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Malaysian Institute of Economic Research
Emeritus Professor Dr Zakariah Abdul Rashid
Executive Director
Malaysian Institute of Economic Research
Malaysian Institute of Economic Research
Outline
Introduction
ASEAN Economic Community (AEC)
ASEAN as a Single Market & Production Base
Trade Agreement and ASEAN
Malaysia as ASEAN’s Investment Hub
Malaysian Institute of Economic Research
Introduction
ASEAN is a potentially large region
Consists of 10 member states
ASEAN is a market with a population of 6 billion people
(i.e. about 9% of global population)
ASEAN covers 4.46 million Km2 over 3% of total land
area on earth
Malaysian Institute of Economic Research
ASEAN: Some Indicators
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1990 2000 2012
760
1,172
3,748
GDP per Capita (US$)
0
500
1000
1500
2000
2500
3000
1990 2000 2012
334
606
2,311
GDP (US$ Billion)
Malaysian Institute of Economic Research
ASEAN: Some Indicators
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
1990 2000 2012
12.8 21.8
110.3
FDI Inflows (US$ Billion)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1990 2000 2012
306
759
2,476
Total Trade (US$ Billion)
Malaysian Institute of Economic Research
ASEAN: Some Indicators
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
1990 2000 2012
45.0
33.0
15.0
Poverty Rate (%) of population living below US$ 1.25 PPP/capita/day
0
100
200
300
400
500
600
700
800
900
1000
1990 2000 2012
317
517
617
Population (Million)
Malaysian Institute of Economic Research
World & ASEAN FDIs
2.00
3.00
4.00
5.00
6.00
7.00
8.00
0.00
5.00
10.00
15.00
20.00
25.00
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US
D b
illi
on
s
Year
ASEAN FDI (USD billions) World FDI (USD billions) Share of ASEAN FDI to World FDI (%)
% Share
Malaysian Institute of Economic Research
Value of FDI in ASEAN
(EU, ASEAN & USA)
-
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
30,000.0
2006 2007 2008 2009 2010 2011 2012 2013
US
$ m
illi
on
Year European Union (EU) ASEAN USA
Malaysian Institute of Economic Research
Value of FDI Inflows
Japan, China, Hong Kong, Korea & Taiwan
-
2,500.0
5,000.0
7,500.0
10,000.0
12,500.0
15,000.0
17,500.0
20,000.0
22,500.0
25,000.0
2006 2007 2008 2009 2010 2011 2012 2013
US
$ m
illi
on
Year
Japan
China
Hong Kong
Republic of Korea
Taiwan, Province of China
Malaysian Institute of Economic Research
Value of FDI Inflows
Australia & India
(3,000.0)
(2,000.0)
(1,000.0)
-
1,000.0
2,000.0
3,000.0
4,000.0
2006 2007 2008 2009 2010 2011 2012 2013
US
$ m
illi
on
Year Australia India
Malaysian Institute of Economic Research
ASEAN Economic Community (AEC)
Single Market and Production Base
Competitive Economic Region
Equitable Economic Development
Integration into the Global Economy
Malaysian Institute of Economic Research
AEC and Investment
Impact of FDI flows:
1. ASEAN Comprehensive Agreement on Investment (ACIA)
is a comprehensive framework that will increase investment
into ASEAN
2. Establishment of AEC and improvement of trade flows will
raise level of FDI in region
3. Larger market will attract more foreign MNCs
4. Regional agreements (i.e. EU, NAFTA) have positive
impact on FDI
Malaysian Institute of Economic Research
Investment, ACIA and its Benefits
ACIA has many benefits that it will bring to investment flows into ASEAN
They are as follows:
Adopting international best practices that help protect investors and their
investments and providing increased protections
Following recent trends in international investment practices that encourage
less restrictive investment regimes
Including portfolio investment and intellectual property as well as broader
definitions of investors and investments
Allowing third-country nationals to benefits from the ACIA
Encouraging a higher level of transparency in investment rulemaking
Adopting Investor-State Dispute Settlement mechanisms (ISDS) and
promoting alternative dispute resolution methods.
Malaysian Institute of Economic Research
Investment, ACIA and its Benefits...
ACIA will help the ASEAN region through:
Create the necessary environment to promote all forms of investment and new
growth areas in ASEAN
Promote intra-ASEAN investment, particularly investments from ASEAN-6
(Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) into the
less developed ASEAN countries
Nurture the growth and development of Small and Medium Enterprises
Promote joint investment initiatives focusing on regional clusters and production
networks
Malaysian Institute of Economic Research
Trade Agreements and ASEAN
Malaysian Institute of Economic Research
Trans-Pacific Partnership (TPP)
Arising out of agreement between New Zealand,
Brunei, Singapore & Chile in 2005
Seen as being led by the U.S.
