KUALA LUMPUR: A trade group has urged the government to use the ongoing free trade agreement (FTA) negotiations between the European Union (EU) and Malaysia as a platform for liberalising the services sector, reviewing equity conditions and enhancing policy consistency.

The EU–Malaysia Chamber of Commerce and Industry (EUMCCI), in its recently launched 2011 Trade Issues and Recommendations publication, urged the government to reassess restrictions, particularly in the services sector including telecommunications, logistics and financial services.

The trade group noted that the cap on foreign ownership and bumiputera participation in a number of sectors continue to be upheld.

“[Malaysia] can bring its protectionist regime into conformity with the demands of a globalised world. By doing that, Malaysia will gain lucrative, preferential access to the world’s largest market — the EU,” said EUMCCI.

EUMCCI said it strongly supported a review of the main barriers to foreign direct investments to Malaysia, which it said included restrictions on acquisition of Malaysian companies, property and licences allotted to foreign companies.

It added that foreign investors faced long and burdensome administrative procedures and that public procurement practices gave better access to bumiputeras, to the detriment of foreign investors.

These recommendations reflect the desire of foreign investors for a stable and predictable environment for doing business in Malaysia and a level playing field.

“The ongoing FTA negotiations can also be used as a platform for bringing more transparency, clarity and policy predictability to the regulatory framework,” EUMCCI said.

These recommendations were part of 10 key measures proposed by EUMCCI, which represent a road map for the group’s ongoing discussions with the Malaysian government on matters of international trade and investment.

EUMCCI also said the successful implementation of the government’s Economic Transformation Programme would move Malaysia’s economy towards a more service-based economy where the services sector’s contribution is projected to grow from 58% to 65% by 2020.

Its recommendations include the development of intellectual property protection and enforcement, the establishment of a competitive taxation system and tax incentive climate as well as the development of human capital.

Other recommendations urge for enhanced transparency, reduction in the level of corruption, improvements in Malaysia’s security level and the creation of a more conducive environment for innovation and creativity.

EUMCCI also proposed that the government foster climate change awareness and incentivise and speed up implementation of green technology.

The Malaysia-EU FTA, which is expected to conclude by the end of next year, would see the opening up of trade in services and the dismantling of tariffs on a wide range of goods.

Malaysia is also in the midst of finalising bilateral FTAs with India and Australia, having effected FTAs with Asean, Japan and China in recent years.

Proponents for the FTA hail the proposed agreement as an opportunity for Malaysia to expand trading relations with the EU, opening access to Europe’s 500 million consumers.

Critics of the FTA meanwhile, fear the FTA could have far-reaching implications on the country’s sovereignty, development and public policy as well as the growth of small and medium enterprises.

Malaysia currently ranks at 22nd position in terms of overall trade in goods with the EU.

Within Asean, Malaysia is the EU’s second largest trading partner with bilateral trade in goods reaching €31.9 billion (RM139 billion) in 2010.

According to government data, Malaysia-EU trade grew by 21.6% last year, with exports to the EU rising 25.6% and imports from the region growing 17%.

This came after trade patterns between Malaysia and EU suffered the impact of the global economic downturn in 2009 which saw total trade declining 16.6%.

This article appeared in The Edge Financial Daily, April 26, 2011.