Welcoming Address by Chief Minister of Penang, Mr Lim Guan Eng at the CEO Speaks on "ASEAN-China FTA" at PSDC Auditorium on Tuesday, 6^th September 2011 at 10 am: 

Welcoming Address at the CEO Speaks on "ASEAN-China FTA" 

I wish to thank our distinguished speaker, Mr Ravidran for taking time off from his busy schedule to be with us in Penang, to share with us, information and knowledge on the ASEAN-China Free Trade Area.

When the ASEAN-China FTA (CAFTA) came into effect on January 1, 2010, it was evident that this will be the Asia's decade because China's economy, computed in Purchasing Power Parity (PPP) terms, will surpass the US economy by 2016 to become the largest economy in the world. PPP compares what people earn and spend in real terms in their domestic economies.

Under PPP, tthe IMF estimates that the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America's share of the world output down to 17.7%, the lowest in modern times. China's would reach 18%, and rising.

Just 40 years ago, China's economy was a joke and labelled as the Economic Sick Man of Asia. 10 years ago, the U.S. economy was three times the size of China's. There is therefore a necessity for Malaysia and Penang to understand the implications of CAFTA if we are to trade smartly and competitively with the soon to be largest economy in the world.

In the decade of the '90s, ASEAN-China trade grew at an average annual rate of 20%, faster than the growth in China's global trade of 15% and ASEAN's global trade of 11%. In 2001, ASEAN-China trade was US$41.6 billion and it increased at an average annual rate of 30%, reaching US$223 billion in 2008. This made ASEAN the 4th largest trading partner for China while China the 3rd largest trading partner for ASEAN. Malaysia is the 2nd largest trading partner, after Singapore for China in ASEAN. As of 2010, China actually became the largest trading partner for Malaysia, overtaking Singapore, Japan and the US.

As of January 2010, CAFTA encompassed 1.9 billion people, had a combined GDP of US$6.6 trillion and total trade amounted to US$4.3 trillion. Under the CAFTA, more than 9,000 products imported from China to Malaysia are duty-free while China will reduce tariffs on more than 7,000 products from ASEAN. Besides manufactured goods, the agreement also covers services and investment. Hence, there are opportunities for many MNCs to increase local content of their products to be above 40% to take advantage of the ACFTA so that products can be shipped from Penang, Malaysia into China.

Let everyone including MNCs and SMEs consider Penang as a reliable location that protects your investment and yet serve as a gateway to China through the CAFTA. Penang is positioned prominently in this trading relationship as more than half of Malaysia's exports to and imports from China are in the electrical and electronics sector. The trade relationship between Penang and China form an important part of the global supply chain for major electronics corporations that operate in both places. In other words, we offer not just our natural competitive and comparative advantages in logistics, the high-tech, high-value and knowledge based industries but also in language. resort tourist destination and a cultural intermediary between East and West.

With Mr Ravidran's presentation on ASEAN-China FTA today, I hope that we can find answers to the following:

1. How can our local companies in Penang take full advantage of the ASEAN-China FTA?

2. What are the opportunities for our local companies to increase trade in physical goods?

3. What are the opportunities for us to increase economic activities in the services sector?

4. Will there be opportunities to increase the 2-way flow of direct investments, i.e. China-Penang and Penang-China?

5. What are the opportunities for cooperation in other economic areas?

Hopefully, we can show that what Rudyard Kipling said in the first line of his famous poem in not true,

Oh, East is East and West is West, and never the twain shall meet,
Till Earth and Sky stand presently at God's great Judgment Seat;
But there is neither East nor West, Border, nor Breed, nor Birth,
When two strong men stand face to face, though they come from the ends of the earth!

This may be read as saying that 'it is indisputable that geographic points of the compass will never meet in this life, but that when two equally strong man meet, the accidents of birth, whether of nationality, race, or family, do not matter at all - the Asian and the European are equals'. Let us hope then that East and West meets in Penang.

With this, I wish you all a fruitful talk today.

*Lim Guan Eng, Penang Chief Minister