Speech by The Honourable Dato' Sri Mustapa Mohamed at the Malaysia - Australia Free Trade Agreement (MAFTA) Signing Ceremony, 22 May 2012

 

 

H.E. Dr. Craig Emerson MP 
Minister for Trade and Competitiveness Australia

H.E Mr. Miles Kupa 
High Commissioner of Australia to Malaysia 

Distinguished Guests 

Ladies and Gentlemen

Good morning and thank you for your presence here to witness another milestone in the development of economic relations between Malaysia and Australia. 

The first Bilateral Trade Agreement between our two countries was signed in 1958 and since then we have concluded many other agreements and MOUs covering areas like defence, scientific and technological cooperation, accreditation and testing, standards, agricultural research and higher education. The Agreement we are going to formalise today is a significant component of the official framework of rules and regulations that define our bilateral relations. 

As we are all aware, negotiations for a free trade agreement between our two countries began way back in 2005, but it made limited progress for some years. Prime Minister Gillard's visit in October 2010 to Malaysia, and Prime Minister Najib Tun Razak's return visit to Australia in March 2011, gave the negotiations a new momentum and discussions were concluded just two months ago. I am pleased that today we are able to put pen to paper to mark the beginning of a new era. 

What impact will MAFTA have on bilateral trade and investment? In 2011, Australia was Malaysia's 12th largest trading partner while Malaysia was Australia's 10th largest trading partner. Trade volume overall has been on an uptrend. It increased by 11% last year to reach US12.4 billion, and by 28% in the first quarter of this year alone.

Looking forward, I think we can expect to see significant improvement in these figures in the years to come. And this is because of the dramatic opening up of access to exporters from both sides that this Agreement offers. This is the first FTA Malaysia is signing that will grant our exporters duty free treatment for 100% of our goods as soon as the Agreement comes into force - on 1 st January 2013. Australian exporters to Malaysia will also be able to immediately enjoy significantly reduced tariffs for goods, reaching up to 99% by 2020. 

BENEFITS UNDER MAFTA VIS-À-VIS Asean Australia New Zealand FTA (AANZFTA)

Trade in Goods

MAFTA offers faster rate of Tariff Elimination for Malaysian exports. Under MAFTA - Australia will eliminate ALL tariffs upon entry into force, i.e 1 January 2013 . Under AANZFTA - Australia has committed to eliminate all tariffs only by 2020 .

MAFTA offers wider coverage of goods for Tariff Elimination. Under MAFTA – Malaysia will eliminate tariffs on 99% of goods by 2020.

• Better tariff elimination given to Australia which Malaysia has not offered to any other FTA partners. These products are iron and steel, automotive, fruit, liquid milk and TRQs products.
• Malaysia has removed its products (531 lines) from the sensitive list of AANZFTA.
• These products are mainly for iron and steel, automotive parts and components, glass and glassware, and fruits.

Under AANZFTA - duties for 98 products under the exclusion list will not be eliminated or reduced.

In Services

Under this MAFTA agreement, Australia will allow Malaysian companies to participate in private hospital services and facilitate Malaysia's participation in providing traditional and complementary medicine services ( Malay massage, homeopathy, Ayurveda and traditional Chinese medicine ). Malaysia, on the other hand, has offered:

• 100% equity in private higher education services ;
• up to 100% equity in telecommunication services ;
• 70% equity in insurance and investment banking ;
• 100% equity in investment advisory companies ; and
• 70% in both corporate finance advisory and financial planning companies .

So this Agreement, ladies and gentlemen, presents an opportunity for exporters from both sides to up their performances immediately. This is made easier by the fact that most of our goods do not directly compete, but rather complement each other.

Let us look at the situation on the investment side. Realised Australian investments in Malaysia's manufacturing sector totalled U$773 million at the end of 2011. Among the Australian companies in Malaysia include Ansell Group of Companies, Mission Group of Companies, CSR Group of Companies, BHP Steel Group of Companies, and Leigh-Mardon (Pg) Sdn Bhd.

In contrast, Malaysian investments in Australia totalled US$4.3 billion and these were mainly in mining, financial services, construction, insurance and real estate. So, clearly, a re-balancing is in order and we look forward to seeing more Australian investments headed for Malaysia in the near future.

I should stress that MAFTA covers other areas too, such as trade in services, investments as well as economic and technical cooperation. If we can properly exploit the potential in all these areas of business, this will certainly take our bilateral relations to a whole new level.

There are also a number of non-conventional outcomes of this Agreement which we have to work on. We look forward, for example, to receiving Australian assistance for a number of projects in the automotive sector.

In fact there will be an exchange of MOU right after the signing of MAFTA between the Malaysia Automotive Institute and AutoCRC. This MOU will form the basis for further collaboration between both countries in automotive research and development of new technologies and human capital.

We have, in turn, offered to provide inputs to support the development of traditional and complementary medicine services in Australia. In the same spirit. I like to invite the Australian business community to expand their investments in Malaysia's services sector, including in education, telecommunication and financial services sub sectors.

In higher education, there are currently three Australian branch campuses in Malaysia. Two of the branches have Australian ownership, i.e. about 45% in Monash University, and 25% in Swinburne University of Technology. As for telecommunication, Reach Bandwith Sdn Bhd, a licence holder for Network Service Provider, has Australian ownership of 51%. I am confident that we will see more investments from Australia in services sector, post MAFTA.

As I said just now, ladies and gentlemen, MAFTA will come into force on the 1 st of January next year. The Joint Trade Committee co-chaired by Minister Craig Emerson and I will oversee its implementation, and an FTA Joint Commission chaired by our Senior Officials will help monitor its impact on the ground. I think we can all look forward to a smooth implementation of the Agreement.

Let me thank once again all officials on both sides who have worked so hard to help conclude this Agreement. A new era of Malaysian-Australian economic relations is at hand. Congratulations to all.

 

Thank you.