Malaysia-South Korea FTA Offers Myriad Opportunities, Boosts Sentiment of Business Community - Experts

By Nurunnasihah Ahmad Rashid

KUALA LUMPUR, March 29 (Bernama) -- The resumption of free trade agreement (FTA) talks between Malaysia and South Korea will open the door to a myriad of business opportunities for Malaysian companies, boosting confidence in trade and investment while strengthening their bilateral relations, experts said.
 
National Chamber of Commerce and Industry of Malaysia (NCCIM) president Soh Thian Lai said the FTA, if formalised, would pave the way for Malaysian companies to tap South Korea's advanced markets, which are famous for their technology and innovation, thereby fostering growth, enhancing competitiveness and potentially leading to job creation within local industries.
 
“This anticipation of more favourable trading conditions encourages Malaysian businesses to explore new markets, enhance their competitiveness and prepare for expanded opportunities.
 
“While the progress made before the stall (in talks) in 2019 provides a valuable foundation, Malaysia must reassess and refocus its priorities in light of current global economic trends,” he told Bernama.
 
On Tuesday, the Ministry of Investment, Trade and Industry (MITI) announced that Malaysia and South Korea have resumed talks on the FTA which is set to increase bilateral trade and investment between the two countries.
 
Bilateral trade growth and industry demand between the two nations have been encouraging, and the FTA is expected to cover the digital economy, the green economy, supply chain and bio-economy.
 
Soh said emphasis should be placed on sectors that promise sustainable growth and technological advancement.
 
Greater Trade Opportunity
 
The provost for research and innovation at the Malaysia University of Science and Technology, Geoffrey Williams, said it is very important for Malaysia to look for new FTAs to broaden the markets for Malaysian exports and reduce dependency on existing markets such as China.
 
“This gives more opportunity for new exports and investments for both countries. It will improve business confidence and interest in Malaysia as a trade and investment partner.
 
“It is important for both sides to be flexible and to reduce regulatory obstacles to make trade and investment as agile, innovative and competitive as possible. Flexibility and openness are key to getting a good agreement quickly,” he added.
 
Malaysia’s total trade exceeded US$422.52 billion (RM2 trillion) for the third consecutive year to reach RM2.64 trillion in 2023, chalking up a trade surplus of RM214.1 billion. It has been in surplus over a successive 26-year period since 1998. (US$1 = RM4.73)
 
Despite the surplus, the 2023 trade figure saw a 7.3 per cent decrease versus a year ago, in tandem with slower global demand, lower commodity prices, geopolitical uncertainties, high inflation rate, downcycle in the semiconductor sector and the high base effect of last year.
 
Complementing Existing Agreements
 
Small and Medium Enterprises Association (Samenta), national president William Ng said a bilateral FTA with South Korea would complement other multilateral agreements that Malaysia have and send a strong signal to businesses on both sides to intensify trade and investment.
 
“Given that Malaysia and South Korea are already committed to the Regional Comprehensive Economic Partnership (RCEP) and the Asean-South Korea FTA, any new FTA between us (and them) should focus on other emerging areas of trade and cooperation, including in areas of e-commerce, digital trade, healthcare and services,” he added.
 
Experts believe that the inclusion of services, investment, digital and biotechnology sectors in the trade talks is commendable. However, they also advocate for the inclusion of other vital sectors such as agriculture, education, renewable energy, semiconductors, financial services, tourism and education, ensuring a comprehensive and inclusive trade agreement that benefits a wider spectrum of Malaysian economy.
 
Time To Formalise Agreement 
 
Soh said achieving a balanced and beneficial agreement should be Malaysia’s priority rather than setting a rigid timeline.
 
“Nevertheless, a focused and efficient negotiation process could see the formalisation of the trade agreement possibly by the end of this year or early next year, provided that both parties maintain constructive and consistent dialogue.
 
“In avoiding future delays, and ensuring the momentum of the FTA talks, both governments must engage in regular, transparent communication and demonstrate flexibility and understanding of each other’s key concerns and priorities,” he added.
 
Williams said flexibility and openness are the key to getting a good agreement quickly.
 
“It is important for both sides to be flexible and to reduce regulatory obstacles to make trade and investment as agile, innovative and competitive as possible. A trade agreement should be achievable because there are good relations and mutual business and investment interests,” he added.
 
MITI Minister Tengku Zafrul Abdul Aziz said Malaysia-South Korea’s bilateral trade has trended up over the last few years.
 
As Malaysia’s eighth-largest trading partner, and a key collaborator to the country’s Look East Policy, the resumption of the FTA with South Korea is both timely and strategic.
 
“The Malaysia-South Korea trade relationship has existed for over four decades, and we hope to leverage this to help us move our target industries up the global value chain in sectors such as electrical and electronics (E&E), medical devices, pharmaceuticals, the green economy and chemicals,” he said in a statement.
 
In 2023, total trade with South Korea amounted to RM111.1 billion (US$24.3 billion). Malaysia was ranked South Korea’s third largest trading partner in ASEAN and 12th largest globally.
 
-- BERNAMA