Firstly, I would like thank and congratulate the Minister of International Trade and Industry, YB Jeli for arranging this special parliamentary session to debate the entry of Malaysia into the Trans Pacific Partnership Agreement (TPPA). Although this agreement does not require parliamentary approval, the Minister decided to arrange for today and tomorrow’s special session, fulfilling what was promised last year, so that the people can have an opportunity to listen to the viewpoints as well as criticisms of the TPPA from a variety of perspectives be it from this side of the bench among the opposition MPs or from the other side of the bench among the BN MPs.
At the same time, I welcome the Minister and the Ministry’s decision to organize a comprehensive briefing session for all MPs in order to provide a detailed explanation on the TPPA including and especially on the ‘hot button’ issues such as the price of medicines, intellectual property and government procurement. Although not all of the answers and explanations which were given by the Ministry were accepted by the MPs who attended the sessions, this is a good benchmark set by the Minister and should be followed by other Ministers and Ministries, especially when important policies and laws are being tabled.
In making any decision to support or reject any government policy, we as MPs, should evaluate the policy objectively and rationally. We should not reject any policy based on grounds which are unreasonable or reasoning which is baseless. For example, we should not reject the TPPA based on the reason that we do not want to be dominated by the United States. In reality, what is needed is for us to strengthen our trading relationship with all of our major trading partners. Some of these trading partners are involving in the TPPA negotiations including Singapore (our no.1 export market), the United States (no. 3), Japan (no.4) and Australia (no.9). Some of the countries are not involved in the TPPA negotiations such as China (no.3) and Indian (no.7) but are part of the Regional Comprehensive Economic Partnership (RCEP) discussions.
We should also not make any statements that some parties support or reject the TPPA due to the interests of only one race or one group. Such accusations are baseless and should be rejected in no uncertain terms.
What is needed is an objective evaluation of the costs and benefits for Malaysia in joining the TPPA, RCEP and other free trade agreements (FTAs) which are being negotiated by Malaysia.
In this context, I want to bring up a few important issues regarding the TPPA which have not been credibly handled by the Minister or his Minister, especially from the standpoint of concrete policy proposals.
The first issue which I want to raise is the impact of the TPPA towards small and medium enterprises (SMEs).
Even though the cost benefit analysis conducted by PwC shows the potential positive impact to the SME sector as a result of the opening of new markets, there is a high possibility that these positive impacts would be enjoyed mostly by SMEs which are already export oriented. These companies are mostly on the larger end of the SME spectrum. For the smaller scale SMEs, most of them would not benefit from the TPPA and in fact, there is a high possibility that they would experience a reduction in business as a result of greater international competition.
Based on a study done by the Penang Institute, small companies in Malaysia on the whole are smaller, have lower leverage levels, are valued lower in the stock market (for those which are listed) and are involved in sectors which are less profitable. One can say that these companies are not as likely to be able to compete and benefit from the TPPA compared to the GLCs and also the larger non-GLCs.
According to Michael Kang, the President of the Malaysian SME Association, 30 percent of the 195,000 SMEs in Malaysia “will disappear” after the implementation of the TPPA.[1] The concerns of these SMEs are valid especially for those whose main exports are not the United States, Canada, Mexcio and Peru, four markets which will be opened as a result of the TPPA.
The government cannot deny that there still exists a large credibility gap between itself and the small scale SMEs. The implementation of the GST provides a good illustration. Before the implementation of the GST in April 2015, the government through the Customs Department gave the assurance to SMEs and other small businesses that their GST refunds would be returned to them within 2 months. But up to know, I’ve been told that these SMEs still have to wait for months before these refunds are returned to them. The negative impact from a cash flow restriction perspective will be more greatly felt by the smaller scale SMEs which don’t have as much cash reserves as the bigger SMEs.
The government needs to give assistance to SMEs which will be negatively affected by TPPA. Financial as well as technical assistance needs to be provided to the smaller scale SMEs to prepare them to face the competition which will be unleashed by the TPPA. But up to this day, we have not heard any concrete proposals announced by MITI or other ministries to help the affected SMEs to face the challenges associated with the TPPA. If the government does not have any mitigation measures which are well thought out, well targeted and systematic, how can the SMEs trust the promise given by the government that the TPPA will bring about positive benefits to them? This is the first issue which needs to be addressed by the Minister.
