OBG talks to Wan Saiful Wan Jan, CEO, Institute for Democracy and Economic Affairs

Interview: Wan Saiful Wan Jan

To what extent does Malaysia need to re-evaluate its economic role prior to the creation of the ASEAN Economic Community (AEC) in 2015?

WAN SAIFUL WAN JAN: Malaysia used to hold a key position in the Non-Aligned Movement before the leadership decided to play a bigger role in ASEAN. Unfortunately, in ASEAN our leadership role is gradually declining. In terms of the economy, we are not growing or opening up as fast as we can, and integrating the economies of ASEAN will be challenging, not just for Malaysia but for other members as well. If we look at the EU, the complexities of having such a diverse group of countries in one union is beginning to show. I think this is a lesson that Malaysia needs to understand and appreciate.

There are many challenges, particularly as the AEC pertains to government procurement and state-owned enterprises, which are hurdles that will need to be addressed. When we look at these two areas, there are several issues relating to Malaysia’s current economic agenda and the question of trying to socially re-engineer society using economic tools and government intervention. To give an example, if we consider a free trade area among ASEAN countries in the automotive industry, it would be difficult because Malaysia wants to boost Proton and Perodua, national automotive manufacturers. Other domestic vendors would be protected as well. Across the supply chain there is heavy bias. Manufacturers have protectionist treatment for certain suppliers, with preferential policies cascading all the way down to the lower level. If the Malaysian leadership can address these issues, and we play our cards right, maybe we can reclaim our ASEAN leadership role.

How can the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP) attract further investment to the country?

WAN SAIFUL: The TPP is a free trade agreement (FTA) that is being negotiated by 12 countries – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. Should all 12 countries sign the agreement, a market of 800m people with a combined GDP of $27.5trn will be opened up to Malaysians. By the same token, once the TPP is signed, 800m people, including the businesses that some of them own, will also be able to offer their products and services to Malaysians.

Of course, some businesses in Malaysia will be affected. Those who are enterprising will have immediate access to new markets and will be able to generate revenues and create jobs. However, businesses that offer low-quality products will find that consumers can buy better ones produced from abroad. Those who have monopolies in certain sectors will discover that they have to compete and prove attractive to customers. Notwithstanding, people will ultimately benefit from increased choice and competition.

However, I am not saying everything about the TPP is fine. The timing and manner in which the public engagement initiative was conducted could have been done differently. I would prefer unilateral liberalisation without a need for a trade pact. Nevertheless, weaknesses in the government’s handling of the matter must not be taken to mean that opening up our economy will be negative. These are two very different things. Ultimately an open, transparent and accessible market is much better than one that benefits only the politically connected. A market that is freer is also one that is most beneficial for common people.

While some people feel that Malaysia should focus more on the RCEP and ASEAN rather than the TPP, I believe we should be part of the TPP negotiation as we should be able to shape it rather than simply follow it after its ratification. With that said, it is difficult to say whether I support or do not support the TPP and RCEP, as information about the negotiations have not been made public. Being part of the negotiation process and shaping it as much as you can is vital. It is my belief that all of these multifaceted agreements – ASEAN, TPP, RCEP and the EU-Malaysia FTA – can be negotiated concurrently, and that they are not mutually exclusive deals.