KUCHING: The Institute for Democracy and Economic Affairs (IDEAS) warns against the possibility of withdrawing Malaysia from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as has been advocated by certain groups.

IDEAS emphasises that based on the Cost-Benefit Analysis (CBA) published by the Ministry of International Trade and Industry (MITI) in July 2022, being a ratified party to the CPTPP would be a net positive for Malaysia in terms of GDP growth and trade activities.

IDEAS also warned that withdrawing now would be extremely harmful to Malaysia’s international reputation. Instead, IDEAS called for a continuous assessment of the impact of the CPTPP to ensure public buy-in and minimise short-term adjustment costs.

The CPTPP is a mega-free trade deal involving 11 members from across the Pacific Rim. In 2019, the member economies of the CPTPP collectively comprised 13per cent of global GDP.

Unlike traditional free trade agreements (FTAs) the CPTPP goes beyond providing market access for goods, services and investments to providing highquality standards on issues such as state-owned enterprises, government procurement, the environment and labour issues.

Such high standards when implemented collectively will improve transparency and governance in trade and investment practices for all participating economies.

As noted by IDEAS chief executive officer Dr Tricia Yeoh, “It took Malaysia about eight years of negotiations before Malaysia finally signed the agreement in 2018, after which it took another four years before Malaysia finally ratified it late this year.

“A U-turn now would severely impact Malaysia’s international credibility, and could possibly scare off foreign investors who above all crave stability in a partner country.

“Withdrawing means Malaysian exporters would lose access to the growing CPTPP market, which may possibly involve the economies of the UK, China, Ecuador, Uruguay, Costa Rica and Taiwan in the future.

“We trust that the newly appointed Minister of International Trade and Industry will make a wise decision after seeking counsel from industry players and advisors within the ministry.”

IDEAS points to the quantitative findings of the Cost-Benefit Analysis (CBA) that was released by MITI in July of this year, which suggested that ratifying the CPTPP would be a net positive for Malaysia.

The CBA had projected that ratification would raise GDP by RM248.2 billion over the period of 2021 to 2030, thereby raising GDP growth by 1.9 per cent relative to baseline figures in 2030.

The CBA also projected that Malaysia’s trade balance would measure at RM235.1 billion in 2030, remaining in surplus at 8.5 per cent of GDP within the same year.

Now that the ratification has come into force, IDEAS director of research Dr Juita Mohamad said we can expect to see a lowering of tariff rates and the elimination of non-tariff measures, which will be felt almost immediately by consumers.

“In the medium to long term, workers are expected to benefit from seeing their wages rising according to the market and its needs,” she added. “In addition, multiple government efforts to upskill and support SMEs, including bumiputera enterprises, need to be improved upon so that a supportive ecosystem can be developed to elevate themselves to the standards expected within the trade agreement.

“In the long run, we expect to see Malaysian businesses flourishing and taking advantage of provisions within the CPTPP to improve their market access. Additionally, the economy as a whole will experience welfare gains in the long run.”

IDEAS agrees that there should be greater efforts to encourage more public buy-in of the CPTPP. While the ratification of the agreement marks an important milestone, we encourage a continuous assessment on the impact of the CPTPP on the ground, to take place within the country and among the CPTPP members.

The appointment of IDEAS and ISIS by MITI as part of the CPTPP review think tank network marks Malaysia’s commitment to continue to assess the benefits of CPTPP post-ratification.

IDEAS also calls for additional support for SMEs to enhance their competitiveness and market-readiness so that they can effectively participate in the supply chain.