1 LIBERALISATION IN SERVICES SECTOR. 2 Outline Overview of Malaysia’s Services Industry Modes of Supply Liberalisation of the Services Sector Malaysia’s.

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LIBERALISATION IN LIBERALISATION IN SERVICES SECTORSERVICES SECTOR

LIBERALISATION IN LIBERALISATION IN SERVICES SECTORSERVICES SECTOR

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OutlineOutline

• Overview of Malaysia’s Services Industry• Modes of Supply• Liberalisation of the Services Sector• Malaysia’s Position in AFAS, WTO, FTAs• Issues pertaining to Services

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Overview of Malaysia’s Services Overview of Malaysia’s Services IndustryIndustry

• The Services Sector has been targeted as the new engine of growth under IMP3.

• Total share of services in Malaysia’s GDP has grown by 9.7 per cent to 53.6 per cent in 2007 (Non-Government 46.7%) from 52.0 per cent in 2006 (Non-Government 45.3 %).

• IMP3 targets an increase in the GDP contribution from 50.5 per cent in 2005 to 59.7 per cent by 2020 to be achieved through:– an annual average investment of RM45.8 billion; and– an annual average growth of 7.5 per cent during the

period.

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IMP3 TargetsIMP3 Targets

 IMP3

Targets2007 2006 2005

GDP Contribution (%)

59.7(Y 2020)

46.7 45.3 44.6 

GDP Growth (% p.a.)

 7.5 p.a.construction:

5.7%)

9.7 7.2 5.4

Investments (billion)

 RM45.8(p.a.

RM65.4 RM55.5 RM57.7 

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Trade Performance of the Services Sector

Jan-June2008

(RM bil.)2007

(RM Bil.)%

Growth2006

(RM Bil.)%

Growth2005

(RM Bil.)

TotalTrade* 98.25  192.2 16.0  165.7 21.6 153.5 

Exports* 49.88  96.8 7.9  79.6 10.9 71.8 

Imports* 48.37  95.4 10.8  86.1 5.4 81.7 

TradeBalance* 1.51  1.4 n.a  (6.5) n.a (8.6)

*Based on DOS and covered 3 categories: travel, transport and others.

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Modes of Supply of ServicesModes of Supply of Services

• In the Trade in Goods, liberalisation is undertaken through:– reduction in tariffs; and– disbandment of Non-Tariff Barriers (NTBs).

• In the services sector, liberalisation is undertaken through four modes of supply:

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4 Modes of Supply4 Modes of Supply

MODES CRITERIASUPPLIERPRESENCE

Mode 1: Cross-border trade

Service delivered within the territory of the Member, from the territory of another Member. The advancement of technology has made this possible. E.g. internet (e-trading)

Service supplier not physically present within the territory of another Member

Mode 2: Consumption abroad

Service delivered outside the territory of the Member to a service consumer of the another Member. It involves the consumer traveling to the country in which the service is produced. E.g. tourism and education services.

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4 Modes of Supply4 Modes of Supply

MODES CRITERIASUPPLIERPRESENCE

Mode 3: Commercial presence

Service delivered by a service provider of one country through commercial presence in another country. E.g. FDIs

Service supplier physically present within the territory of another MemberMode 4:

Movement of natural persons

Service delivered by a service personnel of one country who travels to another country to provide the service. E.g. services provided by expatriates, business and professionals and foreign workers.

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Liberalisation of Malaysia’s Liberalisation of Malaysia’s Services SectorServices Sector

• Liberalisation in the services sector is currently being undertaken in:

– ASEAN: through the ASEAN Framework Agreement on Services – AFAS (full liberalisation to be undertaken by 2015 and logistics 2013);

– WTO: through progressive liberalisation (General Agreement on Trade in Services -GATS);

– bilateral and regional FTAs: through progressive liberalisation and binding of commitments in GATS.

