EU-Malaysia


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 negotiations were launched in Brussels in October 2010. The seventh round of FTA negotiations took place in Brussels in April 2012 and was followed by meetings of Technical Working Groups in a number of negotiating areas in Kuala Lumpur September 2012. The EU has reached the half-way point of the FTA negotiations with Malaysia. However, the most difficult issues remain to be resolved.  The negotiations were stalled since September 2012 due to the political campaign in advance of the General elections.  Following the general elections that took place in May 2013, Malaysia should now step up its level of ambition to allow for further progress in the negotiations. But unfortunately no date for a new round has been fixed yet!

In November 2011, the European Services Forum formulated a position paper which detailed the interests of the European services industry in these negotiations :

ESF Key Priorities for better access to Malaysia‟s services markets are as follow:
1. Remove or reduce obligations to enter the market through joint venture.
2. Remove or reduce the restrictions on foreign capital ownership (at least up to 51%).
3. Wider levels of cross-border commitments in trade in services across all sectors.
4. Improve national treatment in all services sectors, providing the same business opportunities to non-Malaysian citizens.
5. Better enforcement of laws and regulations according to fair and transparent criteria.
6. Improved regulatory transparency including commitments to propose regulations in draft form and provide interested parties the opportunity to comment on such draft regulations.
7. Greater market access and transparency in public procurement.
8. Provide a high level of post-establishment investment protection.

For more information:

===============================

In November 2011, ESF already adopted a Position Paper highlighting the services industries priorities for the FTA negotiations. This current Position Paper reiterates many aspects of that contribution, as not much has legally changed regarding the international trade framework in Malaysia for European services providers since.    

The 2021 EU Indo-Pacific Strategy confirmed the EU’s longstanding interest in resuming FTA negotiations with Malaysia. The EU already has state-of-the-art FTAs in place with two ASEAN countries (Singapore and Vietnam), is negotiating FTAs with Indonesia, Thailand, and recently resumed FTA negotiations with Philippines. In 2023, both parties began another stocktaking exercise to determine their positions regarding a possible resumption of the negotiations.

On Monday 20 January 2025, Europe and Malaysia announced the re-launch of negotiations for an EU-Malaysia Free Trade Agreement at the occasion of the visit of Malaysia Prime Minister Anwar bin Ibrahim to in Brussels. See here the statement of European Commission President Ursula von der Leyen. The next round of talks should take place in June 2025.

It is with this perspective that the European Services Forum has developed its Position Paper to express its priorities for the forthcoming FTA negotiations. You will also find here some statistics on the importance of services trade between the EU and Malaysia.

EXECUTIVE SUMMARY

  • The European Services Forum strongly supports the negotiations towards an ambitious EU-Malaysia Free Trade Agreement and welcome the resuming of the talks.
  • The EU is Malaysia’s fourth largest trading partner, but bilateral trade does not match the importance of the two partners. EU-Malaysia FTA will contribute to increase bilateral trade.
  • EU exports of services to Malaysia represent 26.4% of the total trade (goods & services), but only 14.8% of Malaysia total exports to the EU, which is a rather low level for a middle-income country. Bilateral trade in services between EU and Malaysia in 2023 amounted to €10.6 bn, with EU exports amounting for €5.5 bn and imports amounting to €5 bn. In 2023, EU services exports to Malaysia are dominated by the category Transport services (28%),“Other business services” (26.3%), Insurance services (7.3%) and interestingly Manufacturing services (17.4%). Malaysia is only the 26th EU trading partner of the EU in services trade.
  • ESF takes note that Malaysia has signed bilateral FTAs, notably with Japan, New -Zealand and Australia, plus the ones through the ASEAN, and is currently negotiating, in addition of the EU, with negotiations with UAE and EFTA countries, and also joined the RECP, and more importantly the CPTPP. ESF calls upon the negotiators to do their utmost so that the European services companies will obtain at least the parity with the best FTA signed by Malaysia but considers that so far, the level of commitments remains rather low and call for more market access in trade in services.
  • At the end of the Uruguay Round, Malaysia GATS commitments were very weak. And this remains today the only bidding elements towards the European Services companies. The FTA must seriously improve market access to EU service businesses.
  • In 2022, Malaysia was the best-performing country among Southeast Asia’s largest economies with the most potential to attract foreign investors, and the efforts made by the Malaysian Investment Development Authority (MIDA) are much appreciated. We expect that the FTA will improve EU FDI in services sectors (55.6%), which is lower than the world average (77.7%).
  • The FTA should improve the mobility of European businesspeople to Malaysia.
  • The FTA should include strong provisions in the Digital Trade Chapter, including on cross-border data flows. The FTA should also include a strong Horizontal Chapter on Disciplines for Domestic Regulation, rules on State-Owned Enterprises.
  • Given the strong interest of services companies in public procurement both for services contracts and works/infrastructure contracts, ESF calls for a comprehensive market access to public procurement for services in the FTA negotiations, with substantive coverage of public institutions and entities.
  • On Trade and Sustainable Development, ESF encourages the EU to negotiate similar level of commitments with Malaysia than the ones negotiated with the most recent EU agreements in the region.
  • Malaysia did not take any GATS commitments in many services sectors. ESF goes into the details of all services sectors in the last section of this Position Paper, makes some comments and recommendations for the consideration of the negotiators (in sectors like professional and business services, telecommunication and digital services, express delivery, distribution services, insurance and financial services, transport services, etc).

Copyright ©2025 ESF. All Rights Reserved | Design & developed by Infoicon Technologies

Copyright ©2023 ESF. All Rights Reserved | Design & developed by Infoicon Technologies