THE HIGHER THE CLIMB

Malaysia 2017 | ECONOMY | INTERVIEW

TBY talks to Dato' Sri Mustapa Mohamed, Minister of International Trade and Industry (MITI), on economic integration, investments in infrastructure, and the future of free trade.

 Dato’ Sri Mustapa Mohamed
BIOGRAPHY
An economist by training, Dato’ Sri Mustapa Mohamed holds a first-class honors degree in economics from the University of Melbourne and a master’s in economic development from Boston University. Born in 1950, he was first elected to parliament in 1995. He has since held a number of senior governmental positions, including Deputy Finance Minister, Minister for Entrepreneur Development, Minister for Higher Education, and Minister for Agriculture and Agro-based Industry. He has been Minister for International Trade and Industry since 2009.

What is your vision on the future of ASEAN economic integration?

ASEAN is a dynamic region with excellent growth prospects, a large growing young population, and a rising middle class that is becoming more affluent. Within ASEAN, we compete to attract multinationals to set up their regional or global headquarters, and this drives us all to build a great infrastructure and a strong and attractive business ecosystem. In addition, having prosperous and stable neighbors around is great for any country, and an increasingly stable ASEAN benefits all countries. Intra-trade within the EU currently stands at 70%, compared to 24% within ASEAN as we do not have seamless trade of goods and services across borders yet; however, we are moving toward convergence, uniform standards, and reducing barriers. In December 2015, we declared ourselves an ASEAN Community with three pillars: political security, economy, and social development. The levels of development are different, and we have different cultures and languages; however, we have expressed our commitment to achieve closer integration.

Malaysia is in the process of signing the Trans-Pacific Partnership (TPP) and the China-initiated Regional Comprehensive Economic Partnership (RCEP). How will an open market of 3 billion inhabitants affect the Malaysian economy and its competiveness?

As a trading nation with a limited domestic market of 30 million people, we need to constantly look beyond our borders for trade, investment, and economic growth. To date, Malaysia has signed and implemented 13 FTAs that have boosted our trade and opened up numerous opportunities for our local companies. Malaysia currently ranks as the 23rd largest exporting nation; however, we cannot be too reliant and should continuously aim to diversify our trade. Our entry in the TPP, together with 11 other nations and a combined GDP of USD27.5 trillion, would mean a significant expansion of our trade opportunities, particularly in Canada, Mexico, and Peru, with whom we currently do not have preferential access. We need to wait for a clearer picture on the TPPA but Malaysia is prepared for any eventuality.

Malaysia is in the midst of a 10-year long, MYR100 billion investment in infrastructure. How will this enhance the attractiveness of Malaysia as an investment destination?

Infrastructure and connectivity are critical in supporting economic growth as they improve production and logistical efficiency. Our network of first-class infrastructure now includes multiple nationwide highways, seaports, airports, 4G networks, industrial parks, and integrated economic zones. The North-South highway over peninsular Malaysia was a game changer and a starting point for further highway development in the country. In 2014, the World Bank ranked us 25th in the global Logistics Performance Index, in particular because of our strategic location in the Straits of Malacca and our sophisticated ports. With a compound annual growth rate of 20% in our cargo and container volume, we are currently working to increase capacity, for example at the Malacca gateway project. In Kuala Lumpur, we have made strategic investments in the expansion of our public transport system, with a recent extension of our LRT network and the opening of phase one of our MRT system in December. The projected High-Speed Rail (HSR) to Singapore, for which both prime ministers concluded an MoU in 2016, will cut travel time between the two capitals to just 100 minutes—another major boost for our bilateral relations there.

What are your expectations for the year ahead?

The ministry is optimistic about the overall prospects of Malaysia's economic growth, and we expect that private investments will continue to be the key growth catalyst next year and will keep growing at 9.4% per year. In 2016, we anticipate a combined total of almost MYR300 billion.