The Malaysian Insider | May 12, 2012
EU access to government contracts won’t hurt Bumis, says envoy
By Shannon Teoh
KUALA LUMPUR, May 12 — The European Union’s (EU) demand for access to government procurement in its free trade agreement (FTA) with Malaysia need not harm the 40-year-old policy of affirmative action for Bumiputeras, insists its envoy here.
The EU ambassador to Malaysia, Vincent Piket, has previously expressed confidence that negotiations on the FTA, which critics say will harm Bumiputera business, the local agriculture sector and access to cheap medicine, will be completed by the end of this year.
He denied any such impact in a recent interview with The Malaysian Insider, insisting that after two years and seven rounds of talks, the deal will “set the standard for a top-notch FTA for Malaysia with a major global economic partner.”
“EU firms that trade with, invest in and contribute to Malaysia... need equal access to those parts of the government procurement market that matter to them. That includes larger projects but not small local activities by Class F contractors.
“We have no interest at all, no objective to use the FTA to modify or damage that type of smaller projects at the local level,” the Belgian diplomat said.
But he added that while “Bumiputera preferences are still needed... they need to be focused on most needy parts of population” instead of “being given to companies or to persons that don’t need it any longer.”
“That was the bottomline analysis in the New Economic Model,” the envoy from Malaysia’s fourth largest trading partner said, referring to the flagship economic blueprint unveiled early in Datuk Seri Najib Razak’s administration.
Piket said the FTA will make Malaysia more attractive for foreign direct investment.
Affirmative action for Bumiputeras was introduced under the New Economic Policy (NEP) in 1970 to achieve better wealth distribution with a 30 per cent equity target for the community, which makes up over 60 per cent of the population.
Several policies including equity quotas for public-listed companies, preferential selection for Bumiputera firms in government procurement and education quotas have become a point of debate over recent years as Malaysia seeks to liberalise its economy to boost growth.
Piket also pointed out that “some of Malaysia’s big players have found their way” into the government procurement market of the EU, the world’s largest economic bloc accounting for over a fifth of global GDP.
Over the last five years, trade in goods between the EU and Malaysia had been expanding steadily with an average annual growth rate of about 3.2 per cent, hitting €33 billion (RM131 billion) last year.
But several NGOs and opposition politicians have warned that opening doors further could lead to unemployment as goods including subsidised farm products flood into the market.
Anti-FTA activists also say that an intellectual property chapter will bar generic drugs, forcing AIDS patients to fork out over RM45,000 per year instead of RM250.
But Piket, who has spent 20 years with the EU, said that the FTA will make Malaysia “a member of our top trading and economic partners, side-by-side with high-income countries such as South Korea and Singapore.”
“It will be an important flagship agreement that will signal to the world where Malaysia wants to go economically and in terms of trade, adding to country’s attractiveness for foreign direct investment.
“We recognise Malaysia is still a developing economy, so we recognise there has to be some asymmetry but with an end-date. Let’s say seven years, so by 2020. It’s logical,” he said, referring to Malaysia’s aim to become a developed, high-income economy by the end of the decade.
The ambassador also insisted that trade with Malaysia will continue to grow despite the current slowdown and sovereign debt crisis in the euro zone which would mean “a very heavy domestic agenda” in the EU in the short term.
“We are destined to come out of it and come out of it stronger because of the whole new set of rules for our financial markets and better governance. Two years down, the EU economy will not only be back to growth but also stronger.
“We have 500 million customers, soon 28 members as Croatia will join next year and a ring of about 12 or so countries that are economically very, very close to integration.
He also dismissed the notion of Greece exiting the euro, saying it would not be beneficial for any of the parties involved.
“There are 17 members in euro zone right now and it will be 17 at the end of the year. There is only one trend, that is expansion of the euro zone when we bring in new members when they meet criteria,” Piket added.