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CPTPP membership for Taiwan will benefit Malaysia

30 Jul 2020 / 01:11 H.

    THE US-China trade war and the Covid-19 pandemic have caused tremendous changes in the global economic and trade environment. All economies must reconsider who and how to do business in the future to sustain global competitiveness, increase production, and maintain employment.

    Taiwan performs well in the competitiveness assessment of the World Economic Forum (12th) and International Institute for Management Development (16th). In addition, Taiwan ranks among top 10 in Deloitte’s Manufacturing Risk Index and Cushman & Wakefield’s Global Manufacturing Competitiveness Index. At this critical time when the global supply chain is undergoing restructuring, Taiwan needs the world, and the world also needs Taiwan as a leading player in the global value chain.

    Based on the above, Taiwan strives to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with a view to securing trade and investment, diversifying trade connections, connecting with the international market and improving economic efficiency, and maintaining its position in the supply chain.

    Taiwan has close economic and trade relations with members of the CPTPP. While 30% of Taiwan’s imports come from CPTPP members, 20% of Taiwan’s exports go to CPTPP members. Among them, Japan, Singapore, Malaysia, and Vietnam are Taiwan’s top 10 trading partners. Regarding investment, 30% of Taiwan’s total FDI came from CPTPP members, while more than half of its investment (54%) went to CPTPP members.

    According to the WTO-OECD Trade in Value-Added (TiVA) database, Taiwan has the highest participation in global value chains among current CPTPP members.

    The high percentage of imports from CPTPP members to Taiwan demonstrates Taiwan’s tightly-knit relationship to the CPTPP value chain.

    A comparison of the complementarity index of trade in goods shows that 50% of Taiwan’s import demand are met by Singapore, Malaysia, Mexico, Japan, Canada, and Vietnam, and vice versa.

    Malaysia and Taiwan share multiple economic and commercial interests.

    Over the past decades, Taiwan has been one of Malaysia’s major trading partners.

    Last year, for instance, Taiwan is the seventh largest trading partner of Malaysia.

    Taiwan is also a significant investor in Malaysia, ranked the fifth of FDI up to date, focusing mainly on manufacturing industries, especially in the electronic, biotechnology and high technology-related sectors.

    This strong investment relationship provides a platform for industrial collaboration which underpins the solid trading relationship in between.

    Malaysia has been very proactive in attracting Taiwanese investment because the cross-collaboration between Malaysia and Taiwan in the electronics, green energy, information and communication technology, as well as creative and service industries could grant massive potential for Malaysia’s further economic development.

    The more than 1,750 Taiwanese companies that have already invested in Malaysia rely heavily on a stable supply of materials, equipment, and key components from Taiwan.

    This can be seen from the flow of trade: More than 75% of Taiwan’s exports to Malaysia are semi-finished products such as electrical components and mechanical parts.

    However, a challenge lying ahead is a lack of preferential trade agreement between Malaysia and Taiwan that maintains a number of barriers to trade and investment, including tariff and non-tariff ones.

    Taiwan’s inclusion in the CPTPP can eliminate tariffs on trading goods and encourage more Taiwanese companies to choose Malaysia as their investment destination and Asean production base as they seek to expand into the region.

    Given Taiwan’s niche participation in global high-tech domain and long-term trade and investment relationships with Malaysia, Taiwan’s inclusion in the CPTPP could help Malaysia advance its producing capacity as well as upgrade its production quality.

    Taiwan’s CPTPP membership may further extend all the benefits to Malaysia’s foreign trade and its employment accordingly.

    Jack Su

    Senior adviser

    Taipei Economic and Cultural Office in Malaysia

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