2016年-世界发展银行全球_Malaysia_Economic_Monitor_June_2016___Leveraging_Trade_Agreements_109页_2mb

Malaysia Economic Monitor: Leveraging Trade Agreements (June 2016)

Core Content

This report provides an analysis of Malaysia's economic developments and the potential impact of trade agreements on its growth trajectory. It highlights the role of trade in Malaysia's economic growth, the benefits of recent trade agreements, and the challenges and opportunities for structural reforms.

Main Views and Key Information

1. Recent Economic Developments and Outlook

• GDP Growth: Malaysia's GDP growth remained resilient in 2015 and 1Q 2016, with a growth rate of 4.2% (seasonally adjusted annual rate, saar, q/q). The growth rate is expected to moderate slightly to 4.4% in 2016, and then rise to 4.5% and 4.7% in 2017 and 2018, respectively, as commodity prices recover and global growth improves.
• Private Consumption: Private consumption continued to be the main driver of growth, supported by higher utilities spending and government transfers. It helped mitigate the decline in private investment, particularly in the oil and gas sector.
• Export Decline: Exports declined by 17.2% in 1Q 2016 due to low commodity prices and weak global demand.
• Fiscal Consolidation: Despite lower oil-related revenues, fiscal consolidation continued. The federal government met its 2015 fiscal deficit target of 3.2% of GDP. The introduction of the Goods and Services Tax (GST) in 2015 and further fiscal measures in 2016 helped contain public expenditure.
• Current Account Surplus: The current account surplus is expected to narrow from 3.0% of GDP in 2015 to 2.1% in 2016. This is due to lower commodity prices and subdued global growth.
• Monetary Policy: Inflation is projected to be between 2.5% and 3.5% in 2016, with no second-round effects anticipated. The financial system remains strong, and exchange rate flexibility is seen as a key shock absorber.
• Risks: The main risks to the economy include global growth uncertainty, commodity price fluctuations, and potential weakening of the ringgit, which could impact consumer confidence and slow growth.

2. Leveraging Trade Agreements

• Trade as an Engine of Growth: Trade has been a major driver of employment and income growth in Malaysia over the past four decades. The country is one of the most open economies in the world, with a trade-to-GDP ratio of 136.3% (2010–2014), compared to 58% for EAP developing countries.
• Trade Agreements: Malaysia has signed 14 free trade agreements (FTAs) and is involved in several new-generation trade agreements, including the Trans-Pacific Partnership (TPP), Malaysia-EU FTA (MEUFTA), and Regional Comprehensive Economic Partnership (RCEP).
• Economic Benefits of Trade Agreements: These agreements have helped reduce tariffs, improve market access, and open opportunities for both inward and outward direct investment. They also cover areas like competition policy, government procurement, investment protection, intellectual property rights, and labor standards.
• Services Sector: The services sector contributes relatively less to GDP and exports compared to other EAP countries. The value of services embedded in manufacturing exports is 12% in Malaysia, compared to 28% in Japan, 25% in the US, and 22% in Canada. Services exports remain underexploited, and new trade agreements may not be binding enough to liberalize the services sector significantly.
• Investment Policy: Improved investment policies and the inclusion of mechanisms like Investor-State Dispute Settlement (ISDS) under the TPP can enhance the investment climate and attract more FDI. Malaysia's FDI performance has consistently surpassed the regional average.
• Structural Reforms: Trade agreements can facilitate key structural reforms in Malaysia, such as improving the competitiveness of the services sector, enhancing the investment environment, and promoting fair competition between private and government-linked companies (GLCs).
• SMEs and Trade Agreements: Small and Medium Enterprises (SMEs) are a crucial part of Malaysia's economy, but their share of direct exports in any given sector is less than 35%. Trade agreements can provide new opportunities for SMEs, especially in sectors like electrical and electronics, where their share of direct exports is less than 5%. Raising SME productivity and linking them with global value chains (GVCs) will help them benefit from trade agreements.
• Non-Tariff Measures (NTMs): NTMs remain a significant barrier to trade, especially in the services sector. Malaysia needs to streamline and harmonize its NTMs to benefit from trade liberalization, particularly under the TPP. The removal of NTMs is expected to generate substantial income gains.
• GLCs and Competition: The implementation of new trade agreements will require a more level playing field for private sector firms compared to GLCs. Malaysia needs to reform its GLC system to improve domestic dynamism and international competitiveness.
• Opportunities for Growth: The new trade agreements can help Malaysia move up the value chain, diversify its exports, and create more and better jobs. They also offer additional investment protections for domestic firms operating abroad.

Key Reforms and Opportunities

• Services Sector: A more open services sector is needed to support export growth and improve competitiveness.
• Investment Environment: Improved investment policies and legal frameworks can attract more FDI and enhance the investment climate.
• SME Support: Tailor-made legal and regulatory environments, along with productivity improvements, are crucial for SMEs to benefit from trade agreements.
• Fiscal and Monetary Policy: Continued fiscal consolidation and supportive monetary policy are essential for maintaining macroeconomic stability.
• Non-Tariff Measures: Streamlining and reducing NTMs is necessary to fully benefit from trade liberalization and improve market access.

Conclusion

Malaysia's economy has shown resilience despite external challenges, and trade agreements are expected to play a pivotal role in its future growth. By leveraging these agreements, Malaysia can enhance its competitiveness, support structural reforms, and create more and better jobs. However, the implementation of these agreements requires careful planning and reform to ensure that the benefits are realized and that the economy adapts to a more open and competitive environment.