The Malay Mail Online 2 December 2015

KUALA LUMPUR, Dec 2 — The protection of Bumiputera interests in the Trans-Pacific Partnership (TPP) will reduce the benefits Malaysia can extract in the short term, a libertarian think-tank said today.

Dr Razeen Sally, the Institute for Democracy and Economic Affairs’ (IDEAS) chair in political economy and governance, said the main benefit of the free trade agreement for Malaysia would be the liberalisation of the Malaysian market and increased competition.

“[But] with the carve outs for the Bumiputera on investments and state-owned enterprises, the benefits for opening up will be less for Malaysia in the short term,” Sally told a press briefing here.

He also said the TPP would not just benefit American corporations, but also non-Bumiputera companies here, except that such benefits would be “weakened” as a result of the Bumiputera protections.

“It would help to open up certain areas, not just for multinational corporations, but efficient enterprises here that don’t have snouts in the Bumiputera trough,” he said.

According to the TPP text, Malaysia has offered to open up the government procurement market, but the Bumiputera policy is reserved, with 30 per cent set aside for Bumiputera contractors in the construction services and a margin of price preference to Bumiputera suppliers and manufacturers in the goods and services sector.

Malaysia also has exemptions for government-linked corporations like Khazanah Nasional and Permodalan Nasional Berhad (PNB), said Sally.

“The ideal situation would be for the government to continue the ETP (Economic Transformation Programme) and GTP (Government Transformation Programme), rather than dance around the NEP (New Economic Policy), and to lock it in with the pro-competition TPP,” said Sally.

He also lauded the controversial investor-state dispute settlement (ISDS) provision under the TPP that allows corporations to sue governments, pointing out that many member states of the TPP have weak institutions including their judiciary.

Sally argued that the ISDS is necessary for investors to have confidence to invest in a particular country so that they can opt for independent arbitration as a last resort.

He also said the case of tobacco giant Philip Morris suing Uruguay for enlarging health warnings on cigarette packs under the terms of a bilateral trade agreement was an “isolated” case.

“The ISDS has been used by many countries. Ninety-nine per cent of cases were settled well,” he said.

According to Sally, the TPP also allows governments to negotiate with pharmaceutical companies for lower drug prices and to break patents in the event of a pandemic.

“There are safeguards in this agreement,” he said. “While there are costs for poorer countries, it’s not as big as critics make it out to be”.

The TPP cost-benefit analysis for Malaysia is expected to be released tomorrow.

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