Malaysia External Trade Development Corporation

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Malaysia's Trade with ASEAN

Malaysia's Trade with Japan

Malaysia's Trade with Pakistan

Malaysia's Trade with China

Malaysia's Trade with Korea

 

FTA Series: Malaysia's Free Trade Agreements FTAs
A useful guide for more information on FTA.

FTA Series: ASEAN-Japan Comprehensive Economic Partnership
A useful guide for more information on AJCEP

FTA Series: Malaysia-Japan Economic Partnership Agreements
A useful guide for more information on MJEPA

FTA Series: Malaysia-Pakistan Closer Economic Partnership Agreement
A useful guide for more information on MPCEPA

ASEAN Free Trade Area (AFTA)

Common Effective Preferential Tariff Scheme (CEPT)

• 54 tariff lines of Cambodia;
• 203 tariff lines of Lao PDR; and
• 27 tariff lines of Myanmar.

These products are still placed under their respective Sensitive Lists. These products are to be transferred into the CEPT Scheme not later than 1 January 2008 for Lao PDR and Myanmar and 1 January 2010 for Cambodia.

Number of Tariff Lines at 0% for ASEAN in the CEPT Package 2007

 

Source: ASEAN Secretariat, as of July 2007

Current Status of Tariff Reduction by Malaysia 

Beginning 1 January 2007, Malaysia eliminated duties on 3,368 tariff lines under the CEPT Scheme. The remaining 2,291 tariff lines will be eliminated on 1 January 2010 to fulfil the CEPT commitments. These products are: automotive; iron and steel; glass and glassware; ceramic; and paper products.

GENERAL EXCEPTION LIST

89 tariff lines are exempted from tariff concessions under the CEPT Scheme. These products are: alcoholic beverages; and arms and ammunition.

Malaysia 's Commitment under the CEPT Scheme

Source: Ministry of International Trade and Industry
Based on ASEAN Harmonised Tariff Nomenclature (AHTN) 2002

RULES OF ORIGIN (ROO)

ASEAN is simplifying the rules and procedures for using the CEPT Scheme to encourage trade among Member States.

To access CEPT tariff concessions ASEAN exporters/manufacturers can now choose the most convenient ROO, either:

• the existing 40 per cent local/regional value content;

or

• the relevant Product Specific Rules (PSR). 
  ASEAN has adopted Product Specific Rules (PSR) for 1,453 tariff lines, effective 1 January 2007. Apart from these newly endorsed PSR, ASEAN has also adopted PSR for:
• 839 tariff lines of textiles and apparel (1 January 1996);
• wheat flour (27 April 2005);
• 23 tariff lines of wood and wood based products and 36 aluminium products (28 September 2005); and
• 35 tariff lines of iron and steel (1 September 2006). 
  Negotiations for the second or final package of Product Specific Rules have been completed for the remaining tariff lines, except for 144 tariff lines which include automotives, iron and steel and chemical products.
  The Second or final package of PSR will be implemented by the first quarter of 2008.

NON-TARIFF BARRIERS (NTBs)

An agreed work programme was established in ASEAN to eliminate these barriers in three packages:

• 2008, 2009 and 2010 for ASEAN-5;
• 2010, 2011 and 2012 for the Philippines;and
• 2013, 2014 and 2015/2018 for Cambodia, Lao PDR, Myanmar and Viet Nam.

The NTBs are classified according to three types of boxes:

ASEAN countries are required to notify other members and ASEAN Secretariat when a specific Non-Tariff Measure (NTM) is being introduced. 

A peer review process has been put in place to ensure that the implementation of NTMs is justifiable.

ASEAN INTEGRATION SYSTEM OF PREFERENCES (AISP)

The ASEAN Integration System of Preferences (AISP) is a unilateral scheme of preference given by ASEAN-6 that provides zero duty to products of export interest to Cambodia, Lao PDR, Myanmar and Viet Nam (CLMV).

As at December 2006, ASEAN-6 has offered zero duty for 3,195 products of the CLMV namely:

• Myanmar with 1,681 products;
• Cambodia (632);
• Lao PDR (494); and
• Viet Nam (388).

