What’s the Buzz about CPTPP?
By Callum Chen August 11, 2022
- MITI done well in many aspects to support industry, remove trade barriers
- Urge all to get in touch with Govt Ministries, understand what’s there to help
The Government of Malaysia had commissioned PwC to conduct an assessment of the potential economic benefits and costs of Malaysia’s ratification of the CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and to propose interventions and mitigation for the identified costs.
The report, including the CBA (Cost Benefit Analysis) analysed manufacturing activities in 12 key sectors and the final report was shared recently by MITI (Ministry of International Trade and Industry) with the Industry.
CPTPP is unlike traditional free trade agreements (FTAs) as it goes beyond providing market access for goods, services and investments. The CPTPP also aims to harmonise rules and disciplines for new and emerging trade as well as cross-sectoral issues.
The CPTPP was signed on the 8 March 2018 by 11 countries and has been ratified by eight, with Brunei Darussalam, Chile and Malaysia still pending. The United Kingdom (UK) has applied to join the CPTPP and so has the People’s Republic of China (China), Chinese Taipei and Ecuador. As at 2019, the original 11 countries have a combined population of 508 million (6.6% of world population), generated a total GDP of US$11.3 trillion (RM50.36 trillion) (13% of world GDP) and accounted for 15% of total world trade.
From our Malaysian perspective, the 11 countries alone accounted for 29% of Malaysia’s total exports and 24.4% of total imports. With UK, China, Chinese Taipei and Ecuador, the eventual combined population will be 2 billion (26% of world population), with a GDP of US$29 trillion (RM129.23 trillion) (33% of world GDP) and will account for 32.8% of total world trade.
[RM1 = US$0.224]
In the report, Malaysia stands to gain a cumulative GDP increase of US$56.5 billion, investments reaching US$112.3 billion and exports reaching US$354.7 billion, with a strong trade balance surplus at 8.5% of GDP in 2030.
So, what’s next? With the opening up of markets, come bigger challenges too. Are we ready for the global marketplace? Can our industry keep up and compete effectively and efficiently when we are still recovering from the pandemic? Broken supply chains, coupled with a good measure of unreasonable profiteering, have created big inflationary pressures on the key manufacturing components such as raw materials, which have gone up by 45%, and labour, with wages up by at least 26% (and not to mention the huge mismatch in terms of required skills vs requirements).
We are still grappling with labour shortages in the plantation, construction, textile and manufacturing sectors. Malaysia is a land of plenty. Our MITI has done well in many aspects to support the industry, removing trade barriers, and still keeping in place a measure of protectionism for our local industry. It is very much up to us as the Industry to capitalize on the opportunities given.
Industry needs a shift in focus. Stop crying “no migrant workers, production affected”. Think automation, digitization and digitalization. Think how to reduce reliance on manual input, reduce human errors, think how to increase productivity and efficiency, think stability and how to ensure consistent quality and supply. Upskill our local workforce to align with the requirements of a progressive industry and a highly competitive marketplace. Invest in automation and upskilling our workforce. Focus on STEM (Science Technology Engineering and Mathematics) subjects in education.
If you haven’t already started on your digital transformation journey, I would encourage you to make use of MITI’s Industry4wrd Readiness Assessment. Trained assessors will help you to understand your company’s readiness for Industry 4.0 and make recommendations about where to start your transformation. They will also advise you on how to apply for the financial incentives given by the Government.
I urge you all to get in touch with our Government Ministries, join their talks and understand what’s there to help us. Get to know them and the initiatives that they have launched.
Make friends with the SME Corp, and check out MyAssist MSME. They have advisory panels to help you out with their various programmes and initiatives. Check out the SME Revitalisation Financing (SMERF) where you can get financing up to RM250,000.
Did you also know that the SJPP (Syarikat Jaminan Pembiayaan Perniagaan), wholly owned by the Ministry of Finance Inc, can issue guarantees for up to 80% of your loans with the bank? The guarantees for the SME (Small and Medium Enterprises) and Mid-Tier Companies (MTCs) can be up to RM20million, without collateral.
Yes, there are fees and you would need to prepare a proposal. There are no free lunches. If you are committed to grow, the SJPP has your back.
Check out MIDA (Malaysian Investment Development Authority) at www.mida.com.my.
Have you heard of PENJANA (Pelan Jana Semula Ekonomi Negara), otherwise known as the National Economic Recovery Plan? Launched by the Prime Minister’s Office to help fight the COVID-19 Pandemic in 2020, local Malaysian companies (manufacturing or agricultural) can claim Reinvestment Allowance (RA) for up to 15 consecutive years (+ 3 additional for certain categories). Based on the Finance Act 2021 (gazetted on 31 Dec 2021), the Special RA is extended for an additional two (2) years to YA 2024.
As of the last update, companies can claim up to 60% of their reinvestment expenditure. And have a look at Malaysia Digital (www.mdec.my), the national strategic initiative by the Malaysian Government to encourage and attract companies, talents and investment while enabling Malaysian businesses and the Rakyat to play a leading part in the global digital revolution and digital economy.
Check out the MyWIT programme which offers 40% salary subsidy for 6 months and training incentives for in-house or external/ 3rd party training. This is scheduled to end on 31 Aug 2022, but hopefully they may extend it.
As I said, our Malaysia is a land of plenty. We are blessed with valuable natural resources, blessed with geographical stability (no earthquakes & volcanoes) and good peace-loving people. Whether the CPTPP is ratified or not, the playing field will still be levelled and the stakes are going to get even higher. We need to be ready not only to survive but to thrive in the global marketplace. Let’s all work to grow our economy and prosper together.
Callum Chen is President, MCMTC (Malaysian Consortium of Mid-Tier Companies) The MCMTC comprises of MTCs (Mid-Tier Companies) from all industries. The MTCs form 1.7% of total companies in Malaysia, employ 16% of the total workforce but contribute 39.9% of Malaysia’s GDP.
Get in touch with us at www.mcmtc.my
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