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Malaysia-Turkey Successfully Sign Free Trade Agreement

[ 24-04-2014 ]
Malaysia-Turkey Successfully Sign Free Trade Agreement

KUALA LUMPUR, April 17 (Bernama) -- Malaysia and Turkey today successfully signed a bilateral Free Trade Agreement (FTA) in Ankara, Turkey, that would serve as the catalyst to boost bilateral trade to US$5.0 billion in 2018.

Malaysia was represented by International Trade and Industry Datuk Seri Mustapa Mohamed while Turkey was represented by its Minister of Economy Nihat Zeybekci.

Mustapa and Nihat Zeybekci signed the agreement, which is Malaysia's seventh bilateral FTA with foreign countries, after Japan, Pakistan, New Zealand, Chile, India and Australia.

The signing of the FTA was witnessed by Prime Minister Datuk Seri Najib Tun Razak and his Turkish counterpart, Recep Tayyip Erdogan.

"It is a significant FTA because it is between two moderate Islamic countries, two members of OIC (Organisation of the Islamic Conference), and two members of D8 (Group of Developing Eight).

"This agreement really puts impetus not just on our bilateral relation but also on OIC and D8," MITI Secretary-General Datuk Dr Rebecca Fatima Sta Maria said at a press conference today.

Total trade between Malaysia and Turkey increased 86 per cent over five years, reaching US$1.1 billion in 2013.

At its core, the Malaysia-Turkey FTA (MTFTA) is an arrangement that provides preferential market access for Malaysian goods entering the Turkish market and vice-versa.

Additionally, it also covers a number of areas related to goods, including rules to determine origin of products, disciplines that relate to standards and sanitary measures, as well as, other provisions that provide for facilitation of trade such as customs cooperation, economic and technical cooperation.

Rebecca said the most significant outcome of MTFTA is the fact that Malaysia was able to lock-in tariff preferences that were either on par with, or better than, those previously granted under Turkey's Generalised System of Preferences (GSP), which were no longer available for Malaysia, beginning Jan 1, 2014.

As such, with the signing and subsequent entry into force of MTFTA, Malaysian exporters can not only continue to gain preferential market access into, but also remain competitive in, the Turkish market.

Turkey's commitments under MTFTA required the country to eliminate and bind duties at zero per cent for close to 70 per cent of tariff lines, immediately upon entry into force of the FTA.

In return, Malaysia too has reciprocated and offered to bind duties at zero per cent for 70 per cent of our tariff lines.

Malaysian exports that would benefit from immediate duty-free treatment in Turkey include electronics & electrical products, rubber products, chemicals, selected iron and steel products, machineries, wood products and leather products.

Based on existing trade trends, the estimated value of Malaysian exports for these products is averaged at around US$250 million.

Rebecca said among potential areas of collaboration with Turkey are renewable energy sector, MRO services, aviation related products, defence related products, automotive sector and petrochemicals.

Meanwhile, Turkish exports to Malaysia that would benefit from immediate duty-free access include agricultural produce, fisheries, food products and mineral products.

Rebecca said as the FTA is realised over a period of eight years, more and more products would benefit from reduced or eliminated duties, resulting in about 86 per cent of tariff lines in Turkey that grant preferential market access to Malaysian exports.

Another significant gain for Malaysia is in the textiles and apparel sector, which make up Malaysia's largest export items to Turkey.

Under the FTA, Turkey will eliminate duties on all textiles and apparel products, with much of the elimination exercise taking place immediately upon entry into force of the FTA.

Furthermore, Turkey would eliminate all existing additional duties on textiles, apparel and footwear products.

These duties affect more than a thousand lines and range between 20 and 30 per cent.

Rebecca said Turkey also agreed not to reintroduce or impose new additional duties upon entry into force of the FTA.

For palm oil and palm products, Turkey offered a one-off duty reduction of 30 per cent from the current Most Favoured Nation rate.

Reduction of duties on these products essentially mean that Malaysian palm oil and palm products are placed at a competitive advantage in the Turkish market, over similar products originating from other countries.

In line with existing policies and practices, Malaysia has excluded rice, alcoholic beverages, tobacco, used tyres and weapons from any tariff concessions under this FTA.

Malaysia and Turkey began negotiations for the MTFTA in May 2010 with a view to conclude an FTA.

Almost four years and rounds later, both sides successfully closed the deal in January 2014, having arrived at a mutually beneficial package.

It was also agreed that the FTA will first focus on goods, and subsequently cover investment and services.

"Negotiations on services are expected to commence one year from the signing of MTFTA," said Rebecca.

Both Malaysia and Turkey will commence respective ratification procedures after the signing today.

The FTA would only enter into force after both sides have completed this process.

The ratification process for Turkey may take more than 12 months from the date of signing as Turkey has to obtain Congressional approval for the Agreement.

Rebecca said Malaysia would be able to complete its ratification process upon signing.

Earlier, Najib witnessed the exchange of memorandum of understanding between Felda Global Ventures Holdings Bhd's new company FGV Cambridge Nanosystems and Nanokomp Ileri Teknoloji Malzemeleri Arge Dan Ins San Tic Ltd Sti.

Through this agreement, FGV's unit will provide Nanokomp with a steady supply of graphene and carbon nanotubes.

FGV also inked the memorandum of understanding with Evyap Sabun Malaysia Sdn Bhd, a unit of Evyap Group Turkey to supply about 1,000 tonnes of palm oil for Evyap Sabun's oleo-chemical plant in Johor, based on their requirement and needs.