Malaysian government decision not to ratify CPTPP comes under pressure

August 6, 2020: Darell Leiking, Malaysia’s former minister of international trade and industry and MP for Penampang has confirmed that on November 29, 2019, the government decided that it had made the right decision in not ratifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This was based on a one-year research effort, which had found potential negative impacts on domestic industry.

Mr Leiking was rebutting a claim made on August 4, 2020, by the current Minister, Azmin Ali, that a September 5, 2018, cabinet decision to conduct research on the impact of the CPTPP without specifying when it might ratify, meant that the present government could go ahead to ratify now.

Mr Leiking reported that the cabinet deliberated the CPTPP several times after September 5, 2018, and had decided that all issues had to be resolved prior to ratification. Many of these issues had been raised by Azmin’s then economics ministry, now the Economic Planning Unit, who presented to the Economic Action Council on Sept 19, 2019.

The EPU found that while Malaysia’s exports would rise by RM516 million (US$123 M) per year, its imports would surge by RM10 billion (US$2.4 B) per year, mainly in automobiles and plastics. It predicted significant impacts on the trade balance and government revenue, as well as on Petronas and Khazanah Nasional, government procurement, the Malaysia Plan, local firms and SMEs, local share ownership, bumiputera firms, and farmers and fisherfolk.

As well, the CPTPP includes Investor-State Dispute Settlement (ISDS), allowing a foreign investor to bypass the national court system to sue the Malaysian government in private international tribunals for unlimited compensation if it can argue that a new law or policy harmed its investment.

The cabinet resolved on July 31, 2019, to reject ISDS on principle, and Mr Leiking used that to persuade the 15 other nations participating in the Regional Comprehensive Economic Partnership (RCEP) negotiations to drop ISDS from that agreement.

Malaysia, Brunei, Chile, and Peru have yet to ratify the CPTPP. Australia, Vietnam, Japan, Canada, Singapore, New Zealand and Mexico have ratified it. It entered into force for those who had ratified it, on December 30, 2018.