Malaysia has granted duty exemption on 793 products to these countries:

• Myanmar with 293 products;
• Viet Nam (237);
• Cambodia (179); and
• Lao PDR (83).

These duty exemptions are given to products such as:

ASEAN HARMONISED TARIFF NOMENCLATURE (AHTN)

AHTN is a harmonised product classification nomenclature implemented by all ASEAN member countries with the aim of further facilitating and promote intra-ASEAN trade. 

The transposition of AHTN 2002 into ATHN 2007 among ASEAN members is on-going. Only Thailand and Indonesia have implemented and transposed their CEPT package into AHTN 2007. 

Malaysia issued the gazette on 31 December 2007 and the AHTN will come into force on 1 April 2008. The application of the AHTN is expected to be extended to non-ASEAN countries by 2011

ENHANCED CEPT AGREEMENT

In August 2007, ASEAN agreed to review and update the CEPT Agreement to become a comprehensive Trade in Goods (TIG) Agreement for AFTA. The reasons are:

• to update some provisions to accommodate the current development in ASEAN;
• to provide legal standing to the Ministerial decisions pertaining to CEPT/AFTA;
• inconsistencies found between the provisions in the CEPT Agreement, Protocols and decisions of the AFTA Councils/AEMs;
• non-existence of some principle provisions such as Most Favoured Nation (MFN) treatment and National Treatment;
• some provisions in the CEPT need to be updated to be at par with the disciplines imposed in FTAs. and
• all past amendments to the CEPT agreements in different protocols will be merged into the new comprehensive agreement.

 

ASIAN - Korea

Background

• The ASEAN-Korea Summit on 8 October 2003 tasked Ministers to discuss feasibility of a Framework Agreement on Economic Cooperation between ASEAN and Korea with a view towards establishing a Free Trade Area (FTA).
• At the 8th ASEAN-Korea Summit held on 29 November 2004, the Leaders signed the ASEAN-ROK Joint Declaration on Comprehensive Cooperation Partnership Agreement. Through the Joint Declaration, the Leaders among others agreed to: 
  
  • the recommendations of the ASEAN-ROK Experts Group (AKEG) on the measures to expand two-way trade and investment by liberalising and integrating the markets;
  • the establishment of an ASEAN-ROK Free Trade Area (AKFTA ); and
  • launching the AKFTA negotiations in early 2005 with a goal of having at least 80% of products at zero tariff by 2009, and consideration of special and differential treatment and additional flexibility for new ASEAN Member Countries.
• The Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea was signed by the Leaders at the ASEAN-Korea Summit on 13 December 2005 in Kuala Lumpur, Malaysia and came into force on 1 July 2006.
• During the ASEAN-Korea Summit on 13 December 2005, the Economic Ministers of Korea and ASEAN signed: 
  
  • the Agreement on Dispute Settlement Mechanism between ASEAN and Korea.
• On 26 August 2006 in Kuala Lumpur, the Economic Ministers of ASEAN and Korea, with the exception of Thailand, signed: 
  
  • the Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea.

Scope

• The main elements of the Framework Agreement include: 
  
  • establishment of ASEAN-Korea Free Trade Area (AKFTA):
• FTA for Trade in Goods to be realised by 2012 for ASEAN-6, 2018 for Vietnam and 2020 for Cambodia, Lao PDR and Myanmar; and
• FTA for Trade in Services and Investment to be implemented within the timeframes to be mutually agreed between ASEAN and Korea; and 
  
  • cooperation in the areas of:
• Customs Procedures;
• Trade and Investment Promotion;
• Small and Medium Enterprises;
• Human Resource Management and Development;
• Tourism;
• Science and Technology;
• Financial Services;
• Information and Communication Technology;
• Agriculture, Fisheries, Livestock, Plantation Commodities and Forestry;
• Intellectual Property;
• Environmental Industry;
• Broadcasting;
• Construction Technology;
• Standards and Conformity Assessment and Sanitary and Phytosanitary Measures;
• Mining;
• Energy;
• Natural Resources;
• Shipbuilding and Maritime Transport; and
• Film.

