Dialogue on Potential Impact ofTrans- Pacific Partnership Agreement (TPPA)

Presented by : Dato’ Sri Tan Thian Poh, President of MTMA

on the Textile & Apparel Industry in Malaysia

The textile and apparel industry in Malaysia

TPPA and its impact to the Malaysia’s economy

Globalization and Free Trade Agreements

Benefits of TPPA to the textile/apparel industry

What can the Government do to assist?

Conclusion

Outline:

Member countries of TPPA

(in Alphabetical Order)

Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States of America and Vietnam

The Textile and Apparel Industry in Malaysia

The Textile and Apparel Industry in Malaysia

Brief Overview:

10,101 firms with 95,538 employees (2010 Economic Census)

One of oldest industries in Malaysia

Tenth largest export earners

Emphasized in the Industrial Master Plan 3 (2006-2020)

The Textile and Apparel Industry in Malaysia Trade Performance:

-

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

16,000,000,000

Year 2011 Year 2012 Year 2013 Year 2014 Year 2015

Trade Performance : Textile / Apparel Industry IMPORT

EXPORT

The exports value has been relatively consistent.

Imports performance has increased since 2014.

TPPA and Its Impact To The Malaysia’s Economy

TPPA and Its Impact To The Malaysia’s Economy

Current Economy:

The weakening of Ringgit The rising cost of living The rising cost of doing business Retrenchment

“hope in the midst of

economic uncertainty”

TPPA and Its Impact To The Malaysia’s Economy

Hope in the midst of economic uncertainty:

TPP participation is consistent with Malaysia’s New

Economic Model

Gain competitive advantage in market access compared

to competitors from non TPP countries

Positive effects on Malaysia’s GDP

Positive effects on investment over a ten-year period

Cont..

TPPA and Its Impact To The Malaysia’s Economy

Hope in the midst of economic uncertainty (cont…):

Positive effects on wealth and job creation

New market creation

Excessive products for domestic consumption

Multiplier effect

Globalization and Free Trade Agreement

Globalization and Free Trade Agreement

Globalization is inevitable

Malaysia is a trade dependent country

Not participating in TPPA would be costlier to Malaysia

Inability of Malaysian exporters to access the lower or

zero tariff of Malaysia’s export markets

Advantage as a First-Tier TPP Partner

Benefits of TPPA To Textile/Apparel Industry

Benefits of TPPA To Textile/Apparel Industry

New breath of life the industry

Projected inflow of investment by RM612 billion to 1.075 trillion (USD 136 to USD 239 billion) over 2018-2027 for investment growth in textile, construction and distributive trade

Out of the projected investment growth amount, the estimated investment growth for textile industry is 3.42 to 4.29 percentage point

The Biggest Gainer:

Benefits of TPPA To Textile/Apparel Industry

Projected output growth for the industry is by 3.14 to 3.78 percentage point

Projected export growth is by 4.09 to 4.87 percentage point

Elimination and reduction of duty by TPP partners will enhance competitiveness in the matured market of significant FTA partners such as Japan and Australia

Better access to four new markets namely the US, Canada, Mexico and Peru

TPPA and Market Access:

Benefits of TPPA To Textile/Apparel Industry

Although in the aspect of market access, 72.9% textile tariff lines constituting 36.44% of total exports to the US will see elimination upon entry into force

Without TPP, only 11% of tariff or 0.9% of total exports are duty free

Two major products are given duty free upon entry into force, which is an offer exclusively given by the US to Malaysia and Vietnam only

TPPA and Market Access:

UNITES STATES

Cont..

Benefits of TPPA To Textile/Apparel Industry

The two major products are:

• HS620520 - Men’s or boys’ shirt, not knitted/crocheted, of cotton; and

• HS620630 - Women’s or girls’ blouses and shirts, not knitted/crocheted, of cotton

These two products also given flexibilities through SSL which allow local producers the flexibility to source for inputs from non-TPP countries

TPPA and Market Access:

UNITES STATES

Benefits of TPPA To Textile/Apparel Industry

There will be 90.9% textile tariff lines constituting 89.55% of total exports to Canada will see duty elimination upon entry into force

Without TPP, only 40% of tariffs or 12.46% of total exports are duty free

Major products given duty free upon entry into force are women’s jersey and pullover, women’s or girl’s cotton blouses and handkerchiefs

TPPA and Market Access:

CANADA

Benefits of TPPA To Textile/Apparel Industry

27.57% textiles tariff lines constituting 0.74% of total exports to Mexico will see duty elimination upon entry into force

Without TPP, only 12.67% of tariffs or 0.02% of total exports are duty free

Major products given duty free upon entry into force are nylon yarns and ties/bow ties

TPPA and Market Access:

MEXICO

Benefits of TPPA To Textile/Apparel Industry

13.25% textiles tariff lines constituting 2.53% of total exports to Peru will see duty elimination upon entry into force

Without TPP, only 6.52% of tariffs or 0.02% of total exports are duty free

Major product given duty free upon entry into force is wool tops

TPPA and Market Access:

PERU

Benefits of TPPA To Textile/Apparel Industry

Attracting investment into the industry especially in the upstream sector where activities such as fiber and yarn spinning, dyeing and production of fabric are undertaken.

This rule will also encourages companies in the upstream sector would be able to achieve economies of scale by producing supply for both local and international downstream manufacturers within the TPP region.

TPPA and YARN FORWARD RULE

What Can The Government Do To Assist?

What can the Government do to assist?

Investment Incentives Incentives for investors

Infrastructures and Facilities Better industrial parks and facilities

Capacity Building Human capital development

Cont..

What can the Government do to assist?

Foreign Labour Supply

Reduce illegal foreign workers

Every 10 foreign workers employed, another 5.2 jobs are created for local (World Bank)

Government-Industry Partnership in Foreign Labour Supply Management System

Block approval for foreign labour

Cont..

What can the Government do to assist?

Minimum Wages

Productivity-linked

Tier system (unskilled, semi and skilled)

Minimum wages based on country’s poverty lines

Market-based wages

Longer period of review

Cont..

Conclusion

TPPA : Benefits outweigh shortcomings

Vital to propel the textile and apparel industry forward

The dawn of hope for the sunset industry

Maximise the potential of TPPA

Betterment for Malaysia