APEC members encouraged to join; also open to non-
AEC members
ASEAN participants: Brunei, Malaysia, Singapore, Vietnam
High-level, stringent conditions, comprehensive
Malaysian Institute of Economic Research
Regional Comprehensive
Economic Partnership (RCEP)
Led by ASEAN
Reduce noodle-bowl effect
Arising from ASEAN+1 FTAs with China, India, Japan,
South Korea, Australia and New Zealand
RCEP includes trade liberalisation in goods, services,
and investment, technical cooperation, IPR and
dispute settlement
Emphasises ASEAN centrality and flexible
Malaysian Institute of Economic Research
RCEP
Open accession clause
Any ASEAN FTA partner can choose not to participate immediately
Participation of any other external economic partner
In addition to AEC’s 5 priority service sectors
Air transport
E-ASEAN
Healthcare
Tourism &
Logistic services
RCEP’s other foci are:
Transportation
Distribution
Telecommunication, &
Financial services
Malaysian Institute of Economic Research
RCEP
RCEP would accept the priorities set by the AEC for free
flow of goods:
Elimination of tariffs
Elimination of non-tariff barriers
Put in place rules of origin responsive to new challenges
Simple, harmonised trade facilitation
Achieve customs integration
ASEAN Single Window
Malaysian Institute of Economic Research
RCEP
3 kinds of connectivity:
physical
Institutional, and
People-to-people
Liberalisation of services such as to contribute to formation and development of regional production and distribution networks
Strengthen links with global production chains
In sum: RCEP to promote economic cooperation
To be business-friendly
To promote SME growth
Malaysian Institute of Economic Research
Malaysia as ASEAN’s Investment Hub
Malaysia is a balanced economy
Malaysia has a strong institutional and regulatory
framework since post-colonial times
Malaysia has a tradition of liberalisation
Malaysian Institute of Economic Research
Malaysia: Investment Hub
Malaysia in preparation for RCEP and TPP
All ASEAN states may not be interested in TPP
Preparation for TPP will give Malaysia an
advantage in ASEAN
With RCEP and TPP, Malaysia will have the best
of both worlds and it will be linked to the most
powerful economies in the world
Malaysian Institute of Economic Research
Malaysia: Investment Hub
Malaysia has accomplished many achievements:
National Single Window
Standards & Conformance
Trade Facilitation
Good score on non-trade measure
Investment Liberalisation
Investment Facilitation
Malaysian Institute of Economic Research
Malaysia: Investment Hub
Key agencies facilitating investment:
1. MIDA
2. Pemudah
Malaysian Institute of Economic Research
Malaysia: Investment Hub
MIDA
To promote foreign and local investments in the manufacturing and services sectors
To undertake planning for industrial development in Malaysia
To recommend policies and strategies on industrial promotion and development to the Minister of
International Trade and Industry
To evaluate applications for manufacturing licences and expatriate posts; tax incentives for
manufacturing activities, tourism, R&D, training institutions and software development; and duty
exemptions on raw materials and components; and duty exemptions on machinery and equipment for
agricultural sector and selected services sector
Issuance of confirmation letter for the application of import duty and/or sales tax exemption on
machinery, equipment, spare parts, consumables, prime movers and container trailers for
manufacturers in the principal customs area (PCA), companies engaged in a hotel business and
haulage operators under the self-declaration mechanism, effective 2nd May 2014
To assist companies in the implementation and operation of their projects, and offer assistance
through direct consultation and co-operation with the relevant authorities at both the federal and state
levels
To facilitate the exchange of information and co-ordination among institutions engaged in or connected
with industrial development
To further enhance MIDA's role of assisting investors, senior representatives from key agencies are
stationed at MIDA's headquarters in Kuala Lumpur to advise investors on government policies and
procedures. These representatives include officials from the Ministry of Human Resources,
Immigration Department, Royal Customs Malaysia, Department of Environment, Tenaga Nasional
Berhad and Telekom Malaysia Berhad.
Malaysian Institute of Economic Research
Malaysia: Investment Hub
PEMUDAH
To review the status of the public services delivery system in terms of processes, procedures, legislation and human resource and to propose new policies for improvements;
To benchmark best practices to improve the ease of doing business;
To enhance collaboration among public and private sector agencies to improve Malaysia’s competitiveness;
To monitor the implementation of policies, strategies and procedure that would improve the efficiency and effectiveness of the public and private sector delivery system; and
To take appropriate action to address issues in line with the National philosophy of 1Malaysia, People First, Performance Now.
Malaysian Institute of Economic Research
Conclusion
ASEAN is a vibrant economic region
Growth and investment opportunities in ASEAN will
increase in the decade to come
AEC and ACIA will make ASEAN more attractive for FDI
Malaysia is a potential investment hub for ASEAN
Malaysian Institute of Economic Research