Malaysia is the EU’s second largest trading partner inside the ASEAN group of countries; with Singapore being the EU’s largest trading partner. Bilateral trade with Malaysia in goods reached €31.9bn in 2010 but so far services have not been a major component of the trade relationship. In 2009 EU commercial services exports to Malaysia stood at €2.6bn and imports reached €1.9bn. For the same year the EU invested €0.8bn via FDI and held stocks of €24.7bn.
Despite this, it is clear that there are increasing opportunities to build on the services trading relationship due to a policy direction of increased liberalisation within Malaysia and a specific focus on boosting the role of services in the economy and in trade. For example, currently Malaysia has been adopting measures specified under various plans, such as the Ninth Malaysia Plan (2006-10) and the Third Industrial Master Plan (2006‑20), with a view to guiding the country towards global competitiveness and becoming a higher-value added and knowledge-based economy. Malaysia aims to increase the share of the services sector to GDP to 60% by 2020, in an effort to establish a knowledge-based economy less reliant on manufactured exports.
Additionally, while services, in comparison to manufacturing, have been relatively closed to international competition, with FDI restrictions posing the major obstacles, trade objectives have begun to change. Specifically there has been a new focus on promoting services to reduce the Malaysian economies reliance on manufactured exports. With these objectives in mind, the government has identified services as a leading growth engine and has begun to liberalise unilaterally; with key export interest areas including education, healthcare, construction, professional services, ICT, and franchise operations. FDI has also been seen as important and there has been a relaxing of foreign investment restrictions and a streamlining of the regulatory framework since 22 April 2009.
Turning to the EU’s trade negotiations in the region and following the breakdown of FTA negotiations with the ASEAN group of countries, EU Member States gave the green light for the Commission to pursue negotiations towards FTAs with individual ASEAN countries in December 2009. This began with the EU opening negotiations with Singapore and following it up with the opening of negotiations with Malaysia; when EU member states approved the launch of negotiations for an FTA on 10 September 2010. The first round of negotiations took place in Brussels, 6-9 December 2010. A second round followed in Kuala Lumpur during the first week of March and a third and fourth round took place in Brussels on the 10-13 May and Kuala Lumpur on the 12-15 July, respectively. Services and investment discussions are said to be progressing well.
The European Services Forum is currently formulating a position paper that will detail the interests of the European services industry in these negotiations and will be released in the latter half of 2011.
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