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Transactions Costs in Regional Trade and
Trade Facilitation
- The Malaysian Business Perspective by
Raja Abd Aziz Raja Musa
Vice President, Federation of Malaysian Manufacturers [FMM]
Chairman – Customs Committee, FMM
Chairman, FMM Malaysian Ceramic Industry Group
ABOUT MALAYSIA
•Malaysia is the 19th largest trading nation in the world
•23rd Most Competitive Economy in the World
• IMD World Competitiveness Yearbook 2006
•26th Most Globally Competitive Economy in the World
•The Global Competitiveness Report 2006/2007 by World
Economic Forum (WEF), Switzerland
•19th Most Globalized Economy
• AT Kearney’s 2006 Globalization Index
•3rd Most Preferred Global Services Location
•AT Kearney’s Annual Global Services Location Index 2005
FACTS ABOUT MALAYSIA
Area:
330,252 sq. km
Population:
26.1 million
GDP Growth
5.8 % ( 2007 est. 6%)
–Powered by manufacturing and services sector
Per Capita Income
US$5,498
Inflation
3.7%
Labour Force
11.5 million
Unemployment
3.5%
Trade Surplus
US$29.5 billion
•Total trade reached RM1.069 trillion (USD0.30 trillion)
•Exports (USD168 bn) expanded by 10.3%
•Asia accounted for 61% of total exports
•North East Asia was the largest regional market, accounting for 27.4% of
total exports
•Imports (USD137 bn) grew by 10.7% -- 12% from China
TRADE FACILITATION RELATED COSTS
DIRECT
Cost of compliance related to
completing certification
requirements (e.g. Import
Licence, Health Certificate,
CIDB Certification, etc)
Charges for trade related
services (e.g. trade insurance,
agents’ fees, etc
INDIRECT
Extra costs incurred due to
procedural delays : Customs clearance & certification
procedures
 Inventory holding costs (storage
while waiting for clearance)
Opportunity cost – hinder speed of
doing business
TRADE FACILITATION RELATED COSTS
Challenges faced by Malaysian Businesses
1. Duplication of Physical Examination of Shipment by
Different Authorities/Agencies Causing Delays
• Different government agencies involved in regulating
imports and exports
TRADE FACILITATION RELATED COSTS
Challenges faced by Malaysian Businesses
2. Gap between Information System and Overall
Resources within the Different Approving &
Inspection Authorities
• Different system and platform used by the different
authorities – lead to hitches and delays
TRADE FACILITATION RELATED COSTS
Challenges faced by Malaysian Businesses
3. Insufficient Time for Stakeholders to React to
Regulatory Changes
• New regulations are implemented instantaneously as the
date of entry into force – stakeholders do not have enough
time to obtain full comprehension on the regulatory changes
and react accordingly
TRADE FACILITATION RELATED COSTS
Challenges faced by Malaysian Businesses
4. Increase in Cost of Doing Business
• Rising Fees/Charges Imposed by Service Providers
TRADE FACILITATION RELATED COSTS
Challenges faced by Malaysian Businesses
5. Different Level of Development within Approving
Authorities
• In terms of system used, manpower/skills set
How to Address the Challenges
1.National Single Window
• Improve intra agency/permit approving authorities (PIA)
coordination throught the National Single Window (NSW)
initiative to connect all PIAs into one common platform
with traders, banks and other stakeholders in the logistics
chain.
How to Address the Challenges
2.Regular Dialogue between Public and
Private Sector on Trade Facilitation
• Consultation process involving all stakeholders with the
aim to improve efficiency
• Task Force to improve government delivery system
How to Address the Challenges
3.Harmonization and Simplification of
Customs Procedures & Tariff Classification
• Expedite implementation of system in all Customs stations
that binds all official Customs ruling made by Customs HQ –
one common system for all Customs stations
How to Address the Challenges
4.Increase Capacity of Regional Shipping
Lines Through Cooperation
How to Address the Challenges
5.Collaboration Between Government and
Industry – Public-Private Smart
Partnership
( i ) Regular Dialogues
(ii) Training for Customs Officers
What Can We Do ?
 Company Level : It is the responsibility of the company to keep abreast with the
latest regulatory changes and take the appropriate action
 Association Level: Play active role in disseminating information to the
business community
 Provide avenue for companies to provide feedback to the
authorities/government/relevant bodies
 Provide forum to enable public-private sector consultative
process to improve government delivery system
What Can We Do ?
 Government Level : Regularly consult the business community on trade
facilitation process, regulatory changes, delivery system,
etc
 To listen to private sector and note and take action
based on inputs from other stakeholders
 Should adopt attitude that government agencies are not
just to regulate but to facilitate trade !
What Can We Do ?
AT REGIONAL LEVEL
 Sharing of Information and Experiences
 Play Active Role in Strengthening Regional
Trade Facilitation Initiatives
 Promote Regional Integration to Enhance
Competitiveness of Asian Enterprises in the
International Market Place by Actively
Lobbying to Lower the Cost of Doing Business
THANK YOU
for your attention
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