LIBERALISATION IN SERVICES SECTOR

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LIBERALISATION IN SERVICES SECTOR
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Outline

• Overview of Malaysias Services Industry
• Modes of Supply
• Liberalisation of the Services Sector
• Malaysias Position in AFAS, WTO, FTAs
• Issues pertaining to Services

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Overview of Malaysias Services Industry

• The Services Sector has been targeted as the new
  engine of growth under IMP3.
• Total share of services in Malaysias GDP has
  grown by 9.7 per cent to 53.6 per cent in 2007
  (Non-Government 46.7) from 52.0 per cent in 2006
  (Non-Government 45.3 ).
• IMP3 targets an increase in the GDP contribution
  from 50.5 per cent in 2005 to 59.7 per cent by
  2020 to be achieved through
• an annual average investment of RM45.8 billion
  and
• an annual average growth of 7.5 per cent during
  the period.

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IMP3 Targets
  IMP3 Targets 2007 2006 2005
GDP Contribution () 59.7 (Y 2020) 46.7 45.3 44.6  
GDP Growth ( p.a.)  7.5 p.a. construction 5.7) 9.7 7.2 5.4  
Investments (billion)  RM45.8 (p.a. RM65.4 RM55.5 RM57.7  
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Trade Performance of the Services Sector
Jan-June 2008 (RM bil.) 2007 (RM Bil.) Growth 2006 (RM Bil.) Growth 2005 (RM Bil.)
Total Trade 98.25  192.2 16.0  165.7 21.6 153.5 
Exports 49.88  96.8 7.9  79.6 10.9 71.8 
Imports 48.37  95.4 10.8  86.1 5.4 81.7 
Trade Balance 1.51  1.4 n.a  (6.5) n.a (8.6)
Based on DOS and covered 3 categories travel,
transport and others.
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Modes of Supply of Services

• In the Trade in Goods, liberalisation is
  undertaken through
• reduction in tariffs and
• disbandment of Non-Tariff Barriers (NTBs).
• In the services sector, liberalisation is
  undertaken through four modes of supply

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4 Modes of Supply
MODES CRITERIA SUPPLIER PRESENCE
Mode 1 Cross-border trade Service delivered within the territory of the Member, from the territory of another Member. The advancement of technology has made this possible. E.g. internet (e-trading) Service supplier not physically present within the territory of another Member
Mode 2 Consumption abroad Service delivered outside the territory of the Member to a service consumer of the another Member. It involves the consumer traveling to the country in which the service is produced. E.g. tourism and education services. Service supplier not physically present within the territory of another Member
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4 Modes of Supply
MODES CRITERIA SUPPLIER PRESENCE
Mode 3 Commercial presence Service delivered by a service provider of one country through commercial presence in another country. E.g. FDIs Service supplier physically present within the territory of another Member
Mode 4 Movement of natural persons Service delivered by a service personnel of one country who travels to another country to provide the service. E.g. services provided by expatriates, business and professionals and foreign workers. Service supplier physically present within the territory of another Member
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Liberalisation of Malaysias Services Sector

• Liberalisation in the services sector is
  currently being undertaken in
• ASEAN through the ASEAN Framework Agreement on
  Services AFAS (full liberalisation to be
  undertaken by 2015 and logistics 2013)
• WTO through progressive liberalisation (General
  Agreement on Trade in Services -GATS)
• bilateral and regional FTAs through progressive
  liberalisation and binding of commitments in
  GATS.

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Preparation for Liberalisation of Services Sector

• Strengthen domestic regulations
• For non-regulated sectors, self-regulation is
  advised or if required, to advise the Government
  on regulatory requirements
• Review regulations that impede services exports
• Identify issues that impede the growth and
  development of services sub-sectors. Issues can
  be addressed in the MSDC for long-term
  competitiveness

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Preparation for Liberalisation of Services Sector

• Propose incentives that can assist the industry
  to become more competitive. Incentives are
  currently available through MATRADE and SMIDEC
• Undertake mergers and acquisitions to strengthen
  the industry
• Pursue MRAs with trading countries, in particular
  within ASEAN and FTA partner countries
• Build local capacity and identify niche markets
  in areas where we have comparative advantage
• Explore market access opportunities abroad
  through partnerships

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COMMITMENTS IN AFAS
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AFAS

• Signed in 1995
• - to enhance and strengthen cooperation among
  service suppliers in ASEAN
• and
• - progressively liberalise trade in services
  among ASEAN countries through
  reduction/elimination of restrictions.
• AFAS adopts the structure and approach of General
  Agreement on Trade in Services (GATS) .

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Progress of Services Liberalisation Under AFAS

• Four Rounds of Services Negotiations have been
  completed
• - First Round (1996-1998)
• 1st Package 1997 2nd Package 1998.
• - Second Round (1999-2001) 3rd Package.
• - Third Round (2002-2004) 4th Package.
• - Fourth Round (2005-2007)
• 5th Package 2006 6th Package 2007.
• 7th Package signed at the end of 2008.

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Equity Targets and Parameters (Mode 3)
PRIORITY SECTORS (ICT, tourism, healthcare, air travel and logistics) PRIORITY SECTORS (ICT, tourism, healthcare, air travel and logistics) OTHER SECTORS (including professional services) OTHER SECTORS (including professional services)
2008 51 2008 49
2010 70 2010 51
2013 (Logistic Services) 70 2015 70
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SERVICES NEGOTIATIONS IN WTO
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• Services Negotiations in the WTO
• Covered by the General Agreement on Trade
  in Services (GATS) of the WTO.
• Main objectives of GATS
• - increased transparency and predictability of
• rules and regulations on trade in
  services and
• - promote progressive liberalisation in services
  through successive rounds of negotiations.
• Services negotiations undertaken on
  request- offer approach, on bilateral and
  plurilateral basis.
• Liberalisation of commitments of members
  are
• multilateralised (applicable to all
  Members)

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• Market Access Negotiations
• Developed countries seek ambitious market access
  commitments and want
• - Members to bind existing autonomous
  liberalisation
• - foreign equity ownership of at least
  51
• Developing countries want
• - progressive liberalisation of services
  sectors
• - market opening in sectors where they
• have export interest

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• Malaysias Position
• Prepared to undertake commitments under the
  principle of progressive liberalisation
• Finalising the second revised Offer under Doha
  Round, encompassing 11 sectors and covering 85
  sub-sectors.

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FREE TRADE AGREEMENTS (FTAs)
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Approach to Services Negotiations in FTAs

• Based on the principle of progressive
  liberalisation, commensurate with capacity of
  industry.
• WTO plus
• Based on domestic consultations liberalisation
  to benefit domestic stakeholders
• Cooperation elements added where relevant for
  capacity building and transfer of
  knowledge/technology

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FTAs Signed

• Bilateral
• Malaysia-Japan Economic Partnership Agreement
  (MJEPA)
• Malaysia-Pakistan Comprehensive Economic
  Partnership Agreement (MPCEPA)
• ASEAN Dialogue Partners (where services
  packages have been concluded)
• ASEAN - China (ACFTA) 1st package
• ASEAN - Korea (AKFTA) Korea yet to ratify

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ISSUES PERTAINING TO SERVICES
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• A need for all Ministries to prepare a road-map
  for liberalisation of services under their
  respective purview
• A need for a coordinated approach for the
  development of the services sector e.g. through
  Malaysia Services Development Council (MSDC)
• To undertake outreach programmes to stakeholders
• To assist export-ready companies
• To compile comprehensive data on services
• To review of existing rules and regulations

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THANK YOU