Malaysia has always been a trading nation. Strategically located along the Straits of Malacca, it sits on a major shipping channel that connects the Indian Ocean to the west and the Pacific Ocean to the east. Malaysia recognizes the importance of international trade and relations to the nation’s growth and development. This emphasis is reflected in the nation’s gross exports of goods and services.
Given Malaysia’s reliance on international trade, Malaysia has adopted liberal trade policies and puts a high emphasis on regional and bilateral trade agreements. Malaysia joined the General Agreement on Trade and Tariff (GATT) in 1957 and was a founding member of the World Trade Organization (WTO), which replaced the GATT.
Currently, Malaysia has seven bilateral Free Trade Agreements (FTAs) with the following countries: Australia, Chile, India, Japan, New Zealand, Pakistan, and Turkey.
The Association of Southeast Asian Nations (ASEAN) members have established the ASEAN Free Trade Area. The ASEAN Free Trade Area (AFTA) is a trade bloc agreement to support local manufacturing in all ASEAN countries. The primary goal of AFTA is to increase ASEAN’s competitive edge as a production base in the world market. The secondary goal is to attract more foreign direct investment to ASEAN. The Common Effective Preferential Tariff and the elimination of tariffs and non-tariff barriers among ASEAN members are the main instruments in achieving its goals. In 2018, ASEAN collectively represented a market with a GDP of more than US$3.1 trillion and a population of 655 million people. ASEAN members are Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
Through ASEAN, Malaysia has regional FTAs with China, Japan, Korea, India, Australia, and New Zealand and participates in the ASEAN Trade-In Goods Agreement (ATIGA). Other concluded trade agreements include the Trade Preferential System-Organization of Islamic Conference (TPS-OIC) and Developing Eight (D-8) Preferential Tariff Agreements (PTA). The ASEAN – Hong Kong, China Free Trade Agreement (AHKFTA) entered into force in June 2019. Under that agreement, Malaysia will eliminate customs duties on 85% of products traded with Hong Kong within ten years and reduce another 10% of tariff lines within 14 years.
The Trans-Pacific Partnership Agreement (TPPA) was signed on Feb 4, 2016. Since the United States’ formal withdrawal from TPP in 2017, the remaining TPP countries formed the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP). The CPTPP was signed on March 8, 2018, by all 11 participating countries - Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. On October 5, 2022, the government of Malaysia ratified the CPTPP, which is expected to expand Malaysia’s access to new markets such as Canada, Mexico, and Peru, which had not been previously by other existing free trade agreements.
The Regional Comprehensive Economic Partnership (RCEP) came into force for Malaysia on March 18, 2022. The RCEP, considered the largest FTA comprising 29 percent of world trade, is between the ten ASEAN members and China, South Korea, Australia, Japan, and New Zealand. The goal of the RCEP is to create a more comprehensive regional economic integration among its members. The RCEP also aims to simplify and harmonize the member countries’ respective bilateral FTAs.
FTAs Currently Under Negotiation:
· Malaysia-Iran Preferential Trade Agreement (MIPTA)
· Malaysia-European Free Trade Area Economic Partnership Agreement (MEEPA)
· Malaysia-EU Free Trade Agreement (MEUFTA)
The Malaysia-Iran Preferential Trade Agreement (MIPTA) was initiated by the previous Malaysian government. The initiation of the negotiation was announced during a Malaysian trade mission to Iran in May 2016. Since then, there have been no publicly available updates on MIPTA.
The Malaysia-EU FTA (MEUFTA) negotiation was formally launched on 5 October 2010. After several rounds of negotiations, the negotiations reached an impasse in 2012. However, both sides had agreed that negotiations would resume when a fresh mandate and/or flexibilities become available later. Malaysia and the EU concluded the Agreement on Partnership and Cooperation (PCA) in December 2015. A PCA is a comprehensive agreement on bilateral and multilateral cooperation comprising politics, economics, trade, investment, justice, culture, education, science and technology, healthcare, agriculture, tourism, energy, traffic, and the environment. Malaysia and the EU intended to sign this PCA in January 2019. Individual ASEAN members must first sign a PCA with the EU to qualify for the free-trade agreement (FTA).
Malaysia is also in ongoing negotiations with the European Free Trade Association Partnership. The European Free Trade Association (EFTA) countries consisting of Iceland, Liechtenstein, Norway, and Switzerland. These members are not a member of the European Union. Negotiations between EFTA and Malaysia are still going on.
For information on FTA partner countries, including how to take advantage of an FTA, please visit FTA Help Center.