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SMIs stand to gain from Free Trade Agreements

[ 01-01-1970 ]
SMIs stand to gain from Free Trade Agreements

PETALING JAYA: Local small and medium industry (SMI) corporations in Malaysia need not worry that Free Trade Agreements (FTA) signed between the government and developed nations will kill off their business.

Giving them this assurance, SME Corporation chief executive officer Hafsah Hashim said signatory nations would be allowed to incorporate certain sensitive goods into the FTA exclusion list.

“And the goods under the exclusion list will be protected,” said Hafsah.

The FTA, she added, would bring great benefits to local players in the long run as it would liberalise the movement of goods and services between signatory nations.

The Malaysian government and the European Union (EU) would be entering into their second round of meetings to explore the feasibility of signing an FTA agreement this month.

The upcoming meeting is a follow-up to the preliminary talks conducted in March, when both parties ironed out technical issues with the International Trade and Industry Ministry.

Citing the Asean-China Free Trade Agreement (ACFTA) signed in 2002, Hafsah said the deal had allowed Malaysian companies to build their resilience progressively to mitigate competition from Chinese companies.

“FTAs encourage local industries to be more cost-effective, innovative and adopt strategies to produce high quality goods for the global market,” she said.

Hafsah said with better business stategies, FTAs would gradually open doors to greater business opportunities for Malaysian SMEs.

“FTA opens doors to a market of 1.9 billion consumers with a combined gross domestic product (GDP) worth US$6 trillion.

“In addition, signatory nations will gain access to each other’s markets by leveraging the strength and business network of one another,” said Hafsah.

Exclusion list

Admitting that local industries would end up competing with established foreign brands, Hafsah said Malaysian companies would need to be creative in order to remain competitive.

“Pricing will play a great role. Local industries can lower their prices in order to compete as it can increase sales volume,” said Hafsah.

On concerns that foreign companies may take up patents on local goods, Hafsah said SMECorp was doing its best to educate local industry players on the importance of getting patents for their products.

“We cannot stop anyone, local or international, from acquring intellectual property rights.

“Therefore, it’s best for local players to register their patents. This can also be a source of income for them later on if they decide to sell their patents to another entrepreneur,” said Hafsah.

Meanwhile, Parti Sosialis Malaysia (PSM) treasurer A Sivarajan agreed with Hafsah that the FTA exclusion list would help protect certain sensitive goods.

However, he added this depended on how firm the Malaysian officials stand their ground during the meeting.

He said that the developed nation would ask for something in return for items listed under the exclusion list.

“Let’s say we put rice under the exclusion list; the other party will ask us to liberalise another sensitive item, for example our meat products.

“Our local meat industry players will then have to compete with foreign companies which are financially stronger,” said Sivarajan.

Foreign machines

On reducing prices for local products, Sivarajan said local SMEs could only reduce prices to a certain limit as they were also depended on technologies from developed nations.

“Most local companies still use machines manufactured by developed nations as we do not have the capacity to build our own machines.

“When the machines break down, obviously they have to purchase the spare parts from its country of origin with a huge cost that will be passed to consumers.

“The only way SMEs can cut cost is by hiring foreign workers that require lower wage.

“That will, of course, deprive locals of jobs and trigger another problem altogether,” said Sivarajan.

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