RESTRICTED
WORLD TRADE WT/TPR/G/31
29October 1997
ORGANIZATION(97-4738)
Original: English
TRADE POLICY REVIEW
MALAYSIA
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3ofthe
Marrakesh Agreement Establishing theWorld Trade Organization), thepolicy statement bythe
Government ofMalaysia isattached.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onMalaysia.Malaysia WT/TPR/G/31
Page 3
TABLE OFCONTENTS
Page
EXECUTIVE SUMMARY 5
(1) Economic andTrade Environment 6
(2) Malaysia 'sTrade Regime 7
Overview 7
(3) Trade Policy Developments 1993-1997 7
Implementation ofUruguay Round Commitments 7
Tariff Liberalization Initiatives 8
Deregulation andMeasures onServices 9
(a) Banking Sector 9
(b) Insurance Sector 9
(c) Capital Market Sector 9
Measures onInvestment 10
New Measures onProtection andPromotion ofIntellectual
Property Rights 11
Participation inRegional Groupings 12
ASEAN 12
(4) Future Direction andStrategy 12Malaysia WT/TPR/G/31
Page 5
EXECUTIVE SUMMARY
1. TheMalaysian economy hasconsecutively enjoyed strong ratesofgrowth since 1990. This
vibrant andsustained growth hasbeenattributed toanumber offactors, particularly theliberal trade
andinvestmentpolices,economicrestructuringandderegulationaswellasastablepoliticalenvironment.
2. TheMalaysian government 'spro-business stance andactive private sector efforts havehelped
Malaysia integrate intoandbenefit from theworld economy. Thishadresulted inFDIinflows,
accelerated theindustrialization process, aided thetechnology transfer process andevolved Malaysia
intoaproduction baseofhighquality products.
3. Thedynamism oftheexternal sector hasbeenafundamental factor inMalaysia 'seconomic
advancement, withtheexport sector contributing tomore than75%oftheGNP. Future economic
expansion andtherealization ofthevision tobecome adeveloped country bytheyear2020willhinge
onfurther growth ofthissector. Thetargeted annual economic growth of7%visualised under Vision
2020 objectives istobeexport led.
4. Malaysia 'stradepolicy isdesigned topromote andsustain economic growth. Malaysia 'sopen
economy,underpinnedbyaliberaltradepolicy,providesthemeansforeconomicgrowthandadaptability
toanincreasingly globalized economy. Malaysia takesaglobal approach inbothtrade andinvestment
relations.
5. Insustaining tieswithitstraditional partners, Malaysia iscontinuously forging newtradeties
withother trading nations. Whilst pursuing amultilateral approach, Malaysia isalsosupportive of
regional initiatives (likeASEAN, APEC, EAEC) which would beabletostrengthen economies insuch
regional groupings, hence providing strong andviable trading partners forMalaysia.
6. Malaysia, inparticular, attaches great importance tothemultilateral trading system. The
multilateral trading system hascontributed much tothestability andgrowth ininternational trade.
Malaysia has,therefore, always supported theroleoftheWTO instrengthening themultilateral trading
system. Malaysia iscommitted toimplementing theobligations andresponsibilities arising fromthe
Uruguay Round andother subsequent negotiations under theITAandbasic telecommunications.
7. Inthemarket access area,Malaysia iscommitted towards continual liberalization oftradeand
investment ingoods andprogressive opening oftheservices sector. Malaysia willcontinue topursue
tariffreduction inlinewithitstrade liberalization efforts andcommitments inASEAN andtheWTO,
APECandotherinitiativestoenhanceSouth-SouthCooperation.Non-tariffmeasureswouldcontinuously
bereviewed andwhere appropriate beeliminated.
8. Intheservicessector,MalaysiahasmadesubstantialcommitmentsunderGATS.Inthefinancial
services sector, Malaysia hasmade additional commitments under theinterim financial agreement to
allow greater foreign participation intheleasing andstockbroking sectors. Malaysia iscommitted
inimplementing themarket access package foravariety ofbusiness, professional, telecommunications
andhospitality services.
