Malaysia’s trade policy continues to focus on greater integration into the world economy and enhancing its global position as a trading nation. Malaysia has consistently maintained its position as the 18th largest global exporter and the 20th largest global importer in the past few years.

Trade policies focus on ensuring that export growth remains robust through strengthening its presence in traditional markets and diversifying into non-traditional export markets. Trade policies emphasise both internal and external improvements to ensure that export performance remains on track.

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Domestically, policies are geared towards the promotion of high quality and innovative products, creating brand awareness and consumer recognition. Another major objective is to diversify the product range away from over-reliance on electrical and electronic products.

Tariff liberalisation

The trade regime has been progressively liberalised as part of economic development policies. The tariff structure is simplified to encourage imports. Malaysia’s tariff lines, on an ad valorem (in proportion to value) basis, covers 99.3% of total tariff lines. Average applied tariff levels fell to 8% after increasing to 9.2% during the Asian financial crisis in 2001.

Bilateral and regional channels are also being pursued to strengthen the export market base. Negotiations have been concluded to create the Japan-Malaysia Economic Partnership Agreement, and also on an early harvest package with Pakistan. Bilateral negotiations are ongoing with the US, Australia, New Zealand and Pakistan.

Malaysia is trying hard to actively promote trade with new and emerging markets, with the fastest growth being with China, India, the Middle East and new EU members.

Free zones are integral to these trade objectives as well as to industrialisation initiatives, and, as with trade and industrialisation, diversification holds the key to long-term success of the zones. Or at least that is the thinking behind the newest arrival, the 1000-acre Port Klang Free Zone (PKFZ) on Pulau Indah Island, 70 kilometres west of Kuala Lumpur.

“What we are after is diversity,” says Noel Gulliver, PKFZ general manager. “The experience in Dubai shows us that it is diversity that gives strength – the minute you go into one particular industry you are subject to fluctuations in that industry.”

The right mix

Keeping diversity in mind at all times “means sometimes having to make hard decisions”, he says, such as turning down investors who might be interested but don’t add the right element to the mix. PKFZ is looking at sectors across the board, including manufacturing, trade, automotive, furniture and logistics.

Mr Gulliver says PKFZ can provide companies in this wide range of target industries two unique advantages: centrality and affordability.

“We’re always reminded of Singapore but if you ask me it is a one-dimensional place. It has a port and maybe an airport, but for an affordable place for a trading and logistics hub you can go up and down the coast to Thailand [and beyond] and not find one,” he says.

“There is a need for a regional trading hub in this region, and everywhere else is expensive.” Land at PKFZ costs about RM600 ($170) a square metre.

“We are trying to create a different type of free zone – more in line with Jebel Ali in Dubai as well as in line with the prime minister’s objectives,” says Mr Gulliver.