The second issue which I want to raise is in regards to the Investor State Dispute Settlement (ISDS) which may involve state governments. Even though the Ministry has given assurances that the TPPA text will limit frivolous lawsuits from being brought to the International Tribunal against countries, there is no guarantee that ISDS cases which involve state governments will not be brought to such tribunals.
I refer to the following cases in Canada involving state governments which are brought to international tribunals via the ISDS provisions that are found in the North American Free Trade Agreement (NAFTA).
The first example:
“Chemical giant Dow AgroSciences used NAFTA to force the province of Quebec, after it banned 2,4-D, a pesticide that the Natural Resources Defence Council says has been linked in many studies to cancer and cell damage, to publicly acknowledge that the chemical does not pose an “unacceptable risk” to human health, a position the government had previously held.”
The second example:
“Mesa Power Group, an energy company owned by Texas billionaire T. Boone Pickens, is claiming $775 million (approximately €523 million) in a challenge to the province of Ontario’s Green Energy Act, which gives preferential access to local wind farm operators.”[2]
These examples show that not only can the national / federal governments be brought to international tribunals but so can state governments. This is very worrisome because of the limited funds and expertise on the part of the state governments especially compared to the federal government. The cases in the International Tribunals are very costly because the legal expertise for such cases comes from legal firms which are based in the United States and which charge high fees. As an example, the case involving plain cigarette packing in Australia, although was won by the Australian government, cost an estimated AUS$50 million.[3]
To give another example, can the federal government guarantee that the Pahang state government won’t be dragged to an International Tribunal by Lynas if the state government, through the Kuantan Municipal Council, makes the decision not to renew the local operating license of Lynas as a result of pollution violations? In addition, if such cases involving the state governments of Penang, Selangor or Kelantan occur, which are all opposition controlled states, will the federal government provide the necessary financial and technical assistance to these state governments to fight these cases in international tribunals?
For now, I have not obtained any assurances or guarantees from the federal government.
The third issue involves government procurement from the perspective of transparency. One of the supposed benefits of the TPPA which has been announced by the Ministry and which is one of the chapters in the TPPA text is transparency and anti-corruption especially in dealing with government procurement (GP).
But sadly and tragically, the Malaysian government successfully negotiated for an ‘opt out’ clause in the government procurement chapter for Public Private Partnerships (PPP). This means that the practice of direct negotiations under the PPP will continue even after the TPPA has been implemented. It has been proven that under the BN government, PPPs have been used and abused in order to provide supernormal profits to cronies and have put financial burdens on the people of Malaysia. The attractive contracts to provide electicity to Tenaga (TNB) via Independent Power Plants (IPPs); the concession contracts to build and operate toll highways which allow the concession holder to unreasonably increase the toll rates; the contracts to build and operate hostels in the public institutions of higher learning which charge high rates to students; these are all examples of how PPP contracts are awarded in ways which are not transparent and which brings about huge negative impacts on the economy of as well as on the people in the country. The federal government has lost a golden opportunity to use the TPPA as part of the process to improve the transparency of government procurement by getting rid of PPPs. This is one of the main reasons why we in the opposition cannot support the TPPA.
Other issues such as the cost of medicines, intellectual property, environment issues and labour rights will be raised by my colleagues on the opposition bench and hopefully by some of those in the government bench as well.
Given that the issues which have brought up have not been adequately explained and handled by the government, we in the DAP and also in Pakatan Harapan reject the TPPA with one voice.
Source:-
[1] http://www.themalaysianinsider.com/malaysia/article/30-of-smes-risk-going-bust-post-tppa-says-industry-rep and http://www.thestar.com.my/metro/smebiz/columns/2016/01/18/moving-beyond-the-local-market/
[2] http://www.commondreams.org/views/2015/10/23/naftas-isds-why-canada-one-most-sued-countries-world