9. Malaysiawillcontinuetomaintainaliberalinvestmentregimewithopportunitiesandflexibilities
forforeign equity ownership, enhancing thetransparency ofitsinvestment regime aswellasnurturing
acompetitive environment forbusiness.WT/TPR/G/31
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10. Intheareaofderegulation, Malaysia hasreduced substantially government involvement in
business andactively promoted private sector initiatives ineconomic development. Topromote
efficiency, amajor programme ofprivatization wasundertaken inpower generation, telecommunication,
infrastructure andother government services. Thisapproach istobecontinued inthefuture.
11. TheGovernment willwork together withtheprivate sector inpromoting abalanced, broad
based resilient andinternationally competitive economy. Thiswould beachieved through productivity
driven growth, skills upgrading, capital deepening andtechnology investments. Inthemedium term
efforts toachieve further structural transformation oftheMalaysian economy willinclude increasing
thecontribution oftheservice sector andtherestructuring ofthemanufacturing sector.
12. Themanufacturing sector isexpected tocontinue itsroleastheengine ofthenation 'seconomic
growth. Thesector isprojected togrow by10.5% inGDP increasing from 27%in1990 toabout
37%bytheyear2000. Inlinewiththis,manufactured exports areexpected toaccount for81.8%
oftotalexports bytheyear2000 compared to60.4% in1990.
13. Malaysia would assume anactive andpositive roleininternational foraalongside herregional
andbilateral approach topromote liberalization andfacilitation oftrade, taking intoaccount changes
inworld trading patterns aswellinMalaysia 'sbroadening trade interests.
(1) Economic andTrade Environment
14. Theperiod 1993-96 witnessed thecontinuation ofrapid economic progress which started back
inthelate1980s. During theperiod, realGDP grew atanaverage annual rateof8.8percent, with
thehighest growth raterecorded at9.5percentin1995before moderating toamore sustainable growth
rateof8.2percentattheendoftheperiod. Infact,1996marked theninth consecutive yearofrapid
growth where theeconomy enjoyed thelongest period ofsustained robust growth. Withthisgrowth,
percapita GNP rosefromRM8,022 (US$2,971) in1993 toRM11,234 (US$4,493) in1996. More
significantly, thishighgrowth wasachieved withpricestability asinflation wassuccessfully contained
below 4percentthroughout thewhole period. Thelowrateofinflation resulted inbetter purchasing
power without increases incosts orlowering ofthelevelofcompetitiveness.
15. Themanufacturing, construction andservices sectors contributed increasingly toeconomic
growthwhilecontributionsfromagricultureandminingdeclinedsteadily.Since1993,themanufacturing
sector accounted forabout onethirdofGDP andmore thanthree quarters ofmerchandise exports.
Themanufacturing sector 'sshare of28.8% ofGDPin1992increased to34.3% by1996. Atthesame
time, itsbasehadbecome broader andmore sophisticated. Asimilar trend wasnoted forexports of
manufactures withtheshare toGDP in68.6% in1992 increasing to76.8% by1996.
16. Theperiod sawtheincreasing roleoftheprivate sector astheengine ofgrowth. Private
investment grew at16.6percentperannum inrealterms, amounting toRM207.4 billion
(US$82.3 billion) innominal terms, higher thananticipated. Thiswasduetothehighinflows offoreign
direct investment aswellasenhanced domestic investment following theDomestic Investment Initiative
(DII) launched in1993. Theaccelerated privatization programme alsocontributed tothegrowth of
private investment aswellasimproved efficiency andproductivity thatledtorapid economic growth.
