KUALA LUMPUR: The fear of free trade agreements (FTAs) among manufacturers is more imaginary than real as the opening up of a market brings more good than harm, says the Federation of Malaysian Manufacturers president Tan Sri Yong Poh Kon.
Under the Trans-Pacific Partnership (TPP), Yong said Malaysia's manufacturers are set to reap more benefits and opportunities due to the greater market access, burgeoning population of the member countries and tax breaks.
He said generally, there is a fear of FTAs among manufacturers as they are concerned that an influx of duty-free imports will affect their businesses.
"But when you look at Afta (Asean Free Trade Area), which opened up in 2000, members began to see the benefits of a competitive environment, producing competitively and exporting through trading partners in member countries.
"Furthermore, 62 per cent of Malaysia's trade with FTA partners at the moment is duty-free.
"For me, the fear of the TPP is more imaginary than real," Yong said at the Business Times Insight dialogue session, "Trans-Pacific Partnership Agreement - Opportunities and Challenges for Malaysia", here, yesterday.
Yong said past FTAs by Malaysia used to be prickly but as time moved on, issues were resolved and businessmen began to enjoy tremendous benefits from the trade deals.
"Once the FTAs are signed, Malaysia had a 10 to 12 per cent incremental increase in trade, which is important, especially now, under the increasingly difficult and uncertain global economic conditions."
Yong cited the case of a woman entrepreneur who is supplying plastic automotive parts to General Motors and Chevrolet in Mexico.
She is able to export freely to the United States under Nafta (North American Free Trade Agreement).
"She is doing well, helped by an efficient supply chain and prompt delivery time. It's the businessmen who trade and it takes the businessmen to recognise that the TPP is a level playing field for businesses. We don't miss it until we lose it."
Yong said a company in Nilai, Negri Sembilan, which is exporting 55 per cent of its output to Europe, is going through a tough time due to the uncompetitive tax environment in Europe. Currently, Europe imposes a 20 to 30 per cent tax on Malaysian companies but Indonesia and Vietnam enjoy zero tax.
Yong said trading is part of Malaysia's DNA and TPP is the way forward for Malaysia due to its small population, unlike China, which has a strong domestic economy that is able to shield it from global economic uncertainties.