- Malaysia signed CPTPP but has yet to ratify. On the other hand, Taiwan has indicated its interest to join CPTPP.
- IDEAS estimates that ratification of CPTPP would boost Malaysia’s GDP by over RM14 billion and create 140,000 jobs. If Taiwan also joins CPTPP, Malaysia’s GDP would further increase by over RM2 billion and 20,000 additional jobs would be created.
- Given Malaysia and Taiwan’s long-standing industrial collaboration, mutual membership would also be a strong boost to the competitiveness of Malaysia’s manufacturing sectors and efforts to transition to the Fourth Industrial Revolution.
Kuala Lumpur, 8 October 2020 – IDEAS has published Policy IDEAS No. 65, “Malaysia, Taiwan and CPTPP: Economic Impact Assessment”. Malaysia has signed the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) but the Malaysian Government has made no final decision on whether to ratify and implement the agreement. Taiwan is not currently a member of CPTPP but has formally expressed its interest to join. In this new report, IDEAS assesses the impact on Malaysia’s economy if Malaysia ratifies the CPTPP and if Taiwan joins the trade deal.
As Malaysia develops its economic recovery strategy, CPTPP represents an option to stimulate growth, without creating further fiscal pressure. Malaysia’s competitiveness in the region will be important for achieving sustainable growth, and ratification of CPTPP presents an opportunity for Malaysia to enhance its competitive position. These are reflected by IDEAS estimates of the aggregate economic impact of Malaysia ratifying the CPTPP. IDEAS estimates that ratifying and implementing CPTPP would boost Malaysia’s GDP by an additional 1%, driven by an expansion in trade. This would result in new employment opportunities equivalent to 140,000 additional people in work.
In the context of the Covid-19 pandemic, ratification of CPTPP can contribute to Malaysia’s recovery in a number of ways. First, through supporting the economic recovery by stimulating trade and investment, since the ratification of CPTPP is one of the few levers available to stimulate growth without creating additional fiscal pressure. Second, by enhancing Malaysia’s competitiveness in regional and global value chains, at a time when many firms are restructuring their supply chains to be more resilient against future shocks. And third, by accelerating digitalisation of industry in Malaysia through the transition to 4IR, which will be an essential component of the “new normal” in the wake of the pandemic.
Commenting on the publication, IDEAS CEO Tricia Yeoh commented that: “As Malaysia grapples with economic recovery and the long term challenge of enhancing economic competitiveness, ratification of CPTPP is a quick win. Malaysia’s negotiators struck a good deal, which can now be ratified and implemented. Furthermore, as the CPTPP continues to grow it will only become more important that Malaysia is part of the deal.”
The CPTPP is also expected to grow, with several potential partners expressing an interest to join – including Thailand, the UK and Taiwan. Taiwan is consistently among Malaysia’s top ten trading partners despite there being no formal trade agreement in place. As a result, Taiwan’s accession to CPTPP is expected to reduce import costs, boost productivity and create new export opportunities – key ingredients for Malaysia’s recovery. Taiwan is also at the forefront of IR4.0 with great success in creating home-grown champions that are competitive globally.
If Taiwan also joined CPTPP, IDEAS estimates that the boost to Malaysia’s GDP would increase by a further 0.15%, as a result of more trade. This in turn would boost the employment impact to create an additional 20,000 jobs. Malaysian manufacturers, especially SMEs, will benefit greatly not only from cheaper imported machines and other intermediate input but also creating synergies to move our domestic manufacturing base up the value chain. Taiwan’s CPTPP accession can also accelerate Malaysia’s digital transformation effort and create new impetus for Malaysia’s growth, particularly in IR4.0 focused sectors such as medical devices, chemicals, electronics and machinery
“If Taiwan joins CPTPP, the potential benefits to Malaysia would increase substantially, given the strong industrial links that already exist and the significant opportunities for further growth”, added Yeoh.
The report was presented today at a Roundtable in Kuala Lumpur attended by representatives from the government, CPTPP Member countries, industry and academia. The Roundtable welcomed the Report and noted the findings.
A copy of the report can be downloaded at https://bit.ly/MsiaTaiwanCPTPP