17. After registering astrong growth of22.4% in1995, Malaysia 'sexternal trade grew by3.9%
toRM394billion (US$157.6 billion) in1996. Theslower growth wasduetosharp deceleration in
bothexport andimport growth during theyear. Theimprovement intheexternal trade position has
enabled themerchandise account ofthebalance ofpayments torecord asignificantly larger surplusMalaysia WT/TPR/G/31
Page 7
ofRM8.6billion (US$3.44 billion) in1996, against asurplus ofRM0.2billion (US$0.078 billion)
in1995. Thedeficit intheservices account narrowed slightly toRM18.8billion (US$7.52 billion)
in1996(1995:RM19.0billion(US$7.48billion),mainlydueto27%growthinreceiptsfromnon-factor
services suchasfreight andinsurance, airtransportation, travel andprofessional services which outpaced
the17%growth intheimports ofthese services. Consequently, thecurrent account deficit narrowed
significantly toRM13.0million (US$5.2 million) (5.5% ofGNP) in1996(1995: 9%ofGNP). The
basic balance recorded adeficit ofRM1.0billion (US$0.4 billion) in1996 asagainst adeficit of
RM2.5billion (US$0.98 billion) recorded in1995, reflecting thatthecurrent account deficit waslargely
financed bylong-term capital, especially intheformofcorporate investments. Thebasicbalance would
haverecorded asurplus ofRM1.5billion (US$0.6 billion) ifnotforthenetprepayment ofexternal
debtamounting toRM2.5billion (US$1 billion). With theoverall balance recording asurplus of
RM6.2billion (US$2.48 billion), theinternational reserves ofBank Negara Malaysia roseto
RM70billion (US$28 billion) asattheendof1996 from RM63.8billion (US$25.1 billion) asat
theendof1995.
(2) Malaysia 'sTrade Regime
Overview
18. Over thelastdecade, Malaysia hasundergone significant structural changes evolving from
acommodity based producer exporter intoanincreasingly diversified andbroad based economy.
Itisnowmore industrialized andmore oriented towards theexports ofmanufactured products.
19. Fromalowrankingof40thin1980,MalaysiaaccordingtorecentWTOstatisticsonInternational
Trade hasmoved upto19thlargest exporter and17thlargest importer intheworld
20. Malaysia 'sforeign trade isconducted within theframework ofafreeenterprise system. The
conduct ofthetwowaytrade iscompletely inthehands oftheprivate sector. Malaysian traders are
freetoimport andexport toallfriendly countries irrespective oftheirsocio-political systems.
21. BearinginmindtheheavydependenceoftheMalaysianeconomyontheexportsector,Malaysia's
basic foreign trade policy approach favours aprogressive liberalization oftrade onaglobal basis.
22. Malaysia'sopeneconomyunderpinnedbyoutwardlookingtradepoliciesandpracticesincluding
itspolicy oftrade liberalization provide themeans foreconomic growth andadaptability toan
increasingly global economy. Itstrade andeconomic policies areshaped tofacilitate theeconomy
tointegrate intothevagaries oftheglobal economy andpartake intheopportunities resulting from
it.
(3) Trade Policy Developments 1993-1997
Implementation ofUruguay Round Commitments
23. MalaysiahasmadesubstantialoffersintheUruguayRoundcontributingtogreatermarketaccess
forimports ofindustrial andagricultural goods. Thescope oftariff bindings increased from1%to
65%asaresult oftheUruguay Round negotiations.
24. Malaysia 'smarket access offers inthegoods sector nowcover 70%ofMalaysia 'stotalimports.
Malaysia 'smanufactured exports areenvisaged toenjoy 45%tariff cutsinitsmajor export markets.
Asaresult oftariff liberalization commitments intheagriculture sector, tariffs insome ofMalaysia 'sWT/TPR/G/31
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major markets willbereduced by35%. Malaysian producers andexporters would havetofacestiffer
competition inthedomestic market inviewofhertariffliberalization commitments aswellastomeet
theincreasing competition from emerging economies intheinternational market.
25. Theimprovedtradingrulesinareassuchasanti-dumpingandcountervailingmeasures,subsidies,
useofsafeguards, rulesoforigin, pre-shipment inspection, technical barriers totrade, import licensing
proceduresandSPSwillprovidearelativelymorepredictableandtransparentglobaltradingenvironment.
Malaysia hasinitiated actions tomodify some ofitsexisting legislations andpolicies aswellasintroduce
newlegislations toconfirm totheWTO obligations asrequired under theUruguay Round commitments.
