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US business community reaffirms support for US-Malaysia FTA

December 05, 2007

U.S. Business Community Reaffirms Support For U.S.-Malaysia FTA

KUALA LUMPUR, Dec 5 (Bernama) — The American Malaysian Chamber of Commerce (AMCHAM) whose members include U.S., Malaysian, and other international companies, has urged the United States and Malaysian governments to consummate the free trade agreement (FTA) now being negotiated.

AMCHAM said both countries stand to gain from a higher level of foreign investments, increased trade activity, greater market access, the creation of better paying jobs and supply of higher quality goods and services.

Malaysia would likely enjoy increased prestige from trading and investment communities around the world due to the scarcity of countries that have FTAs with the U.S, the chamber said in a statement here today.

AMCHAM said the pact would heighten the competitiveness of Malaysian producers and exporters via joint linkages.

In the process, it would facilitate two-way trade, investment flows and ultimately generate brisk economic development.

The negotiations between these two countries commenced in March 2006.

At that time, Malaysia and the United States enjoyed a fantastic trading relationship as they still do.

So far, Malaysia and the U.S., have had six round of negotiations.

In 2006, Malaysia was the 10th largest trading partner of the U.S. with a trade balance of RM158.1 billion which represents 16 percent of Malaysia’s trade activity, with exports to the U.S. of RM102.3 billion or 18.8 percent of Malaysia’s total trade.

Manufactured products form the bulk of this balance, almost 96 percent, AMCHAM said.

Main exports are electrical and electronics (E&E), textiles and clothing, wood and rubber products as well as optical and scientific equipment.

Malaysia’s imports from the U.S. amounted to RM55.76 billion or 12.5 percent of Malaysia’s imports in 2006.

According to Malaysian government statistics, the U.S. was the fourth largest foreign investor in 2006, with RM8.5 billion in FDI approvals, and is the largest foreign investor on a cumulative basis, with over RM105.4 billion of capital invested in the Malaysian economy, said AMCHAM.

Although the modern era of American companies doing business here dates back to the early 1970’s, AMCHAM said many U.S. businesses have been doing business here in Malaysia for over 100 years.

The benefits that Malaysia and the United States expected when FTA negotiations commenced are much the same as today.

They include, firstly, a higher level of foreign direct investment (FDI).

In the first full year immediately following the consummation of the North American Free Trade Agreement (NAFTA - the trade agreement between the U.S. and its neighbors, Canada and Mexico) U.S. FDI in Mexico tripled (from RM16.7 billion to RM50.2 billion.)

Singapore and Australia also experienced increased FDI after signing FTAs with the United States.

In the case of Singapore, local small and medium scale enterprises and industries were made more aware of the United States because of the FTA, and began to explore much more the possibility of investing in the U.S. and doing business with American partners.

Secondly, AMCHAM said there will be significantly higher level of trade activity post FTA.

Since the signing of the United States - Singapore Free Trade Agreement in January 2004, two-way trade has increased by 34 percent and exports by 49 percent.

Singapore is the largest ASEAN market for U.S. exports totaling 45.9 percent of total exports to ASEAN in the first half of 2007.

The U.S. remained one of the top three foreign investors in Singapore, with foreign direct investments amounting to RM141.1 billion.

Thirdly, it is likely that Malaysia will enjoy increased prestige from trading and investment communities around the world due to the scarcity of countries that have FTAs with the U.S. (only one other country in ASEAN has an FTA with the U.S.).

In addition, a U.S.-Malaysia FTA is a significant opportunity for Malaysia and the United States to further strengthen their close economic and political relationship, the chamber said.

AMCHAM said a resulting agreement would not only benefit companies from both nations, that would enjoy better access to both markets, but it would result in the creation of more and better-paying jobs, and the supply of higher quality goods and services at lower prices for the American and Malaysian consumers.

The US-Malaysia FTA will enhance the competitiveness of Malaysian producers and exporters through collaboration.

This will further facilitate and promote bilateral trade, investment flows, and economic development.

An example of the success that an FTA might hold can perhaps be found in the experience in the semiconductor industry.

Malaysia has experienced incredible success over the last 40 years in the establishment and development of this industry.

The level of investment from these types of companies and their suppliers, whether they are headquartered in the United States, other foreign countries or Malaysia is significant.

The Malaysian American Electronics Industry (MAEI), an electronics industry committee of AMCHAM Malaysia, employed over 54,000 workers in 2006.

MAEI achieved RM73.2 billion in export sales of electronic products in the same year and its total exports represented a 25.9 percent share of Malaysia’s total electrical & electronics (E&E) exports.

It is safe to say that these companies chose Malaysia and continue to do business here because Malaysia provides an incredibly strong foundation for business due to its sound fiscal and economic policies, the ease with which international companies can do business here, a very pro-business government, political stability, outstanding human capital and good infrastructure, said AMCHAM.

These factors coupled with the consummation of an FTA could make Malaysia an even more significant place for trade and investment and could, quite possibly, make Malaysia the preferred destination for investment and business activity in Southeast Asia, ASEAN and Asia as a whole, AMCHAM said.


 source: Bernama