The leak of a document purported to be part of the draft text for the 12-nation Trans-Pacific Partnership trade accord has further dented optimism talks can be concluded by the end of this year.
“Next year is doable, but this year is very tough,” Mustapa Mohamed, Malaysia’s international trade minister, said in an interview yesterday. “We’ve got another few weeks to go and Christmas. People close shop. What came out in the last couple of weeks from WikiLeaks” is “not helping the process.”
Some TPP provisions would “trample over individual rights,” according to anti-secrecy organization WikiLeaks, which last week released online what it said is a draft of the proposed agreement on intellectual property rights. Chief negotiators from the nations crafting the deal have been meeting in Salt Lake City this week. The next round of talks planned for Singapore next month will be crucial in providing clarity on where the agreement is going, Mustapa said while in the city on a trade and investment mission.
Malaysia has expressed wariness over some parts of the deal to create a trade bloc covering an area with about $28 trillion in annual economic output, including those related to state-owned enterprises and government procurement. Leaders from the U.S. to Japan also face opposition to the deal at home, which the Asian Development Bank said last month is at risk of collapsing into a series of bilateral agreements.
“It’s hard to see Malaysia or any other country in the region just jumping into it without due consideration,” Rahul Bajoria, a Singapore-based economist at Barclays Plc, said by phone yesterday. “These negotiations will probably continue for a little bit longer.” The official deadline to complete the talks remains the end of this year even as a variety of officials involved have indicated this won’t be met.
Prime Minister Najib Razak said last month he was committed to negotiating the best possible deal for Malaysia and presenting it to parliament to decide whether to sign. He wants to protect the country’s affirmative-action program under which it grants preferential treatment in areas including business and education to ethnic Malays and indigenous people. The government is also keen to ensure any agreement on patents doesn’t raise health-care costs, he said.
“We still believe that overall it’s good for Malaysia, but in the end of course we’ve got to convince our people,” Mustapa said yesterday. “We’ve been facing a lot of domestic opposition. In some countries the challenges are not as enormous as what we have in Malaysia.”
Malaysia, Vietnam, Peru and Brunei may be granted a five-year grace period to reform their policies for state-owned enterprises, Vietnam Briefing reported online on Oct. 21, without citing where it got the information.
TPP member countries are pinning hopes on the pact boosting exports and supporting growth amid an uneven global recovery. Malaysia’s economy expanded 5 percent in the three months through September, the fastest pace in three quarters.
Najib has over the past two months cut fuel and sugar subsidies to contain the country’s budget deficit and shore up its current account, after Fitch Ratings lowered Malaysia’s credit outlook to negative in July.
The government will implement a goods and services tax of 6 percent in April 2015, while corporate and personal income tax rates will be lowered after the new levy comes into force, Najib said in his 2014 budget speech on Oct. 25.
Moody’s Investors Service yesterday raised the outlook on its A3 rating to positive, citing improved prospects for fiscal consolidation and reform, plus continued macroeconomic stability.
The ringgit has climbed about 1.6 percent against the dollar this quarter, the best performer among Asia’s 11 most-traded currencies tracked by Bloomberg. The benchmark FTSE Bursa Malaysia KLCI Index (FBMKLCI) of stocks has risen 1.4 percent during the same period and closed at a record on Oct. 24.
“We are on track for 4.5 to 5 percent” gross domestic product growth this year, said Mustapa. Expansion will likely be “a shade higher” in 2014 when exports could rise 3 percent to 4 percent, said the minister.
The government said in August it may delay some infrastructure projects as part of measures to contain the budget deficit. Public building projects with high import content were most likely to be rescheduled, it said.
Najib’s fiscal policy committee has since looked at re-sequencing infrastructure projects, such as a planned 156-kilometer (97-mile) mass railway system under construction in Kuala Lumpur, Abdul Wahid Omar, the minister heading Malaysia’s Economic Planning Unit, said in an interview in Singapore yesterday.
“The idea would be to ensure that we sequence it right such that we don’t get the lumpy import items in any given year,” said Wahid. “They will not result in delaying in projects beyond one year. I think it’s more of in a matter of months.”
Malaysia’s current-account surplus widened to 9.8 billion ringgit ($3.1 billion) in the third quarter from 2.6 billion ringgit in the preceding three months.
The TPP could yield global annual gains of $295 billion by 2025, according to estimates by Peter Petri and Michael Plummer in a June 2012 policy brief published by the Peterson Institute for International Economics.
The accord would go beyond usual trade pacts dealing with tariffs and traditional goods like agriculture. It would establish rules for trade in digital commerce and include environmental standards and protections for companies that compete against government-backed businesses.
Japan’s defense of its farming industry, Malaysia’s proposal to keep tobacco control measures out of the deal, and the impact of currency manipulation on markets are among issues that have impeded progress on a deal that the U.S. calls the cornerstone of its economic policy in the region.
President Barack Obama also faces opposition from Congress, consumer advocates, automakers and labor unions over the agreement.
“The meeting in Singapore is very, very crucial,” Mustapa said. “We will make an assessment on the way forward. For us, the next three weeks are going to be crucial.”