26. Themeasures include:
- phasing outlocalcontent measures tiedtoincentives by2000
- adjustments tothecustoms valuation system
- phasing outexport subsidies inthemanufacturing sector bytheyear2003
- ensuring consistency oftheMalaysian Countervailing Duty andAnti-Dumping Act
1993 withtheWTO agreements
- formulating additional legislation toprovide further protection ofintellectual property
rights suchasthose relating tolayout designs ofintegrated circuits, industrial design
andpatent protection forplant varieties.
- drafting anewActtoaccommodate alltheprovisions intheSPSAgreement andother
inadequacies intheexisting Act.National standards oncontrol, inspection andapproval
procedures willbedeveloped based onrelevant international standards.
- ExistingMalaysianstandardsarebeingreviewedtoalignthemtointernationalstandards.
27. Theexisting incentive system isbeing reviewed toensure incentives areconsistent withWTO
disciplines asembodied intheTRIMs andSubsidies Agreements.
28. Asrequired under theUruguay Round agreements, Malaysia hassubmitted various notifications
totheWTO Secretariat. These wereundertaken according tothespecified deadlines andtimeframe.
Tariff Liberalization Initiatives
29. Intheimplementation oftheUruguay Round market access commitments, tariffs ofatotal
of3426 items havebeenreduced thusfar.Thisincluded tariff reductions on988industrial products
and49agricultural products. Some ofthese included mainly plastic andplastic articles, chemical
products, wood products, paper andpaper products, vehicles andaccessories, machinery andmechanical
appliances, precision instruments andmedical equipment. Several agricultural items, experienced
accelerated tariffcutsorhadtheirratesreduced much lower thantheceiling bound rates. These included
fresh temperate andprocessed fruits aswellasvarious kinds offoodpreparations.
30. Thetariff reduction exercises undertaken bytheMinistry ofFinance inOctober 1994
(Budget 1995) andinAugust 1995 sawtariffs being reduced onatotalofover3,000 items. This
included tariff reductions onthe1,566 industrial items and751agricultural items. Oftheindustrial
items, duties on217items werereduced atratefaster (acceleration) thanthatrequired under theWTO
proportionate cutsreduction schedule, 318items werereduced totheirbound rateswhile 1,031 items
were reduced tolevels lower thanthebound rates(deepening). Foragricultural products, 80items
hadtheirtariff ratesreduced faster thanwasrequired, 147items werereduced totheirbound rates,
while another 524items hadtheirtariff ratesreduced lower thanthebound rates. Onthe12tariffied
agricultural products, theapplied ratesarecurrently zero.Malaysia WT/TPR/G/31
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31. Inthe1996 Budget excise tariffs onatotalof1,047 items werereduced. Thisincluded tariff
reduction on998industrial items and49agricultural items. Oftheindustrial items 33werereduced
ataratefaster (acceleration), 125items werereduced totheirbound rates, while 840items werereduced
tolevels lower thanthebound rates(deepening). Foragricultural products, 12items hadtheirtariff
cutsaccelerated. 12items reached theirbound ratelevel, while another 35items hadtheirtariff rates
lower thanbound rates.
32. Fortheyear1997, 62items experienced tariff cuts.
Deregulation andMeasures onServices
33. Asoneofthesignatories totheGATS and"interim agreement" onfinancial services, Malaysia
iscommitted togradual andprogressive liberalization offinancial services sector. Malaysia 'sschedule
ofcommitments covers atotalof14sectors outofthe16sectors inbanking, insurance, securities and
otherfinancialservicesidentifiedundertheGATSforliberalization.Malaysiamadesubstantivebindings
onastandstill basis. Inbanking, insurance andthesecurities industries, theoffers inmarket access
binds theGovernment tomaintain current policies affecting foreign participation. Malaysia alsomade
amajor improvement through thewithdrawal oftheMFN exemption filedinDecember 1993, sothat
Malaysia 'scommitments toallforeign services suppliers areonafullMFN basis. Inaddition, Malaysia
improved itsoffers bybinding newentry inOffshore Financial Centre (IOFC), andgeneral reinsurance
andcharge cardbusiness. Entry isalsopermitted through investment inexisting financial institutions
subject toanaggregate foreign shareholding limitof30%. Inthecaseoffinancial leasing companies
andstockbroking companies, aggregate foreign shareholding willbeincreased to40%witheffect from
1July2000.
