KUALA LUMPUR, July 19 ― Malaysia's palm oil industry will be one of the sectors to benefit from the United Kingdom’s entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an analyst said.
SPI Asset Management managing partner Stephen Innes said Malaysia has successfully sought Britain to cut its palm oil tariffs ― currently ranging up to 12 per cent to nil ― immediately on entering the pact; this should drive more exports to the UK.
Bilateral trade between the two countries exceeded US$7.3 billion (RM33.4 billion) in 2022 with the UK recording a trade surplus of some US$786 million (RM3.5 billion).
The Malaysian Palm Oil Board anticipates palm oil exports to increase by 3.7 per cent to 16.3 million tonnes in 2023 due to continuous demand from importing countries.
“Commodities like rubber (will benefit from the UK’s entry) and possibly an increase in edible fresh foods,” Innes told Bernama, adding that the UK is struggling post-Brexit and is now “operating on an island of its own.”
“The UK is not self-sufficient in food production; it imports 48 per cent of the total food consumed and the proportion is rising. Therefore, as a food-trading nation, the UK relies on imports,” Innes said.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid told Bernama that the Malaysia-UK relationship has always been cozy with regards investments. The Battersea Power Station project exemplifies how the two countries assisted and complemented each other to create value.
“Many Malaysians had their tertiary education in the UK. Therefore, CPTPP should help to promote two-way trade and investment as the cost of doing business would be more cost-effective post UK’s admission into the pact,” he added.
Mohd Afzanizam said the UK needs to be economically friendlier with the rest of the world as it “goes solo” because it needs to access raw materials and labour for production as well as foreign markets.
“The CPTPP offers greater exposure to the global economy and it could potentially involve China as it is also in the process to be part of the pact.
“While we remain uncertain how China would be admitted considering the existing friction with some member countries, the UK’s aspiration to be part of the club makes economic sense,” Mohd Afzanizam said.
The UK is the first European nation to join the bloc since it was created in 2018. The pact comprises fellow G7 members Canada and Japan, UK’s long-standing allies Australia and New Zealand, alongside Brunei, Chile, Malaysia, Mexico, Peru, Singapore and Vietnam.
“However, it is questionable how much this will benefit its economic growth. The UK is a big services economy, and that sector could have some export benefits. Still, I think it aligns better with the UK shoring up supply chains, which could lead to some domestic import cost benefits,” Innes said.
On whether the UK's entry would be a bulwark against Chinese dominance in the region, he said that Western countries are looking to circumvent China's supply of goods.
“The short answer is probably not so soon, but that will not stop them from rearranging large portions of the globalised economy and this a tall order,” Innes said. ― Bernama