An analysis of the TPPA

We provide the numbers on Malaysia and a comparative analysis between the Trans-Pacific Partnership Agreement (TPPA) countries on various economic aspects.

Among the 12 nations, Malaysia’s economic size is ranked sixth largest in terms of GDP, and it is the seventh most populous nation. When comparing the GDP per capita after adjusting the purchase power parity (PPP), Malaysia’s rank stands at a lowly ninth place (US$16,922), behind Chile and Singapore. However, Malaysia's GDP growth at 5.61% in 2012 was the second highest among the 12 countries. The total combined economic size among all non-US countries is still lower than the US itself, although they are about 50% more populous. The 12 TPPA countries are a well-balanced mix of both developed and developing countries located on both sides of the Pacific Ocean.

The minimum number of bilateral free trade agreements (FTA) signed (or expected) among TPPA countries is six. Malaysia has so far signed six FTAs with countries such as Japan, New Zealand, Australia and Chile. These four are also TPPA countries. Singapore and Chile have the highest number of FTAs signed or expected (11).

Trade friendliness: Lower average applied tariff, higher GDP per capita

Malaysia recorded a trade surplus of RM70.63bil in 2013, of which RM62.58bil came effectively from the 11 TPPA countries (except in real term, Malaysia has trade deficit against Canada, Chile and Vietnam). TPPA countries also contribute significantly to Malaysia’s total import and export, at 35.8% and 41.0% respectively. Among the 11 countries, Singapore, the US and Japan took the lion’s share of total trade volume (about 81% in both export and import total TPPA volume).

Malaysia's GDP per capita is the fourth lowest and Malaysia's average applied tariffs is the third highest. On the other hand, countries like Singapore, Brunei and Australia have low tariffs and high GDP per capita. This data implies a negative correlation between average applied tariffs and GDP per capita for countries.

Diversifying government revenue, competition for international trade

Note: Taxes on international trade include import duties, export duties, profits of export or import monopolies, exchange profits and exchange taxes

The Malaysian government has recorded a general upward increase of revenue collection starting from 2007. However, this increase does not come from taxes collected from international trade. The weightage of the taxes collected, as percentage of revenue, has dropped from 12% in 1996 to two per cent in 2011.

Intellectual property rights: Indicator of technology and innovation

Malaysia is a signatory member of Berne Convention for the Protection of Literary and Artistic Works (Berne, 1887), Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips, 1995) and WIPO Copyright Treaty (WCT, 2002). Malaysia was removed from the IPR violations watch list in 2012, and vows to strengthen intellectual property laws and establish a strong and effective administration through Intellectual Property Corporation of Malaysia (myIPO) under the purview of the Ministry of Domestic Trade and Consumer Affairs. The number of IPR applications is on a steady rise starting from 2003, mostly from local resident IPR holders.

However, when Malaysia is compared to the other 11 TPPA countries, it scores poorly after population size is taken into account. We have about 4,300 registered IPR per million population (from 2005 to 2011). During this period, Japan and Singapore respectively recorded 10 and six times more IPR registrations. This shows a large technology and innovation gap in Malaysia.

Small actors, big roles for national economic growth

SMEs are affected by FTAs as FTAs provide both opportunities and risks for them. The contribution of SMEs to the national economic output has steadily climbed over years since 2005, and as of 2012 comprised about one-third of the GDP.

SMEs find niches more easily in certain sectors. For example, SMEs contributed about 45% GDP to the agricultural sector, but was almost non-existent in mining activities.

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