Status

FTA for Trade in Goods

• Main provisions in the Agreement include: 
  
  • modalities for tariff reduction;
  • rules of origin;
  • modification of concessions;
  • removal of non-tariff barriers; and
  • safeguard measures, including Balance of Payment.
  • The first tranche of tariff reduction/elimination began on 1 June 2007.
  • The modalities for tariff reduction for products agreed by ASEAN and Korea are:

Normal Track

• Korea will eliminate tariffs on at least 70% of its products listed in Normal Track upon the entry into force of the Agreement, i.e., 1 June 2007. All tariffs for products listed in Normal Track will be eliminated by 1 January 2010;
• For ASEAN-6, tariffs will be eliminated in 4 phases beginning July 2006 and concluded by 2012:
• tariffs for at least 50% of products listed in Normal Track will be reduced to 0- 5% by 1 January 2007;
• tariffs for at least 90% of products listed in Normal Track to be eliminated by 1 January 2009;
• all tariffs for products listed in Normal Track to be eliminated by 1 January 2010, with flexibility to eliminate maximum 5% of products listed in Normal Track by 1 January 2012; and
• all tariffs for products listed in Normal Track will be eliminated by 1 January 2012.
• Vietnam is given an additional 6 years while Cambodia, Lao PDR and Myanmar are given an additional 8 years.

 

ASIAN - China

Background

• Cooperation between ASEAN and China was elevated to a higher level with the signing of the Framework Agreement on Comprehensive Economic Cooperation by the ASEAN and China Heads of State / Government on 4 November 2002 in Phnom Penh, Cambodia.
• The Framework Agreement which came into force on 1 July 2003 is an umbrella Agreement which provides general provision on the establishment of an ASEAN-China Free Trade Area (ACFTA) within 10 years by pursuing: 
  
  • progressive elimination of tariffs and non-tariff barriers;
  • progressive liberalisation of trade in services and investment;
  • strengthen trade facilitation measures; and
  • economic co-operation in areas of common interest.
• The following ACFTA Agreements has also being signed:

Early Harvest Programme (EHP)

• Tariffs have been reduced from 1 January 2004 by the six original ASEAN member countries (ASEAN-6) and China. Duties were eliminated on 1 January 2006.
• Malaysia 's products under the EHP: 
  
  • 503 unprocessed agriculture products; and
  • 87 specific manufactured products such as coffee, animal and vegetable fats/oils, cocoa and cocoa preparations, mineral fuels (coal/coke), soap, stearic acid, article of rubber and glass envelope for Cathode-Ray Tube (CRT).

Trade in Goods

Normal Track

• Tariff liberalisation on all other products (other than EHP) has been implemented beginning 1 July 2005 and to be conducted in four tranches i.e. 2005, 2007, 2009 and 2010.
• ASEAN-6 and China is required to reduce tariffs to 0-5% on 40% of their products by 2005 and 60% of their products by 2007.
• Extended timeframe for tariff elimination of up to 2012 will be given for not more than 150 tariff lines. Malaysia 's 150 tariff lines include: 
  
  • polyethylene, polypropylene and polystyrene;
  • rubber tyres and tubes;
  • textiles and fabrics;
  • footwear;
  • ceramic products;
  • articles of iron and steel; and
  • electrical products.
• Continuous improvements are being undertaken on the ROO and Operational Certification Procedures (OCP) to simplify the rules and trading procedures under the ACFTA. These include the possibility of adopting the:
• Back-to-Back Certificate of Origin arrangement to facilitate exports of partial shipments, of which the bulk-break activities are conducted in an intermediate ACFTA party; and
• Third-Party reinvoicing arrangement, whereby sales invoice to the importer are allowed to be issued by companies located in a non-ACFTA territory.
• ASEAN and China has also adopted Product Specific Rules (PSR) for the following products: 
  
