Korea-Malaysia FTA: A Bridge To Future Prosperity

South Korean Ambassador to Malaysia, Yeo Seung-bae, highlights the significance of the commitment demonstrated by both nations during Prime Minister Anwar Ibrahim’s visit to the East Asian nation this week, particularly in advancing efforts to conclude the Korea-Malaysia Free Trade Agreement (FTA) by 2025.

KUALA LUMPUR, Nov 27 (Bernama) -- The official visit of Prime Minister Datuk Seri Anwar Ibrahim to South Korea from 24 to 26 November holds great significance. Most notably, in the Joint Statement, Anwar and Korean President Yoon Suk Yeol agreed to conclude the negotiations of the Korea-Malaysia Free Trade Agreement (FTA) by 2025, explicitly committing to its early conclusion.

Once concluded, the Korea-Malaysia FTA will surely accelerate bilateral economic cooperation. It will not only solidify the foundation for trade and investment but also serve as a driving force for stable and sustainable economic collaboration.

In particular I would like to emphasise that the FTA is expected to benefit Malaysia in three key areas: fostering partnerships in emerging industries, attracting foreign investors, and facilitating institutional reform and administrative modernisation.

First, the Korea-Malaysia FTA is not limited to promoting trade in traditional manufactured goods. It will include strategies for collaboration in emerging sectors such as the green economy, bioeconomy, and digital industries, setting it apart from conventional FTAs.

The FTA aligns with Malaysia’s economic strategies, including the New Industrial Master Plan (NIMP 2030) and the National Energy Transition Roadmap (NETR). It will not only foster partnerships in green energy, biotechnology, and digital economies but will also support innovation in emerging industries, including joint R&D initiatives, technology sharing, and talent development, thereby contributing to the realisation of Malaysia’s MADANI economy vision.

Second, the FTA will facilitate foreign direct investment (FDI) inflows, which are crucial for Malaysia’s economic growth, and will help Malaysian businesses expand globally. Korea has a strong track record of increasing FDI in FTA partner countries, with a tenfold increase between 2006 and 2022. In 2022 alone, over 70 per cent of Korea’s total overseas investments were directed toward FTA partner countries.

The Korea-Malaysia FTA will make Malaysia an even more attractive investment destination for Korean businesses.

Finally, the Korea-Malaysia FTA will serve as a catalyst for institutional reform and modernisation. Economic historian William L. Bernstein, in his book A Splendid Exchange: How Trade Shaped the World, notes that success in the global marketplace depends not on size but on the quality of a nation’s laws, financial systems, and institutions.

The Korea-Malaysia FTA will support institutional upgrades in key areas such as economic cooperation, services, and investment, fostering a more competitive and innovative environment in Malaysia.

An FTA goes beyond merely providing economic benefits; it establishes an institutional foundation for closer cooperation and mutual prosperity between the two nations. In this sense, the FTA can be viewed as an economic declaration of the strategic partnership between Korea and Malaysia.

In the midst of a vast ocean of heightened geopolitical instability and economic nationalism, the Korea-Malaysia FTA will serve as a robust vessel for navigating turbulent waters.

The year 2025 will be pivotal for Korea-Malaysia relations. It marks the 65th anniversary of diplomatic ties, with Malaysia assuming the ASEAN chairmanship and Korea hosting the APEC Summit. The bilateral FTA to be concluded on this occasion will become another historic milestone, reaffirming Korea and Malaysia's commitment to working together for sustainable and mutual prosperity over the next 65 years.

Bilateral trade between both countries has surpassed US$20 billion annually for three consecutive years since 2021. Malaysia is Korea’s third-largest trading and fourth-largest investment partner within ASEAN, while Korea ranks as Malaysia’s eighth-largest trading and investment partner.

Malaysia, as ASEAN’s third-largest economy, ranks among the top 25 global trading nations and serves as a key player in semiconductors, petroleum products, electronics, and palm oil, among other sectors. Since the 1960s, Korea has actively participated in global trade, evolving into the world’s eighth-largest trading powerhouse and a pivotal hub in global value chains for semiconductors, automobiles, petrochemicals, electronics, and machinery.

-- BERNAMA