TPPA in MALAYSIA

The TPPA will not only bring economic benefits and serve Malaysia’s best interests as shown by the two studies commissioned by MITI, one of which estimates Malaysian gross domestic product (GDP) gains of USD23­27 billion in 2027 in a baseline scenario, an increase in economic activity which will sustain 1­2 million new jobs by 2027. Most recently, a World Bank study predicted that Malaysia’s economy would swell by 8% and exports would rise by 20% as a result of the agreement, with Malaysian exporters having an advantage over regional competitors not part of the bloc. More importantly, the TPPA will push Malaysia to address its governance problems such as corruption and its opaque procurement system. In that way, the TPPA will complement the liberalisation and transformation programmes that Malaysia is currently undertaking and push for more economic freedom in Malaysia. This is one of the socio­political benefits of the agreement.

Chapter 17 of the agreement aims to ensure a level playing field between State Owned Enterprises (SOEs) known as GLCs in Malaysia ­ and private entities that compete in the market. It requires GLCs to use commercial considerations, not other considerations such as developing racial or political leanings, and avoid discriminatory treatment in their procurement processes. If GLCs provide assistance to local companies, it should be carried out in a way that does not harm competitors. The agreement also requires explanations on the form of assistance given, the reasons and how it will affect investment and trade to other member countries. However, the obligations of the chapter are not strong enough to reach its objective as it give flexibilities to Sovereign Wealth Funds (SWF), pension funds, and any “enterprise owned or controlled by an independent pension fund” (Article 17.2.5 & 6). This means that Khazanah Nasional as Malaysia’s Sovereign Wealth Fund (SWF), and Employees Provident Fund (EPF), Lembaga Tabung Haji, Lembaga Tabung Angkatan Tentara (LTAT) as pension funds will not be subjected to some of these chapter’s obligations. Malaysia also managed to secure other carve­outs and transitional measures for its SOEs: ­ The obligations of the chapter are not applicable to state government­owned companies and companies owned by Lembaga Tabung Haji and PNB as long as they operate for the purpose they are established for which is to enhance the savings and investments of their member (Annex 17­F Malaysia). ­ Only companies with an annual revenue of more than SDR 500 million will be subject to the obligations (while for other countries the threshold is set at SDR200 million) 3.2 TPPA can help improve the governance of Government Linked Companies (GLCs) ­ Khazanah will not be subject to the dispute settlement mechanism in Chapter 28 until two years of entry into force. Although some Malaysian GLCs are exempted, the obligation to follow non­discriminatory treatment and commercial consideration principles will have a positive impact on the practices of these GLCs as a whole. GLCs will have to be more careful when procuring goods and services, providing loans, grants or other types of assistance to other entities as well as when making investment decisions. Additionally, despite the late application, the transparency requirement of the chapter will encourage Malaysia to adopt positive practices. The transparency section requires Malaysia to publish a list of GLCs, provide information on its non­commercial assistance including the name of agency, the type of assistance, amount and duration of the assistance, and how this assistance affects investment and trade. This is a major improvement for the country. The chapter even requires countries to provide statistical data so that others can analyse the impact of assistance on their trade and investment. These requirements will widen the scope of the GLC transformation programme that the Malaysian government has been undertaking since the time of Prime Minister Abdullah Badawi.