  • textiles and apparel;
  • plastic products;
  • footwear products;
  • iron and steel products;
  • preserved fish canned products;
  • palm oil and ice cream; and
  • jewelry product.
• With the adoption of PSR, ASEAN and Chinese exporters/ manufacturers now have the flexibility of choosing the most convenient rule in meeting the origin criteria of the products i.e., either 40% Regional Value Content (RVC) or PSR, in order to enjoy the ACFTA preferential rate.
• In order for Malaysian exporters to enjoy the tariff concessions offered by China under the ACFTA, Certificates of Origin (Form E) must be obtained from MITI. 
  Benefits
• The establishment of an FTA between ASEAN and China will create an economic region with 1.7 billion consumers, regional GDP of about US$2 trillion and total trade estimated at US$1.23 trillion. It will be the biggest and largest FTA among developing countries.
• With a population of 1.2 billion, market access opportunities through preferential trade for Malaysian products will increase.
• The removal of trade barriers between ASEAN and China will lower costs, increase intra-regional trade and strengthen the attractiveness of Malaysia and the region as a preferred investment destination.
  
  • Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China. 
    List of products offered for tariff reduction beginning 20 July 2005.
  • List of products listed under the Sensitive Track
  • Product Specific Rules under the ASEAN-China Free Trade Area.
  • ASEAN Consultation to Solve Trade Investment Issues (ACT).
  • Framework Agreement on Comprehensive Economic Cooperation between ASEAN and People's Republic of China.
  • Protocol to Amend the Framework Agreement.
  • Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.

Benefits

• The establishment of an FTA between ASEAN and China will create an economic region with 1.7 billion consumers, regional GDP of about US$2 trillion and total trade estimated at US$1.23 trillion. It will be the biggest and largest FTA among developing countries.
• With a population of 1.2 billion, market access opportunities through preferential trade for Malaysian products will increase.
• The removal of trade barriers between ASEAN and China will lower costs, increase intra-regional trade and strengthen the attractiveness of Malaysia and the region as a preferred investment destination.
  
  • Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.
  • List of products offered for tariff reduction beginning 20 July 2005.
  • List of products listed under the Sensitive Track
  • Product Specific Rules under the ASEAN-China Free Trade Area.
  • ASEAN Consultation to Solve Trade Investment Issues (ACT).
  • Framework Agreement on Comprehensive Economic Cooperation between ASEAN and People's Republic of China.
  • Protocol to Amend the Framework Agreement.
  • Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.

 

 

 

 

Japan-Malaysia Economic Partnership Agreement

Background

• Preparatory work to establish a Japan-Malaysia Economic Partnership Agreement (JMEPA) commenced in February 2003 and involved government officials, representatives of trade and industry and academicians in a Joint Study Group.
• The Prime Ministers of Malaysia and Japan agreed on 11 December 2003, to commence formal negotiations. Negotiations were held in Kuala Lumpur and Tokyo in 2004 and 2005.
• Agreement in principle was reached on 25 May 2005 between the Prime Minister of Malaysia and the Prime Minister of Japan on the key elements of the JMEPA.

Scope

• The JMEPA consists of an FTA component and bilateral economic cooperation. The implementation of tariff concessions would be over 10 years with flexibility for selected sensitive products.
• The FTA component covers: trade in industrial and agricultural goods, trade in services, investment, rules of origin, customs procedures, standards and conformance, intellectual property, competition policy, enhancement of business environment, safeguard measures and dispute settlement.
• Cooperation areas included are: agriculture, forestry and commodities, education, human resource development, information and communication technology (ICT), small and medium enterprises, science and technology, tourism and environment.

Status

• Negotiations were concluded in October 2005.
• The Agreement was signed by both Prime Ministers on 13 December 2005 in Kuala Lumpur and came into force on 13 July 2006.
• Sub-Comittees on Imprement of Business Environment and Rules of Origin met on 19 March 2007 and 10 May 2007 respectively to discuss issues arising from the implementation of JMEPA.

