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Malaysia’s racial policies jeopardize trade deal, EU envoy says

14 November 2007

Malaysia’s Racial Policies Jeopardize Trade Deal, EU Envoy Says

By Stephanie Phang

Nov. 14 (Bloomberg) — Malaysia’s refusal to review its race-based policies is jeopardizing a proposed free-trade agreement between Southeast Asia and Europe, said the outgoing European envoy to Kuala Lumpur.

``This protection is a disservice to Malaysia in the long run,’’ Thierry Rommel said of the policies in an interview. ``It has already hampered free-trade talks with the U.S. and with Australia, and it will certainly complicate free-trade talks’’ with the European Union, he added.

Multiracial Malaysia gives ethnic Malays preferential treatment in government contracts, housing and company ownership. Malaysian ministers rejected Rommel’s comments in June that these policies have resulted in protectionism in areas including automobiles, agriculture and services. Only Pakistan and Japan have signed bilateral trade accords with Malaysia.

``This sticking point in FTA negotiations with the EU and the U.S. can perhaps be addressed by the Malaysian government showing the political will to set a definite timeframe to undertake liberalization measures in these segments,’’ said Suhaimi Ilias, an economist at Aseambankers Malaysia Bhd.

About 60 percent of Malaysia’s 27 million people are Malays, and the race-based program was introduced after racial clashes in 1969. Ministers say it’s still needed to maintain stability.

``The philosophy is basically one of discrimination and protectionism with selective and discretionary market opening,’’ Rommel said.

Human Rights, Governance

The 27-nation EU wants a broad relationship with Malaysia that includes human rights, fundamental freedoms, democratic governance and effective multilateralism, he said.

While both governments agreed in October 2006 to start talks on a partnership and cooperation agreement including these issues, the EU is still waiting for Malaysia to indicate that it’s ready to begin discussions, Rommel said. The signing of bilateral agreements with each member of the Association of Southeast Asian Nations must accompany any free-trade accord between the two regional groupings, he said.

Indonesia, Thailand, Vietnam, Singapore and the Philippines have either concluded talks or are in the midst of the bilateral partnership negotiations, leaving Malaysia ``standing as absolutely last of the whole group,’’ Rommel said.

The proposed EU-Asean free-trade agreement will exclude Asean members Cambodia, Laos and Myanmar when it’s signed, although all 10 members of the group will participate in discussions, Rommel said.

The EU wants a ``fairly rapid negotiation’’ of the free- trade agreement with Asean once negotiations begin early next year and hopes to complete talks ``by 2009,’’ Rommel said.

 source: Bloomberg