7 October 2008
Press Conference - 14th Australia Malaysia Joint Trade Committee Meeting
Shangri La Hotel Kuala Lumpur, Malaysia
Tan Sri Muhyiddin Yassin Malaysian Minister for International Trade and Industry: We had a very fruitful meeting this morning. This is the 14th Malaysia Australia Joint Trade Committee. The Honourable Mr Simon Crean on the Australian side and the Malaysian side have met and discussed. We have exchanged views on the current world economic situation, the financial crisis affecting the US and Europe and the impact on the global economy. And we also deliberated a bit more on the situation of the WTO meetings. And the thinking, of course, is we would like to see things keep moving on some current mechanism to proceed to the contentious issues which have not been resolved, and at the same time agree to the effect that many achievements that have been derived at the negotiations should be preserved and we would like to see some things moving forward in the next number of months.
We also, of course, take serious note of the significant progress that we have made on the ASEAN Australia New Zealand FTA negotiations including matters that have been outstanding as regard to automotive and tariff issues related to automotive. We are looking forward to the signing of the New Zealand, Australia and ASEAN FTA at the ASEAN summit at December and the subsequent implementation in 2009.
We also discussed the need to further enhance our bilateral trade and looking forward to Malaysia Australia FTA negotiations to proceed and both of us agreed next month’s date will be fixed when Malaysia will host this meeting to discuss all pertinent issues and see what we can do to help the FTA conclude. Of the course the hope is that it will conclude in a reasonable timeframe.
We discussed a number of bilateral issues but not very much because most have been resolved. But certain matters of concern to Malaysia as regards to some of the issues in terms of trade investments were also discussed. This is in regard to tropical timber, the import ban on ramin products, and cooperation programs products with customs and promotion of halal products and services. Of course at the same time we do need to recognise the role that the private sector is playing.
The Malaysia-Australia Business Council submitted its progress report to both of us this morning and we have seen very remarkable improvement in both trade and investments and we would like to encourage more collaboration between the private sectors of Malaysia and Australia. I think as a matter of interest the figures as regard to trade are very encouraging. Australia is Malaysia’s 11th largest trading partner. In 2007, total trade was valued at RM30.6 billion, with exports of RM20.4 billion and imports of RM10.2 billion.
Of course our major exports to Australia include crude petroleum, electrical and electronic products, chemicals and chemical products, wood products iron and steel products. We of course import from Australia metal products, processed foods, iron and steel, crude petroleum, and cereals.
In terms of investments Australia’s amounted to RM1.7RM and these are in the area of the manufacture of petroleum products, rubber products, chemicals and chemical products, non-metallic products, plastic products and machinery and equipment. Malaysian investment, of course, is not as large but we would like to see this figure rising in the coming years. There is big interest in Malaysia’s investment in chemicals, chemical industry non-metallic products, paper, printing and publishing.
I am happy to say that this meeting has achieved a lot of progress in many fields we do share the views of common matters including APEC the need for the economies to engage themselves in many areas including issues of structural reform. As far as Malaysia is concerned we look to it very seriously, a matter we believe can further enhance trade and investment once issues related to structural reform are taken seriously by the government and the private sector as well. In short this has been a good meeting and we believe that this is another landmark in terms of achieving further the bilateral relations we have between Malaysia and Australia.
Simon Crean, Australian Minister for Trade: Thank you very much.
I share my colleague’s assessment about the significance of today’s meeting. They were very constructive and I think we have mapped a very ambitious program going forward. In fact this is the fourth meeting Tan Sri and I have had in the past five months. I think that it underscores the significance of the relationship between our two countries, a relationship that goes back in recent history in a significant and constructive way over the past century, borne of close personal relationships associated with education and study but also cooperation. And I think that those ties are deep, they’re lasting and they provide a substantial basis for us to move forward.
The discussions we had today were comprehensive. They not only dealt with the multilateral layer of trade negations and both of us, not just in a bilateral sense but as members of the Cairns Group shared the desire that there is a lot on offer in the Doha Round. There is still work to be done to conclude it, but particularly in the current economic global circumstance, it is essential we inject some confidence back into the global economy. So concluding the Doha Round is a major objective and we talked today about ways we can move that forward. We also talked about our regional architecture, our future engagement with APEC engagement, our engagement in the EAS and significantly building off the platform that the conclusion of the ASEAN Free Trade Agreement resulted in. Not only the basis to reinforce approaches in terms of cooperation in the regional architecture, but also a strong underpinning of our bilateral relationship.
