Big firms to reap early TPPA rewards, says Khazanah Research Institute

Khazanah Research Institute says big companies will be the first to benefit from the Trans-Pacific Partnership Agreement (TPPA) although small and medium enterprises will not be excluded. – The Malaysian Insider file pic, November 16, 2015.Big Malaysian companies such as Petronas, Sime Darby and UEM Group will be the early beneficiaries of the Trans-Pacific Partnership Agreement (TPPA) compared to small and medium enterprises (SMEs).

The observation from the Khazanah Research Institute (KRI) comes as SMEs express concern about being sidelined once the TPPA, which promises to remove trade barriers to four new foreign markets for Malaysian companies, comes into force.

KRI managing director Datuk Charon Mokhzani said big Malaysian firms would be in a better position to penetrate these new markets, namely the United States, Canada, Peru and Mexico.

However, SMEs which make up more than 95% of all Malaysian companies, could also benefit from the TPPA if they could become suppliers to these larger firms, Charon said.

Eventually, Charon said, some SMEs could also reap rewards from the TPPA when their products entered these new markets after being introduced by the larger firms.

"The overall effect of the TPPA is still complex and we are still looking at the text and working out a cost-benefit analysis to Malaysia’s economy," Charon told reporters after a workshop "Why Trade Matters" today.

Putrajaya is promoting the US-driven TPPA as a way for Malaysian companies to expand into new overseas markets.

Trade Minister Datuk Seri Mustapa Mohamed had said among those who stood to benefit were firms in sectors such as electronics, oil palm, timber products and textiles.

In a November 13 statement, Mustapa said Malaysian companies had invested RM522 billion overseas, more than the RM477 billion in foreign investments the nation had received.

During a TV3 interview on the TPPA, Mustapa addressed worries that local SMEs would not be able to compete with larger foreign firms who could flood the Malaysian market with cheaper and better products.

He said then that Putrajaya was investing in ways to build up their capacity to ensure that SMEs would be able to survive.

If Malaysia signs the 12-country TPPA next year, it will have access to a market of 800 million consumers and an economic output or gross domestic product (GDP) of US$28 trillion (RM122.63 trillion).

The pact goes beyond a traditional free trade agreement (FTA) which lowers trade barriers such as duties and taxes. The TPPA also promises to rewrite laws on how member countries conduct business.

TPPA supporters say it will ensure workers’ rights are better protected. This includes requiring member countries to remove restrictions on union membership and strikes.

The enforcement of the new worker protection laws is up to each member country, Charon said.

"Each country has to enforce its own obligations. But there are mechanisms for country A to complain against country B, if country B does not meet its obligations." – November 16, 2015.