(a) Banking Sector
34. Over theyears, Malaysia hasremoved many structural barriers thatinhibit competition and
efficiency without compromising prudential standards. Thestructural deregulation wasimportant in
creating amore "level playing field" among thevarious groups ofbanking institutions andinmaking
thesector more liberal andcompetitive. Oneofthemajor reforms undertaken wastheintroduction
ofthetwo-tier regulatory system forthebanking institutions, which sawtheemergence ofstrong and
well-capitalized institutions which werepermitted toundertake abroader range ofactivities andoperate
under amoreliberal environment. Another reform wastherevision intheframework ofthebaselending
rate(BLR) whereby theBLRwascomputed based ontheinterbank rate.
(b) Insurance Sector
35. Intheinsurance sector, Malaysia hasliberalized theforeign share holding limitfrom30%to
49%forinsurance companies thatincorporate locally by30June1998. Inaddition, Malaysia also
made acommitment togrant seven newgeneral reinsurance licences.
(c) Capital Market Sector
36. Since theestablishment oftheSecurities Commission in1993, many developments havetaken
place inthedomestic capital market.
37. Liberalized guidelines onprivate placement ofnewshares wereintroduced inMarch 1994and
newguidelines fortheissue ofsecurities andvaluation ofdomestic public listed companies were
introduced inDecember 1995.WT/TPR/G/31
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38. Access totheprimary market hasbeenbroadened substantially withtheintroduction ofcall
warrants (December 1994), thelisting infrastructure project companies (September 1995) andclosed-end
funds (October 1995) andrecently allowing foreign based companies tolist(April 1997).
39. Twonewexchanges havebeenlaunched -theKuala Lumpur Options andFinancial Futures
Exchange (KLOFFE) inDecember 1995 andMalaysian Monetary Exchange (MME) inMay1996.
With theestablishment ofsuchfutures exchanges, foreign service suppliers havetheopportunity to
holdequity upto30%inlocalincorporated futures broking companies.
40. Foreign fundmanagement companies cannowestablish acommercial presence inMalaysia
(August 1995). They mustbelocally incorporated (andlicensed) witheither 100% foreign equity or
70%and30%localequity. Thefirst10joint-venture foreign fundmanagement companies approved
bytheSecurities Commission willalsobeentitled tomanage localunittrustfunds. Local stock broking
companies arealsonowallowed toestablish unittrustcompanies (September 1995).
41. Withtheintroduction ofsecurities borrowing andlending inDecember 1995, foreign securities
firms cannowborrow securities directly from Malaysian counterparts.
Measures onInvestment
42. Malaysia continues tomaintain aliberal investment regime which ischaracterised byliberal
foreignequityownershippolicies.Upto100%foreignequityispermitted,particularlyinexport-oriented
projects, projects ofhigh-technology andprojects withhighvalue added features orproducts/activities
highly prioritized fordevelopment including R&D. Nosectors areclosed toforeign direct investment
inthemanufacturing sector, although afewsectors arerequired tobeundertaken onajoint-venture
basis toenhance Malaysian capabilities. Freedom ofownership hasbeenassured formultimedia or
ITprojects located intheMultimedia Super Corridor (MSC).
43. There arenolegislation specific toforeign investors. Foreign investors aregenerally granted
fairandequitabletreatmentasaccordedtodomesticinvestorsandMalaysiadoesnotdiscriminatebetween
source economies offoreign investment.
44. Restrictions onentry ofkeymanagerial andtechnical personnel forthepurpose ofinvestment
areminimal. Keyorpermanent posts aregranted toforeign investors upon fulfilment ofasetof
established criteria. There willbeunrestricted employment andentry offoreign knowledge workers
intheMSC.
45. Thepresent exchange control regime inMalaysia isveryliberal andapplies uniformly to
transactions withallcountries. Investors arefreetosource capital globally forMSC infrastructure
andhavetherighttoborrow funds globally.
46. Ahighlytransparentinvestmentregimeismaintainedwhereup-to-dateinformationoninvestment
regulations, policies andincentives arefullyaccessible through published documents andtheelectronic
media.