Benefits

• The JMEPA would allow Malaysia to maintain if not expand its share of the Japanese market for Malaysian exports through preferential tariff treatment and technical collaboration to meet requirements on standards and technical regulations.
• Malaysia would also be able to enhance its position as an attractive destination for Foreign Direct Investment (FDI), particularly in relation to competition from other investment seeking countries in the region.
• The cooperation and collaboration activities envisaged under the JMEPA would promote the growth of new sectors such as high-tech industries, including biotechnology, services including manufacturing related services and ICT and multimedia.
• For SMEs, economic and technical cooperation would facilitate quality enhancement, vendor development and inclusion of Malaysian SMEs into the manufacturing supply chain of Japanese multinational companies.
• Malaysia's total trade with Japan has increased significantly from RM60.0 billion in 1994 to RM112.9 billion in 2005. Japan accounts for 11.7 per cent of Malaysia's global trade in 2005 and second largest trading partner after ASEAN. Japan, with a GDP per capita of RM106,400 continues to be an important market for ASEAN and Malaysia.

 

Malaysia-Pakistan Closer Economic Partnership Agreement 

Background

• Y.B. Dato' Seri Rafidah Aziz, Minister of International Trade and Industry Malaysia and HE Tahir Mahmood Qazi, High Commissioner of Pakistan to Malaysia, signed the Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA) on 8 November 2007.

Scope

• The MPCEPA encompasses liberalisation in trade in goods and services, investment, as well as bilateral technical cooperation and capacity building in areas such as sanitary and phytosanitary measures, intellectual property protection, construction, tourism, healthcare and telecommunications.

Status

• This Agreement came into force on 1 January 2008.
• The existing Bilateral Trade Agreement, Investment Guarantee Agreement and the Early Harvest Programme will be effectively replaced by the coming into force of this more comprehensive and substantive Agreement. However, both countries agreed to review the MPCEPA every 5 years.
• Malaysia and Pakistan will enter into another round of negotiations in 2009. This is to view:

Benefits

• The Agreement will further facilitate and strengthen the two-way trade and investment as well as enhance bilateral economic and industrial cooperation on a long term basis between Malaysia and Pakistan .
• The MPCEPA will also facilitate trade through closer collaboration and greater information exchange.
• The Agreement provides an excellent opportunity to the business community of both countries to further expand their bilateral trade and investment linkages.
• The Agreement will enable the Malaysian business community to use Pakistan as the springboard to also expand their business with Pakistan 's trading partners in the South Asia region.
• Pakistan 's business community can also leverage on Malaysia 's strong business links with ASEAN and the Far East to expand their economic interest in the region.

 

With an open economy and a small domestic market, the free trade agreements (FTA) helps Malaysian companies to export throughout the world by strengthening our competitive advantage, strengthen investors' confidence as well as building Malaysia's economic sustainability.

Malaysia has implemented sixteen (16) FTAs comprising seven (7) bilateral and nine (9) regional FTAs.

Malaysia signed seven (7) bilateral FTAs with Australia, Chile, India, Japan, New Zealand, Pakistan and Türkiye. All bilateral agreements have been enforced.

Malaysia also signed nine (9) regional FTAs comprising:

• Seven (7) through the Association of Southeast Asian Nations (ASEAN) with Australia, China, Hong Kong SAR, Japan, India, New Zealand and the Republic of Korea (ROK); and
• Two (2) regional FTAs were signed under the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Both agreements have entered into force in 2022.

What is FTA?

Free Trade Agreement (FTA) is an agreement between two or more countries, where the countries involved have agreed to provide preferential treatment in each other’s markets. Each FTA partner offers flexibility or incentives to each other for the purpose of trade, investment, service provision and trade facilities as well as economic cooperation.

Why FTA is important

• Obtain better market access
• Facilitate and promote trade, investment and economic cooperation
• Enhance competitiveness of Malaysia’s exporters
• Capacity building in specific areas through technical Cooperation

How do companies enjoy FTA privileges

Click here for more information on how companies can enjoy FTA privileges.

For more information on the FTA, please visit Ministry of Investment, Trade and Industry (MITI)

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