TPPA is good for Malaysia–Tan Sri Sheriff Kassim

January 16, 2016

TPPA is good for Malaysia–Tan Sri Sheriff Kassim


Let’s hope you are right, Tan Sri Sheriff Kassim

I agree with our Honourable Prime Minister that in view of the challenging economic scenario for 2016, a recalibration of the federal government budget is inevitable to take into account the continuing drop in the world price of crude oil.

Thankfully, due to the fiscal reforms introduced last year with the introduction of the goods and services tax and removal of fuel subsidies, the country is now better prepared to address the sharp fall in the price of crude oil and its impact on government revenue.

We can expect that while the calibration may involve expenditure cuts to the budget for this year and possibly next year too, the adjustment will not be too drastic – not like in previous economic downturns.

Malaysia is today confronted with poor sentiments among consumers due to the anticipated one-time effects of the GST and the depreciation of the ringgit, all feeding into the cost of living. There is a wait-and-see attitude in the private sector about how the 1Malaysia Development Bhd (1MDB) issues will be resolved and when the political infighting will end.

At the same time, the external economic outlook is not looking better. There are fresh worries about the sustainability of growth in the two largest economies in the world – the US and China, and with the geo-politics in conflict zones getting more complicated, there is likelihood of greater volatility in the world economy.

Despite these short-term worries, several Malaysian corporations are planning to increase their investments abroad in search of bigger markets and higher returns, as seen in the announcement from Khazanah Nasional Berhad recently.

The President of the Federation of Malaysian Manufacturers (FMM) also said at the Malaysian Economic Association (MEA) forum recently that many of its members are looking at external markets for growth as Malaysia is too small a market for expanding further. Sixty percent of its members are SMEs. They too are looking abroad for new opportunities.

It is therefore not surprising to see from the Malaysian government statistics that we are already a capital exporting country, with the outflows of investments outpacing the inflows of foreign direct investments.

This trend is clearly happening with the major GLICs – Petronas, EPF, Sime Darby and several private sector corporations. Basically, they have no choice but to go abroad. The government itself is encouraging Malaysian corporations to become global champions. When they go abroad, they will choose the countries which are safe for their investments – countries which practise high standards of governance.

One smart decision that the government can take to lift up business spirits and give a helping hand to the Malaysian corporations venturing abroad is by joining the Trans-Pacific Partnership Agreement, or TPPA, because this will open up their opportunities to have access to the biggest trading block in the world.

Investor sentiments will be encouraged that as a TPPA country, Malaysia is showing a commitment to the high standards of governance that are becoming the common expectation in international trade.

Our corporations should not have a problem meeting the high TPPA standards of doing business wherever they go because for the last 10 years, our regulatory authorities like the Securities Commission, the Bursa and Bank Negara Malaysia have been introducing guidelines on the codes of conduct and ethics, integrity and transparency to raise the standards of governance in the corporate sector.

Indeed, our standards are as high as those found in the most advanced countries. In Malaysia, it is mandatory for company directors and top executives to attend training on good corporate practices so that we can be prepared for the competition on the world stage and for attracting world class corporations to establish themselves in our country.

The TPPA is the most comprehensive, high standard trade agreement to date as its provisions on governance make it binding on member countries, unlike the ASEAN Economic Community agreement which is so loose on the obligations of member countries that business leaders are left wondering whether the AEC is serious about creating a regional free trade area.

Although Malaysia should not ignore ASEAN, this regional economic community is not a substitute for the stronger TPPA framework of trade in goods and services, which is governed by clear rules on transparency and integrity on the part of corporations and governments, so as to make the playing field level for all players.

No doubt the TPPA provisions on intellectual property rights, settlement of investor disputes (ISDS) state owned enterprises, government procurement, minority rights, labour standards, human rights etc go beyond trade issues but in modern day trade negotiations with developed countries, these are often the stumbling blocks for the West to open up their markets to developing countries that are in violation of these universal principles of justice and fair play.

Now that the TPPA has laid down the rules, it will facilitate the flow of trade as well as foreign investments to and from the developed countries. How much benefit this will bring to our GDP is a matter for discussion. Some estimates say the benefit will be minimal, only about 1% to 2% additional growth, while other estimates say 8%.

Malaysian manufacturers and exporters are saying that whatever the econometric models say about the benefits from TPPA, the fundamental point is that when free trade opens the doors wider for business, our corporate leaders, including the SMEs, will know how to grab the opportunities that come their way, either locally or in foreign countries.

Critics of TPPA argue that since the governance standards require that member countries must allow a separate legal authority to be set up, called ISDS, to settle investor disputes with the host country, Malaysia will be sacrificing its sovereignty if we join the international trade treaty, especially as it is driven by the US for its own strategic reasons.

US and European multinationals have also been prolific in suing foreign governments, including Australia. Critics argue that our legal system is already good and should be allowed to sit in judgment when a foreign investor sues the government for breach of promise.

They also recognise that there are flaws in our legal institutions and lack of trust in our courts, which explains why, even now, most commercial agreements with foreign partners stipulate that the arbitration on commercial disputes be done outside Malaysia, preferably Singapore.

These flaws, they argue, can be rectified by us internally without being forced to do so by outside parties. The truth is that without outside pressure, it’s unlikely third world countries will introduce the reforms to make their justice system independent and trustworthy and since its going to be difficult to make all countries raise their standards to the same high level of governance, the best solution is to have a separate system to deal with investment disputes involving foreign corporations.

I think this is an acceptable arrangement, given the reality that most large corporations prefer to operate abroad in safe countries. Indeed, as our own corporations have said, they too would feel safer to be in TPPA countries because of the ISDS provision, which is a much more binding requirement than in the other existing free trade agreements.