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Preparation for Liberalisation of Preparation for Liberalisation of Services SectorServices Sector

• Strengthen domestic regulations

• For non-regulated sectors, self-regulation is advised or if required, to advise the Government on regulatory requirements

• Review regulations that impede services exports

• Identify issues that impede the growth and development of services sub-sectors. Issues can be addressed in the MSDC for long-term competitiveness

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Preparation for Liberalisation of Preparation for Liberalisation of Services SectorServices Sector

• Propose incentives that can assist the industry to become more competitive. Incentives are currently available through MATRADE and SMIDEC

• Undertake mergers and acquisitions to strengthen the industry

• Pursue MRAs with trading countries, in particular within ASEAN and FTA partner countries

• Build local capacity and identify niche markets in areas where we have comparative advantage

• Explore market access opportunities abroad through partnerships

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AFASAFAS

• Signed in 1995

- to enhance and strengthen cooperation among service suppliers in ASEAN;and

- progressively liberalise trade in services among ASEAN countries through reduction/elimination of restrictions.

• AFAS adopts the structure and approach of General Agreement on Trade in Services (GATS) .

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Progress of Services Progress of Services Liberalisation Under AFASLiberalisation Under AFAS

• Four Rounds of Services Negotiations have been completed:

- First Round (1996-1998):1st Package – 1997; 2nd Package – 1998.

- Second Round (1999-2001): 3rd Package.

- Third Round (2002-2004): 4th Package.

- Fourth Round (2005-2007):5th Package – 2006; 6th Package – 2007.

• 7th Package signed at the end of 2008.

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PRIORITY SECTORS(ICT, tourism, healthcare,

air travel and logistics)

OTHER SECTORS(including professional

services)

2008 51% 2008 49%

2010 70% 2010 51%

2013(Logistic Services)

70% 2015

70%

Equity Targets and Parameters Equity Targets and Parameters (Mode 3)(Mode 3)

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Services Negotiations in the WTO:Services Negotiations in the WTO:• Covered by the General Agreement on Trade in

Services (GATS) of the WTO.

• Main objectives of GATS:

- increased transparency and predictability of rules and regulations on trade in services; and

- promote progressive liberalisation in services through successive rounds of

negotiations.

• Services negotiations undertaken on “request-offer” approach, on bilateral and plurilateral

basis.

• Liberalisation of commitments of members are multilateralised (applicable to all Members)

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Market Access NegotiationsMarket Access Negotiations

• Developed countries seek ambitious market access commitments and want:

- Members to bind existing autonomous liberalisation

- foreign equity ownership of at least 51%

• Developing countries want:

- progressive liberalisation of services sectors - market opening in sectors where they have export interest

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Malaysia’s Position

• Prepared to undertake commitments under the principle of progressive liberalisation

• Finalising the second revised Offer under Doha Round, encompassing 11 sectors and covering 85 sub-sectors.

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Approach to Services Approach to Services Negotiations in FTAsNegotiations in FTAs

• Based on the principle of progressive liberalisation, commensurate with capacity of industry.

• WTO plus

• Based on domestic consultations – liberalisation to benefit domestic stakeholders

• Cooperation elements added where relevant for capacity building and transfer of knowledge/technology

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FTAs Signed FTAs Signed

• Bilateral:

– Malaysia-Japan Economic Partnership Agreement (MJEPA)

– Malaysia-Pakistan Comprehensive Economic Partnership Agreement (MPCEPA)

• ASEAN + Dialogue Partners (where services packages have been concluded):

– ASEAN - China (ACFTA) – 1st package– ASEAN - Korea (AKFTA) – Korea yet to ratify

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• A need for all Ministries to prepare a road-map for liberalisation of services under their respective purview

• A need for a coordinated approach for the

development of the services sector e.g. through Malaysia Services Development Council (MSDC)

• To undertake outreach programmes to stakeholders

• To assist export-ready companies

• To compile comprehensive data on services

• To review of existing rules and regulations

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THANK YOUTHANK YOU