Japan, Malaysia finalise FTA
Kuala Lumpur, May 23:
Malaysia said it had agreed with Japan yesterday to establish a free trade pact covering most sectors of their economies — a deal that could give Japanese automakers a greater share of Southeast Asia’s largest passenger car market. “We have now finalised everything,” international trade and industry minister Rafidah Aziz told reporters after talks with visiting Japanese trade minister Shoichi Nakagawa. “It will be a comprehensive economic framework agreement covering all the areas that we feel we would like to cover,” Rafidah said. Nakagawa arrived yesterday for last-ditch efforts to salvage negotiations on the planned free trade agreement, which was held up over the question of lowering tariffs on industrial products, especially in the sensitive auto and steel sectors of Malaysia. He and Rafidah refused to say if Malaysia has agreed to lower tariffs, or whether Japan compromised. Nakagawa described the deal as “a national secret.”
“I have been saying that it is the final stretch that is the most difficult,” Nakagawa said. Rafidah said prime minister Abdullah Ahmad Badawi and his Japanese counterpart, Junichiro Koizumi, will announce a comprehensive economic partnership pact in Tokyo when Abdullah makes an official visit there on May 25-26. The pact contains elements of the free trade agreement, which will be formally launched in December, she said. “It covers all areas — goods, services, even agriculture and economic cooperation,” she said. Since launching the FTA talks in January last year, the two countries reached a basic accord on agricultural and marine products. But outstanding issues had remained, including Malaysia’s tentative pledge to fully eliminate tariffs on imported vehicles by 2015. Japan wants an earlier deadline. Malaysia imposes high import and excise duties on imported cars to protect its national Proton and Perodua cars from competition.
The two carmakers jointly control 74 per cent of the auto market in Malaysia, Southeast Asia’s biggest passenger car market. Tariffs have recently been lowered for cars produced in Southeast Asian countries, but other countries still face high barriers. The opening of Malaysia’s auto industry would be welcome news for Japanese automakers, reeling from increasing competition not only from US rivals but also Asian companies, especially Hyundai of South Korea. Japan estimates that an FTA with Malaysia would lift Japan’s real gross domestic product (GDP) by as much as 0.08 per cent or about $3.4 billion, according to a joint study by Japan and Malaysia.