47. Malaysia 'sreadiness toconclude investment guarantee agreements (IGAs) withothercountries,
54asofJune1997(additional 25since thelastTPRM), reflects thecommitment toincrease investor
confidence. TheIGAs would ensure protection against expropriation, nationalization, andallow for
thefreetransfer ofcapital, profits andother fees,aswellastoprovide forthesettlement ofinvestment
disputes under theInternational Convention ontheSettlement ofInvestment Disputes (ICSID).Malaysia WT/TPR/G/31
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48. Inrecognition ofthecontribution ofinvestment toeconomic growth andthewellbeing ofthe
people, Malaysia willcontinually work towards improving regulations oninvestment, withaviewto
facilitate andfurther liberalize theinvestment regime.
NewMeasures onProtection andPromotion ofIntellectual Property Rights
49. Since thelastreview, Malaysia hasundertaken aconcerted exercise toimprove existing IPR
protection andprocedures inaccordance withinternational standards andpractices asprescribed by
allinternational conventions andintellectual property. Efforts arealsounderway toenact newlaws
andamend existing onesincompliance withtheWTO/TRIPS Agreements. These include:
- Amendments oftheTrade Marks Act1976 toinclude protection forservice marks. The
amendment isexpected tobeenforced bytheendof1997.
- Amendment ofthePatents Act1983 toprovide formodified substantive examination. itwill
result infaster grant asexamination isbased onreports from granted patent (forthesame
application) from certain countries. Theamendment wasenforced on1August, 1995.
- Amendments oftheCopyright Act1987in1996toprovide fortheCopyright Tribunal todeal
withcopyright licensing. TheActwasagain amended in1997toprovide adequate protection
forthe'contents 'thataregoing tomove through theMalaysian Multimedia Super Corridor
(MSC) aswellastoprovide adequate ITprotection. Theamendment alsosought toincorporate
most oftheprovisions oftheWIPO Copyright Treaty (WCT) andWIPO Phonogram and
Performance Treaty (WPPT) doneatGeneva inDecember, 1996.
50. Inconjunction withtheMalaysian Multimedia Super Corridor, theGovernment hascome up
withaBillofGuarantees. Oneofthecommitments istoenhance Malaysia 'sposition asaregional
leader inintellectual property andcyberlaws.
51. Enactment oftheMalaysian Industrial Designs Act.TheActwaspassed byparliament in1996
andisexpected tobeenforced bytheendof1997. TheActcomplies withtherequirement oftheTRIPS
Agreement.
52. Steps areundertaken tofulfil Malaysia 'sWTO/TRIPS obligations fullybytheyear1999.
Enactment ofnewlaws, namely, fortheprotection ofplant varieties, performers 'rightandlay-out
designs ofintegrated circuits aswellasminor amendments totheexisting patents andtrademark laws
areatvarious stages ofdrafting.
53. TheIntellectual Property Office isworking towards fullautomation ofpatents andtrademark
examination andprocedures. Itisexpected tobefullyoperational bytheendof1997.
Participation inRegional Groupings
54. Malaysia attaches strong importance toregional cooperation andcontinues toparticipate actively
invarious regional groupings, namely ASEAN, APEC, andG-15. Malaysia hasmaintained thatas
longasregional trading arrangements areWTO consistent, theycanpositively, contribute towards
multilateralism andstrengthen global linkages.WT/TPR/G/31
Page 12Trade Policy Review
ASEAN
55. Malaysia 'spriority istofocus onefforts toenhance trade andeconomic cooperation within
ASEAN. Inaddition toefforts undertaken tostrengthen andexpand intraASEAN trade through the
CEPT, Malaysia together withother ASEAN members arealsoactively working towards expanding
thefields economic cooperation intheareas oftrade inservices, intellectual property, transport and
communications infrastructure development andindustrial cooperation.
56. ASEANisworkingonaframeworkofcooperationtoenhancingthecapacityandcompetitiveness
ofASEAN Services Industries andasimilar arrangement forintellectual property.