We undertook when we spoke first in May of this year that we would re-engage again on the MAFTA, the free trade agreement between our countries, once we concluded the ASEAN free trade agreement. We did that in August and here we are in October at the ministerial level and instructing our officials to meet next month to advance the Free Trade Agreement. Muhyiddin has mentioned the significance of the trading relationship and it has grown a lot, particularly over recent times, not only just in goods but importantly in certain services areas and significantly with investment flows between our two countries. This highlights why we need a comprehensive Free Trade Agreement because the nature of trade is changing. It is changing very much in terms of the services economy direction. It’s 50 per cent of Malaysia's GDP and 80% Australia’s GDP, yet services trade is very much underdone. We need to enhance it.
Capital flows are also important because it is no longer an exercise of just producing and shipping goods. Very much the direction now is for investment to be locating in different countries to take advantage of global supply chains, domestic markets and the like. We have to facilitate the environment in which those sorts of new trading relationships are encouraged. We know it’s important to advance that at the multilateral and the regional level, but it is also vital to advance it at the bilateral level and so MAFTA, I think, is going to be a very important vehicle.
This afternoon our financial services sectors in both countries are sitting down at a round table to talk about issues that are complementary and of mutual benefit. The financial services sector is just one of those services professions, services activities where we think we can develop greater cooperation. So far as the two way trade is concerned, whilst it has been strong, Malaysia is still third in Australia’s trading partner relationship within the ASEAN group. That’s significant but I suppose what could also be more significant, if not just a coincidence is the fact that the two countries ahead of them are Singapore and Thailand both countries with whom which we share an FTA. So I think that the free trade agreement framework is a very important complement, not a replacement, a complement, to the multilateral trading environment. We have to try and maximise the gains in the multilateral framework but also build the platform in which we can take the trading relationships even further having regards to the complementarities between our two countries.
I welcome the commitment that Tan Sri Muhyiddin has made to reactiving this dimension of our relationship. I think it’s important and I’m delighted to be working with him to bring that about. And we hope that the next time we meet in this forum we’ve got something significant to report.
Thank you.
Questions
Q. What would be a reasonable timeframe for the conclusion of the bilateral trade agreement?
Muhyiddin: Well I think both sides, of course, would expect that things like this should be sooner than later, but of course as much as that is so, we will have to see how we move forward. I think that was what the Hon Simon Crean has mentioned, that the officers will now have to sit quite immediately after this next month. We will be hosting that meeting, to look over a number of critical areas, contentious issues, areas of interest to both and how could we achieve at some point of understanding and agreement. Of course some figures we have mentioned like 2009 but we would like to see conclude within a reasonable timeframe as soon as possible. But I believe there are a lot of things that need to be looked, at as usual Malaysia is working within mandate given by government on all the very important areas of negotiations and we will see how we progress from there on.
Q. Can you name what are the critical issues that need to be ironed out before the signing?
Crean: Well I think that it’s in the area of services that clearly scope exists. Depending on the finalisation of Doha there may still be some areas in terms of goods trade that we can find some further opportunities to advance. But I think the point is that we just need a comprehensive bilateral relationship and need to try and build off the platform both of our experience, our understanding of each other and where the multilateral and regional agreements take us. I think we achieved a big breakthough a couple of months ago in concluding the ASEAN Free Trade Agreement. I think it is an important platform in its own right. It does demonstrate to the world that it is possible to negotiate multiparty agreements with countries at different stages of economic development and to recognise those different stages of development within the agreement.
This is a challenge to all multilateral negotiations and the fact that we’ve been able to achieve it, I think is significant in its own right. I have had the opportunity whilst here to visit one of the economic corridors, Iskandar, yesterday to see where under the framework of economic corridors there are new areas of economic opportunity, not just opening up, but actively being encouraged to develop the complementarity to share the knowledge, but to also open up trading opportunities. So I think financial services, education services, logistics, medical services, the professional services, quite apart from investment and the goods areas, these are all areas of activity that we think are in both countries’ interests to investigate and come to better understanding.
Q. Inaudible.
Muhyiddin: I have got the figures here. The total investment in Iskandar is about RM39.1billion. These are committed investment from many potential investors. Of that, RM24 billion is foreign direct investment the rest are domestic. In Sarawak is RM13.53 billion. Of that, practically nearly all which was RM13.2 billion foreign direct investment. In the other three corridor developments they are all local investments. For example NCR RM50million and in Sabah Development Corridor committed investment of RM3.7 billion and the ECR of RM50mil.
