It is significant that Malaysia is Chair of ASEAN this year, at the end of which the ASEAN Economic Community is to be fully implemented, at least according to the blueprint. The community is premised on the principles of economic inclusion, freer movement and exchange of goods and services amongst member countries, in the hope it will increase trade and prosperity across the region.
It is upon these same principles that a much more hotly contested agreement is being negotiated by Malaysia, namely the Trans Pacific Partnership Agreement (TPPA), together with 11 other countries: Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
On the one hand, the Ministry of International Trade and Industry (MITI) who are negotiating on behalf of the Malaysian government – and who believe in the TPPA – say it is an opportunity to increase national wealth. On the other hand, the TPPA has been labelled as treacherous, in its selling out of national sovereignty in one fell swoop.
In order to shed some light on both sides of the divide, IDEAS recently held a Doha-style debate. Although we believe that a market-based economy is better in catalysing growth, there is no corporate view on the best way to approach it. For instance, some believe a unilateral agreement would be ideal, in which no countries are excluded from the “all-boys’-club”, so to speak. Others feel bilateral agreements are a more efficient arrangement between two mutually agreeing nations. Yet others believe that the next best bet in the absence of unilateral agreements would be multilateral agreements like the TPPA.
Members of the audience were asked to vote on whether they supported the TPPA and economic liberalisation. Before the debate, 53% voted yes, 19% voted no and 28% said they were unsure. After the debate, the numbers changed dramatically: 68% voted yes, 26% voted no and only 6% unsure – an increase of 15% for those supportive.
Dr. Razeen Sally, IDEAS’ Chair of Political Economy and Governance (who also hails from the Lee Kuan Yew School of Public Policy, National University of Singapore), spoke in favour of the TPPA and economic liberalisation, whilst Charles Santiago, Member of Parliament from DAP spoke against it in a series of what became an intense exchange between the two gentlemen.
First, there was concern amongst the detractors of economic liberalisation that the TPPA would allow corporations to contest national sovereignty. Charles for instance cited the case in which tobacco company Philip Morris sued Uruguay for compensation, claiming the country’s anti-smoking legislation devalued its cigarette trademarks and investments in the country. Dr. Razeen agreed there could be cause for concern, but these are isolated cases and there are ways to include clauses so national policy is not overturned.
In fact, the argument seems to stem from whether or not one believes that nations should be given such all-encompassing sovereignty as opposed to corporations. The question is, which is the more likely to be tyrannical, governments or companies?
Dr. Razeen put it succinctly when he said that in such a multilateral trade agreement, countries agree to come together to a common platform to mutually agree that they will follow the same rules, and to limit discretion on what they would normally do on home ground. Nations are saying to investors that “we mean what we say” when it comes to transparency, good governance and the rule of law. If there was indeed a dispute, either party could seek international arbitration as recourse.
This leads to the second point on using the TPPA as an opportunity to reform archaic practices and crony capitalism at home, such as opening up the Malaysian government procurement market, where local suppliers have been protected for decades. Public procurement would once and for all be forced to engage in competitive tenders, transparent procedures and protection of confidential information. Without such reform, public funds would not be used efficiently or effectively.
An important point was raised, that it is not necessarily the multi-national companies that are the bad boys, but government-linked companies that dominate our domestic market. On this note, Bank Negara Malaysia recently defended our country’s investment numbers, saying that private sector investment accounted for 64% of total investment in 2014. Whilst this is true, 36% of public investment is also a large amount.
GLCs control more than half the industry share in utilities, transportation, warehousing, agriculture, banking, ICT and retail trade. They also account for 36% and 54% of the Bursa Malaysia market capitalisation and the KLCI respectively. This is likely the reason GLCs are adamantly pushing for their businesses to be excluded from the TPPA – asking for special privileges all over again. This, despite already competing internationally with other foreign companies.
Finally, the discussion moved to the issue of healthcare, and whether medicines would become more expensive after the TPPA is signed. The answer itself was unclear, with Charles saying this would be the case, whilst Dr. Razeen stating that the problems in fact stem from domestic issues of healthcare management. He maintained the position that having more competition in the healthcare market and other sectors would ultimately ensure more consumer choice.
In this highly complex agreement that would impact directly upon people’s lives and livelihoods, perhaps what is most crucial is for there to be even more transparency surrounding the documents and negotiating terms. It does not help that we only have access to the papers and its detailed contents via Wikileaks.
The TPPA is so controversial because it strikes at the core of our belief systems: Should the nation-state be all-powerful? Should government procurement be reserved for local suppliers? Does it stabilise the country’s ethnic balance? Can we really compete if we were to open up to the world? Would the TPPA help us to transform ourselves once and for all into becoming a high-income nation? Would a liberalised, competitive economy make us richer as a nation?
To think of the future, one may well trace our own history to the time of the Malaccan port, the thriving entrepot of the 15th century. It is ironically because of this bustling international trading port that we were able to establish systems of diplomacy and governance that eventually shaped Malay sovereignty and the contemporary Malay sultanate. Trade led us to better growth and decreased poverty all those years ago. Would the same not apply today?
Tricia Yeoh is the Chief Operating Officer of IDEAS