Malaysia

TPPA protest reflects Malaysia’s fall from grace

By Jahabar Sadiq, Editor
July 14, 2013

The mounting protest against Malaysia agreeing to the Trans Pacific Partnership Agreement (TPPA) has one thing right - that Putrajaya should reveal all details of the trade pact that could be sealed as early as October 2013.

And explain what are the real benefits of the pact against the possible losses when having a free trade group among 12 nations rather than remain silent and say it would be good for Malaysia as it wants more market access under the TPPA.

But the critics - ranging from business groups, political parties to Tun Dr Mahathir Mohamad - are wrong about still protecting uncompetitive industries, guaranteed government procurement and the fear of rising prices for drugs and other goods.

The most eloquent tirade has been by Dr Mahathir (pic), reflecting the opaqueness by the Ministry of International Trade and Industry in releasing details of the TPPA mooted at the sidelines of APEC 2011.

The country's longest-serving prime minister's arguments reflect how far Malaysia has fallen among its neighbours with uncompetitive businessmen still hankering for  protection in an age of open markets and a rising cost of living due to a weak currency.

In his blog post two days ago, Dr Mahathir went at length to talk about the pacts that have not benefitted Malaysia including the Malaysia-Singapore water agreements.

"The first agreement lapsed in 2011 and we did not renegotiate at all. The next agreement will lapse in 2060. So we will be getting 3 sen per 1,000 gallons of raw water when the cost of living has probably gone up many-many times.

"Today, the Singapore dollar is 21/2 times the value of the Malaysian ringgit. At the time of the agreement it was one to one. Are we receiving payment in Singapore dollars or Malaysian ringgit? Or is this a secret also?" he asked.

The question is why has the Singapore dollar strengthened and the ringgit weakened to that extent when both currencies were at parity when the two countries separated in 1965.

Do we still want to be known as a low-cost producing nation when the government is pushing for a high-income economy by 2020? Will we do it at the expense of weakening our ringgit and by looking for low-cost labour and exempting them from minimum wage policies?

Malaysia's weak ringgit is also behind the rising prices of everything from drugs to food. We have to pay real world prices for such items with our shrinking ringgit.

Is it a surprise then that BR1M could be extended to families earning less than RM5,000 a month. Wasn't it in the 1970s that such wages were more than a princely sum and enough to buy a car in Malaysia?

Dr Mahathir also cited the Asean Free Trade Area (AFTA) affecting our national car industry, saying Proton with 90 per cent local parts content had higher costs against non-Asean cars that only needed 40 per cent local content to qualify for tax breaks.

Now, why would a low-cost producer have such high costs? Because we continue to protect inefficient vendors working in a small market with annual sales of some 600,000 cars rather than open up that market to competition.

How is it that Thailand and Philippines can produce cars for less, tapping on the synergies of the car manufacturers and letting them alone in choosing their vendors and suppliers?

In his argument, the veteran politician who created Proton said the car was not doing too well abroad because of safety standards, unlike foreign makes in Malaysia which incidentally have worldwide exports.

"If Proton wishes to export to the countries of the manufacturers, it must comply with all their standards. So far, we cannot export to Japan, Korea and Europe," wrote Dr Mahathir.

Aren't these world-class car makers? Wouldn't their standards be as good as Malaysia's? And how is it Proton appears cheaper elsewhere than in Malaysia? Opening our car market would just allow variety and choice with the best costs, ending Proton's already shrinking market share.

That isn't what some leaders want, considering that Proton is now a private company and not owned by the government.

But Dr Mahathir's main point was government procurement that must be protected against encroachment by foreigners, a point that has been echoed by several trade groups.

The United States has been trying to pry open that market with little success, even abandoning an earlier free trade agreement with Malaysia because of that issue. It also faced a similar issue with New Zealand because the country's Treaty of Waitangi meant certain allocations are given to the Maoris.

Yet, what is left unsaid is that the US would agree to a threshold for government procurements to be reserved under Malaysia's affirmative action policy. That deals above a certain value should be opened up to all.

Shouldn't we as a nation have open tenders and competition for those bidding for government contracts? Should it always go through favoured local companies and middle-men as a way to enrich the few rather than lessen the burden of the many?

What is needed now is for MITI to answer its critics and open up the deal for scrutiny. There are benefits in the TPPA and several Malaysian trade groups believe it will open up more markets for them with fewer barriers.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed put it succinctly on Friday when he said, "We are a nation which is dependent on trade, we want to sell our products overseas and lure more investments to the country."

He also said it was important for Malaysia to be part of the TPPA to reduce bureaucracy and increase delivery system which would indirectly reduce the incidence of corruption.

The minister also said he will not keep the contents of the TPPA confidential. That really is the problem with the TPPA now, that it is a secret.

The other issues of competition and rising costs are what Malaysia has to confront and solve after years of market protection that has created fat cats who fear competition, enjoy middle-man status and want to protect their revenues. - July 14, 2013.