Q. Angus Whitley from Bloomberg News. I would appreciate if you could answer a three part question. Mr Crean, you said that we mentioned we discussed the world economic crisis in the talks this morning. While you were meeting this morning, the Reserve Bank in Australia cut interest rates by one percentage point, the biggest cut in eighteen years, ah last 16 years. So my first question is do you anticipate that being enough to get credit flowing again? And to both of you, do either of you anticipate a broader, coordinated, set of interest rate cuts worldwide to get (indistinct). And, thirdly, in your talks, what was your assessment of the threat to the world economy and the Malaysian economy given the $700 billion rescue package that went through Congress.
Crean: On the first question, obviously it’s a significant cut and it must help in terms of stimulating economic activity and build confidence because the cost of capital is an issue at the moment. We all know that. So we welcome the cut and it must help significantly. On the second question of the coordinated approach, of course we are not going to comment upon what reserve banks themselves do. They are independent but we welcome many of the efforts at coordination globally to try and resolve this issue.
It’s not just a question of getting capital flowing again. It’s the question of building confidence because the risk is that if confidence falls then the initiatives themselves might not be as effective as they should otherwise be. So we welcome coordinated efforts. I will leave Tan Sri Muhyiddin to talk about the impact in terms of Malaysia, but I think so far as Australia is concerned, we are concerned about what’s happening. But Australia has something of a cushion because it is resource based and there is still strong demand for resources because of domestic demand particularly in China and India.
I think it is also true to say that the reforms that were put in place in the mid 80s in Australia to underpin the integrity of, and ensure the transparency of, our financial system and to introduce the appropriate regulatory framework has left us in good shape.
The third point that I would make is that Australia has a strong domestic source of savings, not just because of decisions taken in the recent budget to boost the surplus but because of the provision we’ve made in our Future Fund but also significantly the amount of money that’s in personal superannuation invested through the industry funds. So Australia, I think, because of initiatives that it took some time ago to restructure its economy, finds itself in reasonably strong circumstances but clearly there are concerns about the global state of the economy and it’s the reason we spent time today talking about what we can do together to try and bring forward some of that much needed confidence. The conclusion to the Doha Round from the perspective of portfolios that we both represent would be an important shot in the arm.
Muhyiddin: On the collaborative efforts by financial institutions I think we will leave it to the central bank. I believe they are monitoring very closely the situations now. Obviously they should be taking this very seriously what’s happening in the States and the impact on the Malaysian economy. So as far as this (indistinct) is concerned I think that there must be some form of adjustment to meet again the impact on the Malaysian economy. We believe as far as liquidity is concerned, that is not really a problem for Malaysia. I think that is not a big issue but whatever it is there are pre-emptive measures that we need to do to cushion the possible impact on the Malaysian economy. As you know we have got the Malaysian Economic Council which is chaired by the Prime Minister which has its Exco meeting practically every week, not only looking to the situation at home but what is happening in the States and Europe for example that would have a definite impact on our economy.
We did discuss just now this problem in the States $700 billion bail out plan. Some say that this is just the tip of the iceberg, so that, of course, worries us. That means that a lot more might be coming, which might not be good for us. We are, of course, monitoring the situation and my discussion with Simon, of course, is whether this would sort of spark some move to become more protectionist in terms of trade, for example because countries are facing these problems they would be quite serious issues of unemployment and of course economic opportunities in some of those countries.
Of course the US would face that problem. Some say it could be a prolonged period of economic recession so this obviously will have an impact on the global economy. So my concern, of course is whether that means a country becoming more protective to safeguard their own domestic economy. Then we are just rolling back to what plan we had like the Doha negotiations and the WTO agreement and some of the other things we talked about in terms of liberalisation of trade. So this is something we will have to look at seriously. And while Malaysia is quite ready to face this sort of consequence and we know that there could be some dampening of the economic situation at home, the figures are still quite encouraging. The target of 4 to 5 per cent growth is still quite realistic.
So I think that we have taken into account many things but the later development of course in the States will obviously be of serious interest to us as well. So we have to keep monitoring we have taken a lot of measures at home to make sure as far as the domestic economy is concerned we will not be too badly affected. We are of course concerned in terms of trade but trade with the US is very important. It constitutes about fifteen per cent of our total trade. But the good news, of course, is we have been quite diversified in terms of our export market. It is not as much as the US alone or Europe we have gone to the region. ASEAN is a very important market for us China and, of course, India and, of course, Australia and New Zealand coming in with the FTA that we signed. So this could be a way to be able to mitigate the possible downturn in terms of trade figures.
ENDS
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