Nikkei Asian Review 1 October 2015

KUALA LUMPUR — As ministers from 12 Asia-Pacific countries attempt to conclude the Trans-Pacific Partnership negotiations in Atlanta, pact member Malaysia is hurrying to convince domestic stakeholders of the importance of the free trade deal.

But beleaguered Prime Minister Najib Razak is hampered by a dented credibility, as he is embroiled in a political scandal, with investigators saying he pocketed $700 million in donations from an unidentified Middle East source.

Najib’s leadership is crucial to getting the TPP passed through the parliament once negotiations are concluded. The decision to enter into free trade agreements is normally made by the cabinet, but since the TPP touches upon sensitive issues, including the constitutional rights of Malays, and many are not in favor of it, the government has decided to debate the draft agreement in parliament before signing on the dotted lines.

“The government has lost the media war on the TPP,” said Wan Saiful Wan Jan of the Institute for Democracy and Economic Affairs think tank. “They were not able to give good answers to some significant questions,” he added. Najib came under scrutiny after the Wall Street Journal revealed in a July report that $700 million had been deposited into his personal bank accounts in 2013 from companies related to debt-laden state-fund 1Malaysia Development Bhd.

Investigations into 1MDB have been expanded beyond Malaysia with authorities in several countries, including Switzerland and the U.S., probing the fund for suspected money laundering and corruption, according to reports. 1MDB, which has business interests in the power and property sectors, was founded by Najib, who chairs its advisory board.

The ruling party controls 60% of the seats in parliament, but the balance may easily tip to the opposition if pro-government lawmakers are not convinced of the benefits of the TPP, the negotiations for which have been closely guarded.

Malaysia will insist on getting a deal “on our terms,” Mustapa Mohamed, the trade minister, told a closed-door gathering of leaders from the main ruling alliance, the United Malays National Organization, two days before his departure for Atlanta. The UMNO, which is headed by Najib, holds Malaysia’s affirmative action policy closely to its chest, ensuring Malays who make up 60% of the country’s multiethnic population enjoy easier access to almost anything from scholarships to business contracts from the government.

But some of the chapters in the TPP, including government procurements and competitions involving state-owned enterprises, may challenge such special rights. Malaysia has been very defensive in these chapters since joining the negotiations in October 2010. It asked for exceptions or “policy space” in for example, government procurement, arguing the need to implement affirmative action as part of the country’s social development.

In the state-owned enterprises chapter, Malaysia asked for a higher revenue threshold that will exclude some companies from the rules of the agreement. State investment fund Khazanah Holdings and oil company Petronas are examples of state-owned enterprises that play an important role as revenue contributors and in nurturing Malay entrepreneurs. Petronas gave out 52 billion ringgit ($12 billion) worth of contracts in 2012 to companies owned by ethnic Malays, according to state news agency Bernama.

While Malaysia may seem protective of its turf, it also needs the TPP to gain wider access to markets for its products, including electronic goods, rubber gloves and palm oil. The country, which controls 60% of the global rubber glove market, said it will stand to benefit from import duty exemptions from Canada and Mexico for its gloves. Top Glove, the world’s largest rubber glove maker, told the Nikkei Asian Review in an interview in August that the TPP will improve its competitive advantage.

Even so, pressure is mounting on the prime minister, with the opposition asking for Malaysia to be suspended from the negotiations. “It is only after Najib resolves the credibility crisis and issues related to allegations of abuse in 1MDB can the negotiations involving national sovereignty continue,” opposition leader Wan Azizah Wan Ismail was quoted as saying by online news site Malaysiakini. The opposition is mulling a vote of no-confidence in the prime minister in parliament.

“We don’t have the time pressure to finish the TPP,” said a Malaysian source close to the negotiations after the previous ministerial meeting in August, referring to the tight legislative deadlines facing the U.S., for example. But with uncertainties lingering around the country’s leadership, Malaysia may want to negotiate the TPP at its own pace, ensuring its sovereignty is as well reflected as other member countries’.

Leave a comment