It is these high standards of protection against abuse of power by host country governments that make the TPPA superior to the free trade agreements that we have signed before with several countries.

MITI has explained that the ISDS under the TPPA has incorporated several safeguards against frivolous and unfair claims against the governments of host countries and that it will be more transparent to the public. These safeguards have been introduced at the insistence of the smaller countries in the final stages of the negotiations.

I believe that members of Parliament should support Malaysia signing up to the TPPA because the broad political consensus will have a positive impact on public sentiments, which in turn will help to create the feel good factor in the economy.

With Malaysia committing itself to the high standards of governance under the TPPA, this will give support to our sovereign ratings and help the ringgit to strengthen to a level closer to its fair value.

A more cheerful market sentiment is what we need in these trying times, especially for the working public. Many are now worried about their job security. When the mood in the market is more cheerful, workers will be less worried about retrenchment. Their families will be confident to spend more and with stronger consumer demand, this will help the country’s GDP to grow, despite the external uncertainties.

Parliament can help to boost up public and market sentiments by voting for the TPPA.


9 thoughts on “TPPA is good for Malaysia–Tan Sri Sheriff Kassim

  1. Never mind about the TPPA which has both positive & negative points but overall and in the long run it is good for Malaysia & its corporations, both of which will at least be forced to end up with GOOD GOVERNANCE that has been a rare commodity in our society.
    I am more interested in the opening of the article that deals with the so-called recslibration of the 2016 budget. I do hope the PM as the Finance Minister will forcefully demonstrate to the rakyat who are all taxpayers now – thanks to the GST again – that he IS WILLING to make sacrifices in these difficult times by selling off all the VVIP jets and closing down that airwing unit. All Ministers & civil servants are to use commercial airlines for their air travels which should be MINIMIZED & CONTROLLED by limiting them to the MOST IMPORTANT & URGENT. If I am not mistaken during the late PM Tun Razak’s era, spouses including the PM’s wife, had to pay their own fares if they wish to accompany their husbands for official visits both local & abroad – we can’t say there wasn’t a good example previously set by our elders who understandably were LOVED BY THE RAKYAT.

  2. It is important for the Government to practice the culture of
    TRANSPARENCY AND ACCOUNTABILITY but for this the need is

    PERCEPTION to-day appears to be that
    RICH are ENJOYING while the POOR are SUFFERING from
    [Eg.: Defaulter being rewarded with discounts, Illegal Logging-Mining-Pollution laws being ignored, just to mention a few. Millions of compound notices issued but not enforced but only the honest pay full fines – Auditor General & Media reports]

    In these days of falling revenues

    NO NEED TO GIVE HANDOUTS [or reward all civil service when only a few may merit with salary increments] or

    Rakyat may be following examples of leaderships regarding
    appears to have become an ACCEPTABLE CULTURE.

    If leadership serious in PREVENTING

    Singapore’s LKY reduced the salaries/perks of elected/corporate/civil service leaders during financial hardships and increased them in good times.

  3. All of the voice of dissent on TPPA that came from US is about big companies taking advantage of the rakyat in Malaysia, and not much about the existing big corporation in Malaysia. So many provisions have already been granted in the name of the need to respect Malaysia’s discriminatory Ketuanan Melayu that none of exisiting big Malaysian corporates need to worry about competition. Clearly Tan Sri is of an elite class, of whom rakayat could imagine his living standard.

    Frankly speaking, I am quite convince Khazanah should be abolished after the nation got out from the 97 economics crisis.
    I am convinced that Khazanah has merely existed to bail out those over leveraged connected elites during the bad times, and continue to enrich them during the good times.

    Honestly, can anyone tell me what is Khazanah’s mandate? Bureaucrats! Here to enjoy rakyat’s money.

  4. Welcome to 2016 when everyone will be transformed into a service provider based on the Uber Model. It is already happening in the developed world where deregulation has allowed for the development of this new Service Industry. Name it, home delivery, renting of extra rooms under Airbnb, drivers selling rides in personal cars, individuals willing to run household errands and many others will go Uber Model while we are talking about TPPA. Even Pos Malaysia may end up having no mail or parcels to deliver. We must understand that in the end it is the prosperous small businessman and wage earner who will pay the most tax. Big Corporation have their own means to pay legally as less as possible’

    TPPA is no magic bullet.It is going to become the roof under which we all have to operate based on the rule written by the US. Ultimately the Uber Model of services will prevail no matter however hard we try to prevent it because we are with TPPA which will ultimately see the total liberalization of the service sector.
    Are we ready. Get set. and go.

  5. From:

    Here are 9 major ways the agreement would stunt the national economic development of its developing-country members:

    1. The TPP forces equal rules on unequal partners.
    2. The TPP forbids using trade policy to protect domestic industries.
    3. The TPP bans using government procurement to assist domestic firms.
    4. The TPP limits regulation of foreign investors too much.
    5. The TPP undermines the sovereignty of national courts and scares countries from adopting new regulations.
    6. The TPP makes countries more vulnerable to financial crises.
    7. The TPP undermines public health.
    8. The TPP blocks companies from acquiring needed technology.
    9. The TPP undermines state-owned companies.

    For elaboration, go to:

  6. TPP… a trade agreement? There is a huge ongoing debate about this very point especially in the US… as is the point about third party arbitration mechanisms to be controlled, it is feared, by courts whose composition will be out of the hands of sovereign countries…

    So let us not jump the gun… much better to allow the 5000-odd page document to be read and properly understood and debated before the next step.

  7. How can an Agreement drawn up by the USA be good for other countries?
    It was a negotiated deal with all the partners. Now it is up to us to decide to accept or reject it. –Din Merican.

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