What is Trade Restrictions of Malaysia ?

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 What is Trade Restrictions of Malaysia ?


           According to Richards, “Malaysia has benefited considerably from its liberal trade policy" (1993: 29). Such policy has increased worldwide competitiveness through strategic exposure and promoted economic growth. Presently, Malaysia has one of the most liberal trade policies in the East Asian region. The nation's policy of liberalizing trade is not only incorporated with the WTO and AFTA objectives, but also micro-economic objectives. Reducing tariff levels will not only decrease inflationary pressures in the expanding economy but also increase the competitiveness of Malaysian industry throughout strategic exposure. Liberalization can also enhance export incentives from FDI's as seen in the nine FTZs. In line with microeconomic change, trade restrictions have been aligned with development strategies which are often based upon the notation of comparative advantage. Selective protection promotes the development of industrial subsectors that have the potential to produce high value added products, which are intended to replace light manufacturing activities as the main exporters” (Brown 1993: 45).

Tariff Structure 

          As a link to the policy of maintaining a stable economy with past budget strategies of controlling inflation, there have been major reductions and abolition of import duties on goods and services. The 1995 budget proposes a reduction of tariffs imposed on over 2,600 items of which a majority are food items (Budget 1995: 22). Also, tariffs on building materials and household appliances have been reduced. These measures will not only control inflation, but also enhance the quality of life and favour the overall climate for investments. However, Ad Valorem taxes are imposed on imported goods and services (refer to Appendix 4).

 Strategic Exposure

             Strategic exposure represents a crucial component in Strategic Trade Theory. The rationale behind lowering barriers to trade and exposing local industry to foreign competition is to create a more competitive domestic industry (Hamilton 1989: 4). Such a Level Playing Field policy will force local firms to increase their competitiveness to survive. Strategic exposure represents a direct link to becoming an industrialized nation by 2020 and the realization of economic goals. Incorporating FDI as a strategic measure to enhance technological know-how can reduce domestic learning and experience curves in selected industries. By giving foreign investors considerable tax deductible incentives in areas such as training of local employees, research and development and in promotion of exports, Malaysia has been able to increase world wide competitiveness as demonstrated by increasing exports and GDP (Carrol, Errion 1991:21).

           Malaysia aims for the year 2000 to have at least 1.6% of GDP spent on R&D and is predicting that at least 40% will come from the private sector. Furthermore, all firms operating in Malaysia are expected to employ and train Malaysian and Bumiputra personnel so that the over-all employment represents the ethnic break-down of the nation (30:40:30). In recent years, this has put much pressure on companies in increasing the portion of Bumiputras in managerial and in professional positions (Hiebert 1995: 42). Foreign investors are allowed to have expatriate personnel, but are encouraged to attract local personnel for these positions. Improvement in the quality of education and training form a crucial part of the nation's industrial development strategy (Brown 1993: 47).

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