Revival Of Malaysia-EU Trade Deal Benefits Malaysia's Key Export Sectors -- Economist

By Zarul Effendi Razali and Siti Noor Afera Abu

KUALA LUMPUR, Jan 20 (Bernama) -- The revival of negotiations on the stalled Malaysia-European Union Free Trade Agreement (MEUFTA) could significantly benefit Malaysia’s key export sectors, particularly in high-value goods and natural resources.

However, AmBank Group chief economist Firdaos Rosli said the main challenge lies in improving the business environment and addressing regulatory requirements rather than focusing solely on trade.

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“As a member of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), Malaysia is also well-equipped to negotiate high-quality issues such as intellectual property rights and environment, which are of great interest to the EU,” he told Bernama today.

In a statement from the Prime Minister’s Office (PMO) earlier today, Prime Minister Datuk Seri Anwar Ibrahim and President of the European Commission President Ursula von der Leyen announced the resumption of negotiations for the MEUFTA, marking a significant milestone in strengthening Malaysia’s economic ties with one of the world’s largest trading blocs.

The PMO said the resumption of talks also underscores Malaysia’s commitment to fostering deeper economic ties with the European Union (EU), a major trade and investment partner for Malaysia.

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“This milestone also reflects the enduring strength of partnership between both Parties and their shared commitment to fostering economic prosperity,” it said.

According to the PMO, the MEUFTA is expected to unlock immense benefits across multiple sectors of Malaysia’s economy while strengthening the global supply chain in critical sectors.

“It is poised to bolster exports from sectors such as electrical and electronic products, palm oil and its derivatives, as well as optical and scientific equipment to the EU market, among others.

“Furthermore, the MEUFTA will catalyse significant investments from the EU in cutting-edge sectors such as green energy and advanced manufacturing, aligning with the industrial reform goals of the New Industrial Master Plan 2030,” it said.

Meanwhile, Firdaos also noted that Malaysia had gained from global supply chain realignments during the initial US-China trade tensions.

“With the new US administration considering imposing higher tariffs on certain nations, I believe that the global trading dynamics will inevitably shift further and intensify, making it harder for EU exports and corporations domiciled abroad to eventually compete in traditional markets like Malaysia,” he said.

Consequently, Firdaos stressed that securing a trade agreement with Malaysia is becoming crucial for the EU to maintain its market share and sustain growth.

“I think Malaysia should take a more offensive stance in attracting more investments from the EU in the renewed negotiations,” he opined.

While waiting for the MEUFTA, Firdaos urged Malaysian businesses to actively prepare and enhance their capabilities to maximise the agreement’s benefits once it comes into effect.

Malaysian ambassador to Belgium, Luxembourg, and the EU, Datuk Mohd Khalid Abbasi Abdul Razak, said on Sunday that the negotiations for the FTA started in 2010 but stalled in 2012 following Malaysia’s reservations over the EU’s palm oil procurement policies, subsidies and sustainability clauses.

“One of the reasons for the breakdown is discrimination over palm oil, particularly claims regarding open burning and labour practices.

“We have been doing well in clearing a number of issues that have stalled the FTA negotiations, including the introduction of Malaysian Sustainable Palm Oil (MSPO) standard,” Mohd Khalid said in a press conference in conjunction with the Prime Minister’s working visit to Brussels, Belgium on Jan 19-20, 2025.

Prof Dr Yeah Kim Leng, senior fellow and director of the Economic Studies Programme at the Jeffrey Cheah Institute on Southeast Asia at Sunway University, said the FTA has the potential to further increase Malaysia’s sizeable trade and investment flows with the EU, thereby boosting its external resilience and geographical diversification.

“With elevated uncertainties in the global trade environment under Donald Trump’s second administration, the FTA will be helpful in offsetting any decline in Malaysia-US trade and investment flows.

“Moreover, a further reduction in non-tariff barriers will also enhance the country’s attractiveness to investors from the EU, where Malaysia is eyeing greater technology investments to accelerate its shift to higher value manufacturing and service industries,” he added.

-- BERNAMA