Malaysia has largely shielded its Bumiputera -- ethnic Malays who comprise a majority of its population -- from the impact of the Trans-Pacific Partnership (TPP). That is the conclusion of two 2015 cost-benefit studies, which were commissioned by the Government of Malaysia. The studies concluded that Malaysia has mitigated the impact of the TPP on its Bumiputera and small and medium enterprises (SMEs) through concessions secured in the TPP negotiations, including with respect to government procurement, state-owned enterprises, service and investment, and tariffs. This post highlights the concessions.
Government procurement of construction services: Under the TPP, Malaysia will maintain its practice of using government procurement as a tool for Bumiputera and SME development, in particular in the construction sector through several measures:
- Its initial high threshold (63 million Special Drawing Rights (SDRs) (Ringgit Malaysia (RM) 315) will affect only a small number of construction contracts. In 2014, only 0.7% of government contracts for construction services was above RM300 million. Even when that threshold is reduced to 14 million SDRs after a 20-year transition period, it is likely to cover only a small number of contracts. In 2014, less than 3% of Malaysia’s construction service contracts exceeded that level. For construction services above the threshold, Malaysia will be able to set aside 30% annually for Bumiputera firms.
- Malaysia’s exclusion of public-private partnerships from the TPP allows it to provide carve-outs for Bumiputera businesses in such projects.
- Malaysia’s TPP-exclusion of economic stimulus packages for 25 years will permit it to channel procurement to Bumiputera construction companies.
- Malaysia is able to largely preserve its prevailing regulations to develop Bumiputera and SME capabilities in the retail sector. For example, the minimum 30% Bumiputera equity requirement will continue to apply to hypermarkets, superstores, convenience stores and department stores, as will the requirement to allocate 30% of stock-keeping units displayed on the shelf space in stores for goods manufactured by Bumiputera-owned SMEs. In addition, firms with foreign equity ownership will be required to appoint Bumiputera directors and formulate plans for human resource development, such as capacity building and transfer of knowledge, to assist Bumiputera participation in the retail and wholesale sectors.
- Foreigners are not allowed to provide wholesale and retail services in areas that have significant Bumiputera participation, such as fabrics and apparels of batik, passenger cars and commercial vehicles. It is estimated that 88% of the micro-sized establishments in the wholesale and retail trade, food and beverage services, and repair of motor vehicles and motorcycles are Bumiputera-owned businesses.
- Bumiputera shipping companies will not face competition from TPP parties because foreign shipping vessels are not permitted to provide and supply domestic shipping services, maritime cabotage services and government cargo. Permission will only be granted to a joint venture corporation with Malaysian individuals or Malaysian-controlled companies or both, provided that the aggregate foreign shareholding in the joint venture is less than 51%.
- “National Interest Analysis of Malaysia's Participation in the Trans-Pacific Partnership”, Institute of Strategic and International Studies, Malaysia
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