PolicyNo16-2-page-001

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The paper examines opportunities and challenges for Malaysia if it accedes to a Free Trade Agreement (FTA) that has public procurement provisions. It examines the key provisions in the procurement chapter of an FTA, and the core principles that shape them, viz. non-discrimination, convergence, and transparency. The paper considers what suppliers must do to take full advantage of the opportunities offered by access to a much larger procurement market, and the consequent benefits to each partner country.

The benefits to Malaysia from the inclusion of procurement in an FTA are then identified, including the increased chances for Malaysian businesses to win contracts in foreign procurement markets, the resultant boost to exports, and improved procurement practices as a result of convergence and transparency.

The challenges that arise as a result of the necessity to modify the protection given to Bumiputera businesses and local small and medium enterprises are also discussed. It is argued that the impact may be mitigated by higher value thresholds, by exemptions for certain types of goods, procuring entities and businesses, and by transitional concessions, the most important of which are off-sets.

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