Duty-free pact inked

KUALA LUMPUR: Malaysian exports that will benefit from immediate duty-free treatment in Turkey when the Malaysia-Turkey Free Trade Agreement (MTFTA) comes into force include electrical and electronic products, rubber products, chemicals, selected iron and steel products, machineries, wood products and leather products. The export value of these goods average US$250 million (RM809 million).
Turkish exports to Malaysia that will benefit from immediate duty-free access include agricultural produce, fisheries, food products and mineral products.
Trade and Industry Ministry Secretary-General Datuk Dr Rebecca Fatima Sta Maria said both Malaysia and Turkey will commence the respective ratification procedures after the signing yesterday.
"The FTA will only enter into force after both sides have completed this process," she told a media briefing.
The ratification process for Turkey may take more than 12 months, as Turkey has to obtain congressional approval for the agreement. Malaysia will be able to complete its ratification process upon notification to the Cabinet of the signed agreement. The Cabinet had on March 28, 2014 approved the MTFTA.
Under MTFTA, Turkey will eliminate duties for 68.7% of tariff lines immediately upon entry into force of the agreement, while Malaysia offered to eliminate duties for 70% of tariff lines.
As the FTA will be realised over an eight year period, more and more products will benefit from reduced or eliminated duties, where Turkey will reduce or eliminate 87% of total tariff lines while Malaysia will reduce or eliminate 98.86% of total tariff lines.
MTFTA enables Malaysia to lock-in tariff preferences that were either on par with, or better than those previously granted under Turkey's Generalised System of Preferences, which has been no longer available for Malaysia since Jan 1, 2014.
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.
Turkey will eliminate all existing additional duties on textiles, apparel and footwear products. These duties affect more than a thousand lines, and range from 20% to 30%.
For palm oil and palm products, Turkey has offered a one-off duty reduction of 30% 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.
The first round of the MTFTA will focus on negotiations covering trade in goods, while the negotiations on trade in services and investments are expected to commence one year upon the signing of MTFTA.
"We hope it (negotiations on services and investments) would not take more than one year," Rebecca said.
Malaysia's trade with Turkey has increased 86% over the past five years, reaching US$1.1 billion in 2013. During Turkey Prime Minister Recep Tayyip Erdogan's visit to Malaysia in January 2014, it was agreed that total trade would be targeted to be increased to US$5 billion in 2018.
Total Turkey investment in Malaysia stood at US$220 million while up to 2013, 37 Malaysian investments were approved by the Turkish government valued at US$527 million. Top Malaysian investments in Turkey include those by Khazanah Nasional Bhd and Felda Global Ventures Holdings Bhd.
"Turkey's investments in Malaysia are not as big as ours but we see potential going forward," Rebecca said, adding that potential areas of collaboration with Turkey include renewable energy, aviation and defence related products, automotive sector, petrochemicals and more.
Malaysia and Turkey began negotiations in May 2010.