After all, his Ministry (MITI) is the one entrusted with promoting the export of Malaysian goods and services as well as Malaysia as an investment destination. With trade making up 136 percent of Malaysia’s GDP in 2017 (according to World Bank statistics), its importance to the country’s growth and prosperity cannot be overstated. To get the inside view of our nation’s trade and investment policies moving forward, International Business Review spoke to Datuk Darell Leiking and picked his mind on his vision and aspirations for his Ministry.
One issue that Datuk Darell Leiking has on his table is the ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). A multilateral trade agreement made up of Malaysia, Singapore, Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Peru and Vietnam, the CPTPP was formed from the remnants of the Trans-Pacific Partnership Agreement (TPPA), which collapsed after the United States withdrew its participation.
While the MITI Minister acknowledges the vital role-played by Free Trade Agreements (FTA), noting that “65 percent of our annual total trade are with FTA partners”, he is also adamant that such deals should not be detrimental to Malaysia.
This is why the new government is evaluating the CPTPP, even though it has been signed by the previous administration, in order to ensure that certain concerns have been addressed. These include issues such as market access and sovereignty, as well as safeguarding our local producers from unfair competition.
One other aspect that Datuk Darell Leiking and the government as a whole is looking to promote is for Malaysia to become an eCommerce hub. Steps in this direction had already been taken in 2017, when China eCommerce giant Alibaba Group opened its first Southeast Asian office in Malaysia.
The Minister was very complimentary about Alibaba’s role in driving the national eCommerce agenda, highlighting several initiatives in which the Chinese company has been involved.
These include opening Alibaba Cloud’s internet data center in October 2017 and establishing its first regional e-fulfillment hub at KLIA Aeropolis in November 2017. The former gives Malaysian enterprises the opportunity to build their businesses using a global cloud platform while the latter is part of the Digital Free Trade Zone (DFTZ) initiative.
As Datuk Darell Leiking noted, “The selection of Alibaba Group, as the strategic partner for the DFTZ Pilot Project, launched in November 2018, is consistent with the aspiration in driving the national digital economy agenda. Jack Ma’s expertise and knowledge on digital economy will benefit the SME development agenda.”
These benefits include opening opportunities for Malaysian SMEs to reach global markets by leveraging on Alibaba’s strength in eCommerce, which is reflected in it being able to reach 440 million consumers in 190 countries. The Minister also mentioned that at the same time, Malaysian SMEs and technology companies can tap into the training programmes offered by Alibaba. All in all, 3,000 Malaysian SMEs have been registered on the Alibaba platform as part of the DFTZ.
In addition, Datuk Darell Leiking is also hopeful that the partnership with Alibaba will also boost Malaysia – China trade, as well as “offer Chinese consumers a wider variety of Malaysian goods, apart from traditionally popular F&B products.”
Another area in which Datuk Darell Leiking is keeping a close watch on is the escalating trade dispute between China and the United States. As he told IBR, “Due to the interconnected supply chain, the escalation of the trade conflict would be damaging not only to the US and China, but also Malaysia.”
One example he gave was on how the US increasing import tariffs on iron and steel, which is aimed at preventing cheaper Chinese iron and steel from flooding the US market at the expense of American iron and steel producers. However, Malaysia’s exports of intermediate goods to China will also be negatively affected.
On the other hand, the Minister also noted that trade diversion may take place, where China-based companies relocate their operations to ASEAN, including Malaysia. In the case of Malaysia, Datuk Darell Leiking identified aspects such as low production costs, conducive legal and regulatory framework, consistent policies and positive market conditions as pull factors.
That being said, he was also quick to clarify that trade diversion should not be seen as a form of tariff circumvention, and affirmed Malaysia’s opposition to the latter practice. Whereas trade diversion involves Chinese companies manufacturing goods in Malaysia, so that their products are not subject to anti-China tariffs, trade circumvention is when Chinese companies produce goods in China and then tranship them through a third country in order to make it seem that the good originated from that country.
Another possible positive side-effect of the US-China trade dispute, which Datuk Darell Leiking highlighted, is that it allows Malaysia to position itself as an investment hub. This, he said, is because Malaysia has “a geographically strategic location which will be able to offer a cost-competitive platform for investors intending to set up offshore operations to manufacturer advanced technological products for regional and international markets.”
“For Malaysia, the US-China trade tension can also be seen as an opportunity instead of perceiving it as a market impediment, which could position Malaysia as next hub for investments and exports.” – Datuk Darell Leiking, Minister of International Trade and Industry
On his first day as the Minister of International Trade and Industry, Datuk Darell Leiking stated that he aims to make “Malaysia really, really big in industry and also in trade”. The factors and the opportunities are definitely there, and so too is a dynamic MITI Minister acting as the passionate advocate and sales person of the Malaysia Brand.