Economist: Indefinite protection of Bumi interests in TPP undermines aim to be competitive

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said some general provisions in TPP will be reviewed in five or 10 years’ time, while the value of contracts set aside for Bumiputera firms will be gradually reduced. — Bernama pic
International Trade and Industry Minister Datuk Seri Mustapa Mohamed said some general provisions in TPP will be reviewed in five or 10 years’ time, while the value of contracts set aside for Bumiputera firms will be gradually reduced. — Bernama pic

KUALA LUMPUR, Dec 1 — The protection of Bumiputera interests within the Trans-Pacific Partnership (TPP) may conflict with Malaysia’s aims of increasing its competitiveness if there is no time limit on the preferential terms, economist Tan Sri Ramon Navaratnam cautioned today.

Ramon congratulated the International Trade and Industry Ministry (MITI) in securing favourable terms in TPP negotiations, singling out in his praise the terms on state-owned enterprises (SOE) where preference is given to Bumiputera companies when contracts are awarded.

“On Bumiputera and SOE, I think it’s a great job. My only question, my only concern is that I’m not sure whether there is a time limit.

“If there is no time limit, I fear that in the longer term, the purpose of getting into TPP might be somewhat eroded, which is TPP intends to increase competition and access,” he said when posing a question during a question and answer session at MITI’s public dialogue on TPP.

In response, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said some general provisions in TPP will be reviewed in five or 10 years’ time, while the value of contracts set aside for Bumiputera firms will be gradually reduced.

“In the case of Bumiputera preference, although we start with US$63 billion (RM266.4 billion) in year one, by year 2020, it will be US$14 billion. So that’s a form of increasing competition, although it’s not going to be totally eliminated but that’s some way of increasing competitiveness of Bumiputera.

“In summary there are areas where the carve-outs appear to be quite permanent or semi-permanent, some areas it will be abolished,” he said of the Bumiputera related matters that have been excluded from the trade pact that seeks to cut down trade barriers among member nations.

Earlier during the question and answer session, a representative from the “Bantah TPP” coalition claimed that the terms negotiated to protect Bumiputera interests were “inadequate”, criticising a term in item four under the TPP’s Annex II for only covering “licenses and permits” despite the scope of special position of Bumiputera under Article 153 of the Federal Constitution being “bigger”.

Mustapa pointed out, however, that licences and permits were mentioned as TPP involves business, adding that Bumiputera interests were already protected by the government where bodies and funds such as Tabung Haji and Lembaga Tabung Angkatan Tentera were excluded from TPP provisions.

MITI official Wan Wardina Wan Abdul Wahab, who was also present, said ministry officials are aware of the Article 153 provision in the Constitution, but noted that only certain obligations can be inserted into the TPP’s annexe.

“As you can see, we have only taken licences because license is the only one actually affected under the scope of the investment chapter of the TPP.

“Other programmes for example, subsistence programmes, subsidies related to Bumiputera programmes can be carried on. It will not be affected under TPP,” the senior principal assistant director of MITI’s services development division replied during the dialogue session.

She also explained that the Bumiputera policy does not discriminate against foreign investment.

Under Annexe II on Cross-Border Trade in Services and Investment, item four for Malaysia states that “Malaysia reserves the right to adopt or maintain any measures that provide assistance to Bumiputera for the purpose of supporting Bumiputera participation in the Malaysian market through the creation of new or additional licences or permits for Bumiputera eligible to receive such assistance”.

The right to provide such assistance to the Bumiputera community can be exercised if it does not affect the rights of existing licence and permit holders, or future applicants in sectors where foreign investment is allowed, the item states.

Among other things, Article 153 also covers position in public services and scholarships, training and educational privileges in relation to the special position of Malays and natives from Sabah and Sarawak.