11 December 2015, Kuala Lumpur
Trans-Pacitic Partnership Agreement: Opportunities and Impacts for Taiwanese and Malaysia Companies
To assess the likely effects of Taiwan's entry into the TPPA on Malaysian and Taiwanese industries, the Taipei Economic and Cultural Officer (TECO) in Kuala Lumpur, with the help of the Asian Strategy & Leadership Institute (ASLI) have commissioned a study looking into the opportunities and likely impacts of this.
Three approaches were undertaken in drafting the study: (1) Global Trade Analysis Project (GTAP); Revealed Comparative Analysis (RCA) Index; (3) Sectoral Perception Survey.
Results from the study have shown that:
- Positive effects of Taiwan entering the TPPA – both on Malaysia’s imports and exports, as well as on Taiwan’s, outweigh the negatives
- Simulation results show that Malaysia’s overall welfare is improved with entry into the TPPA by USD249 million
- In terms of GDP impact, the results also indicate that Taiwan’s entry into TPPA further enhances Malaysia’s increase in the country’s GDP. The rise in GDP is USD451 million without Taiwan’s entry, while the rise becomes USD602 million with Taiwan’s entry
- This means that Taiwan’s entry into the TPPA not only improves its own economy’s welfare (by USD2,079 million) and GDP (by USD557 million), but also helps enhance Malaysia’s welfare and GDP
- These two broad indicators suggest that Malaysia will be better off in general when Taiwan joins as part of the TPPA. This also suggests that the entry of Taiwan brings more trade creation than trade diversion to Malaysia, thereby improving Malaysia’s welfare and GDP
- Taiwan’s entry into TPPA is expected to bring greater gains to Malaysia on the whole. This is because Malaysia’s overall welfare, GDP, total output levels, exports and imports are expected to increase when Taiwan is added to the coalition
- When Taiwan is not part of the TPPA, trade diversion is expected. Malaysia’s trade, mainly its imports sourcing (less so in its exports), for almost all subsectors in interest are expected to divert away from Taiwan, towards TPPA partners.
- Malaysia’s services subsectors, particularly ‘financial services and insurance’ and ‘business services’ are expected to expand, in outputs, exports and imports if Taiwan joins the TPPA
- Taiwan’s entry into TPPA seems to strengthen further Malaysia’s ‘electronics and electrical’ subsector as output and exports in this subsector expand significantly with Taiwan’s entry
- Malaysia’s agriculture sector is expected to contract with the implementation of the current 12-member TPPA. With Taiwan’s entry, the extent of impact is more or less the same. In this sector, Malaysia is expected to rely more on imports from its partner TPPA members, including if Taiwan joins TPPA. Agriculture exports are expected to fall by USD384 million when Taiwan is not in TPPA and USD453 million when Taiwan joins TPPA (based on modeling)
- 58% of the total firms surveyed for the study believe that Taiwan should participate in TPPA and only 3% negatively, with many still unsure.
- Survey results also show that out of the 38 Malaysian firms surveyed, 18 of them state that Taiwan should participate in TPPA as this will generally benefit their businesses (only one Malaysian firm indicates that Taiwan should not participate)
- Both findings in the GTAP results and survey results are consistent with each other – indicating that potential gains outweigh losses (however, survey results also strongly suggest that there is generally a lack of detailed understanding among industry players on what the TPPA is about)
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