looked like a Western plot to destabilize their economy. The instability was real enough, with riots and bloodshed from Indonesia to South Korea. The ill will escalated to the point of name-calling between Malaysian prime minister Mahathir Mohamad and hedge fund maven George Soros in an infamous confrontation at the IMF annual meeting in Hong Kong in September 1997.” [Pg 45 The Death of Money by James Rickards]

    Finally, why is Dato Sri Mustapha saying that he has no time to debate with anyone on the TPPA? The signals are clear that, come what may, Parliament will vote for our entry to TPPA.

    Good luck Malaysia.
    ________________
    Sumpitan Emas,

    We all know the US makes its own rules and expects others to follow them. Sanctions are being used as a weapon at the slightest opportunity. I am cautious about TPPA. My complaint is that the deal is done in secrecy and in a rush to give neo-liberalism a boost and a legacy present to Obama. Having said that, we should learn to accept TPPA once endorsed by our Parliament and get on with the reality of competition.

    Gradually, NEP will become irrelevant since our government can no longer subside bumiputra elites and rent seeking cronies without going bankrupt. In my view, it is time to adjust and restructure our economy, and that means phasing out NEP policies and make incentives work and building a robust nation of rugged individuals and companies.

    Financial markets are sending a clear message to us to look at our spending ways and think in terms of the medium to long and worry about the stock market volatility. We cannot run our companies by reacting to short market gyrations. Remember the days of oil dividends of the Mahathir era are over, and we must deal with slow growth via prudent counter-cyclical fiscal spending.

    Good and useful rebuttal to Munir’s piece. I always welcome thinking pieces on this blog. Thanks, it is always to read your comments. I am proud in being able to attract you and others like Conrad, Tok Cik, Frank, Hilmi, CLF,LaMoy…–Din Merican

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