57. Asof1997, Malaysia hasphased in8580tarifflines(92% oftotaltarifflines) intotheCommon
Effective preferential Tariff (CEPT) Scheme fortheASEAN FreeTrade Area. There are516tariff
linesintheTemporary Exclusion listwhich willbephased intotheCEPT Scheme by2000. Only
60tariff lineshavebeenexcluded from CEPT Concessions. Theaverage CEPT tariff forMalaysia
in1997 is4.04% andwillgradually decrease to1.97% in2003.
58. ASEAN countries, apartfromeliminating tariffs andNTBs, arefocusing ontechnical barriers
totradeandarecommitted toachieve greater transparency, alignproducts standards inpriority sectors
toInternational Standards. Alistof20priority product groups forstandard harmonization havebeen
identified.
(4) Future Direction andStrategy
59. InlinewithMalaysia 'saspirations tobecome adeveloped nation bytheyear2020, thefocus
ofdevelopment willbeonthepromotion ofabalanced, broad-based, resilient andaninternationally
competitive economy toprovide astrong foundation fortheattainment oflong-term sustainable growth.
Thiswould beachieved through productivity-driven growth, skills upgrading, capital deepening and
technology investment.
60. Policy initiatives willfocus onaccelerating theprivatization programme, strengthening the
financial andcapital markets, encouraging private investment andimproving thequality oftrained
manpower. These efforts aregeared towards theexpansion oftheindustrial baseandensuring that
theinvestment climate remains attractive tobothprivate domestic andforeign investors andthat
manufactured export retain itsdominant roleandgrowing trend. These measures arealsodesigned
tomeet external challenges andtoposition thecountry totakeadvantage ofopportunities afforded
bytheexpansion inworld trade.
61. TheGovernment willcontinue toinitiate measures toprovide aconducive policy framework
tofacilitate commercial endeavours bythebusiness community bothdomestic andinternational. In
order tospurcompetition, Malaysia willprogressively liberalize itsdomestic sector anditstraderegime.
Domestic industries would beincreasingly exposed tointernational competition inorder tobeefficient
inacompetitive rather thanaprotected environment.
62. Internationally, Malaysia within thecontext ofmultilateral trade rules willtrytoensure an
opentrading environment which ispredictable. Inorder toresist protectionist tendencies, Malaysia
willkeephermarkets openandatthesame timework withallcountries tokeepmarkets open. This
willbedoneonbilateral, regional andmultilateral bases.Malaysia WT/TPR/G/31
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63. Thedrive forgrowing exports willnotonlyfocus ontraditional markets butalsoacontinual
development andsearch fornewmarkets. These efforts would alsobecomplemented withaggressive
marketing strategies, thatinclude jointventures withstrong global linksandalsothedevelopment of
local capability ininternational product promotion, product quality, design andpackaging, market
research andintelligence.
64. Inthecontext ofindustrialization, themanufacturing sector willcontinue itsroleastheengine
ofthenation 'seconomic growth. Thecontribution ofthemanufacturing sector willreach 37.5% by
theyear2000 (38.4% byyear2005) from 33.1% in1995.
65. Investments inthemanufacturing sector willbeencouraged tomove towards newsources of
growth withconsequent diversification ofproducts andmarkets. Industrial deepening willbepursued
toachieve greater value added andlinkages bothhorizontal andvertical. Downstream industries will
alsobeencouraged inhigh-tech andresources-based industries. Efforts willbeemphasised topromote
theestablishment ofmore small-medium scaleindustries thatnotonlyprovide support forindustrial
expansion butalsoleadtogreater industry linkages.
66. Theservices sector willalsobeassigned animportant roleinsupporting thetransformation
oftheeconomy asthecountry strives towards becoming anindustrialized nation bytheyear2020.
Tocontribute effectively tothegrowth process, theservices sector hastobecompetitive andefficient.
Malaysia recognises thatliberalization willhelppromote grater competition, efficiency, productivity
andinnovation inthesector. Therefore, Malaysia iscommitted totheprocess ofgradual andprogressive
liberalization ofthesector. Liberalization willbeundertaken inaccordance withtheprevailing domestic
fundamentals andtheability ofthesector toaccommodate changes without negatively impacting on
theorderly development ofthesector.