Dialogue on Potential Impact ofTrans- Pacific Partnership Agreement (TPPA)
Presented by : Dato’ Sri Tan Thian Poh, President of MTMA
on the Textile & Apparel Industry in Malaysia
The textile and apparel industry in Malaysia
TPPA and its impact to the Malaysia’s economy
Globalization and Free Trade Agreements
Benefits of TPPA to the textile/apparel industry
What can the Government do to assist?
Conclusion
Outline:
Member countries of TPPA
(in Alphabetical Order)
Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States of America and Vietnam
The Textile and Apparel Industry in Malaysia
The Textile and Apparel Industry in Malaysia
Brief Overview:
10,101 firms with 95,538 employees (2010 Economic Census)
One of oldest industries in Malaysia
Tenth largest export earners
Emphasized in the Industrial Master Plan 3 (2006-2020)
The Textile and Apparel Industry in Malaysia Trade Performance:
-
2,000,000,000
4,000,000,000
6,000,000,000
8,000,000,000
10,000,000,000
12,000,000,000
14,000,000,000
16,000,000,000
Year 2011 Year 2012 Year 2013 Year 2014 Year 2015
Trade Performance : Textile / Apparel Industry IMPORT
EXPORT
The exports value has been relatively consistent.
Imports performance has increased since 2014.
TPPA and Its Impact To The Malaysia’s Economy
TPPA and Its Impact To The Malaysia’s Economy
Current Economy:
The weakening of Ringgit The rising cost of living The rising cost of doing business Retrenchment
“hope in the midst of
economic uncertainty”
TPPA and Its Impact To The Malaysia’s Economy
Hope in the midst of economic uncertainty:
TPP participation is consistent with Malaysia’s New
Economic Model
Gain competitive advantage in market access compared
to competitors from non TPP countries
Positive effects on Malaysia’s GDP
Positive effects on investment over a ten-year period
Cont..
TPPA and Its Impact To The Malaysia’s Economy
Hope in the midst of economic uncertainty (cont…):
Positive effects on wealth and job creation
New market creation
Excessive products for domestic consumption
Multiplier effect
Globalization and Free Trade Agreement
Globalization and Free Trade Agreement
Globalization is inevitable
Malaysia is a trade dependent country
Not participating in TPPA would be costlier to Malaysia
Inability of Malaysian exporters to access the lower or
zero tariff of Malaysia’s export markets
Advantage as a First-Tier TPP Partner
Benefits of TPPA To Textile/Apparel Industry
Benefits of TPPA To Textile/Apparel Industry
New breath of life the industry
Projected inflow of investment by RM612 billion to 1.075 trillion (USD 136 to USD 239 billion) over 2018-2027 for investment growth in textile, construction and distributive trade
Out of the projected investment growth amount, the estimated investment growth for textile industry is 3.42 to 4.29 percentage point
The Biggest Gainer:
Benefits of TPPA To Textile/Apparel Industry
Projected output growth for the industry is by 3.14 to 3.78 percentage point
Projected export growth is by 4.09 to 4.87 percentage point
Elimination and reduction of duty by TPP partners will enhance competitiveness in the matured market of significant FTA partners such as Japan and Australia
Better access to four new markets namely the US, Canada, Mexico and Peru
TPPA and Market Access:
Benefits of TPPA To Textile/Apparel Industry
Although in the aspect of market access, 72.9% textile tariff lines constituting 36.44% of total exports to the US will see elimination upon entry into force
Without TPP, only 11% of tariff or 0.9% of total exports are duty free
Two major products are given duty free upon entry into force, which is an offer exclusively given by the US to Malaysia and Vietnam only
TPPA and Market Access:
UNITES STATES
Cont..
Benefits of TPPA To Textile/Apparel Industry
The two major products are:
• HS620520 - Men’s or boys’ shirt, not knitted/crocheted, of cotton; and
• HS620630 - Women’s or girls’ blouses and shirts, not knitted/crocheted, of cotton
These two products also given flexibilities through SSL which allow local producers the flexibility to source for inputs from non-TPP countries
TPPA and Market Access:
UNITES STATES
Benefits of TPPA To Textile/Apparel Industry
There will be 90.9% textile tariff lines constituting 89.55% of total exports to Canada will see duty elimination upon entry into force
Without TPP, only 40% of tariffs or 12.46% of total exports are duty free
Major products given duty free upon entry into force are women’s jersey and pullover, women’s or girl’s cotton blouses and handkerchiefs
TPPA and Market Access:
CANADA
Benefits of TPPA To Textile/Apparel Industry
27.57% textiles tariff lines constituting 0.74% of total exports to Mexico will see duty elimination upon entry into force
Without TPP, only 12.67% of tariffs or 0.02% of total exports are duty free
Major products given duty free upon entry into force are nylon yarns and ties/bow ties
TPPA and Market Access:
MEXICO
Benefits of TPPA To Textile/Apparel Industry
13.25% textiles tariff lines constituting 2.53% of total exports to Peru will see duty elimination upon entry into force
Without TPP, only 6.52% of tariffs or 0.02% of total exports are duty free
Major product given duty free upon entry into force is wool tops
TPPA and Market Access:
PERU
Benefits of TPPA To Textile/Apparel Industry
Attracting investment into the industry especially in the upstream sector where activities such as fiber and yarn spinning, dyeing and production of fabric are undertaken.
This rule will also encourages companies in the upstream sector would be able to achieve economies of scale by producing supply for both local and international downstream manufacturers within the TPP region.
TPPA and YARN FORWARD RULE
What Can The Government Do To Assist?
What can the Government do to assist?
Investment Incentives Incentives for investors
Infrastructures and Facilities Better industrial parks and facilities
Capacity Building Human capital development
Cont..
What can the Government do to assist?
Foreign Labour Supply
Reduce illegal foreign workers
Every 10 foreign workers employed, another 5.2 jobs are created for local (World Bank)
Government-Industry Partnership in Foreign Labour Supply Management System
Block approval for foreign labour
Cont..
What can the Government do to assist?
Minimum Wages
Productivity-linked
Tier system (unskilled, semi and skilled)
Minimum wages based on country’s poverty lines
Market-based wages
Longer period of review
Cont..
Conclusion
TPPA : Benefits outweigh shortcomings
Vital to propel the textile and apparel industry forward
The dawn of hope for the sunset industry
Maximise the potential of TPPA
Betterment for Malaysia