As illustrated in Figure 3, the FTA is focused
on the liberalisation of trade for goods and supply
of services. Under the terms of various FTAs, the
Malaysian Government will relax restrictions on
various forms of trade for services, and reform
regulations to ease entry and ownership, under
specified deadlines.
It was mentioned earlier that Malaysia has
done well in trade for goods (which forms a
significant part of the country’s GDP) becoming
one of the largest trading nations in the world for
her exports of agriculture products (for example
palm oil) and manufactured products. However in
services, under the General Agreement of Trade
in Services (GATS) of WTO, the trade in services
differs from goods as it involves four modes of
access (as shown in Figure 3) namely;
●●
Mode 1 Cross Border Trade
●●
Mode 2 Consumption Abroad
●●
Mode 3 Commercial Presence
●●
Mode 4 Presence of a Natural Person
Trade in services is “invisible” as compared
with trade in goods which involves the physical
movement or transfer of an object. For example
Singapore, Switzerland and the UK rely heavily
on international income (the “invisibles”) from
service exports of their financial and tourism
sectors. Lower income countries like Thailand or
China rely more on exports of their agriculture
produce or manufactured goods. However
there are exceptions, high income countries like
Germany and Japan also rely on exports of highend manufactured products.
Malaysia aspires to be a developed or high
income nation by 2020 (the term “developed” and
“high income” is not necessarily synonymous) and
this will require her to transform her economic
policies and mimic those of developed nations. In
this respect one major potential area of growth
is the trade in services. Malaysia has no issues
in complying with Modes 1 and 2 (as defined
by GATS), but local laws such as the REA create
a barrier for foreign services providers wishing
to supply engineering services in Modes 3
and 4. At the same time it restricts Malaysia’s
capability to export her services and reduce
its competitiveness. Obviously it is not only
the engineering service sector which is heavily
regulated, there are many other laws pertaining to
professionals which are similar in nature.
4.0 What, how and why liberalise?
In shor t liberalisation is a relaxation of
Government regulations and restrictions in
areas of social, economic and trade policies,
sometimes referred to (but not always so) as
“deregulation”. Recently the word “deregulation”
has had negative connotations in relation to the
banking sector because it was one of the main
reasons that led to the global financial crisis of
2007-08.
Liberalisation is used as means to stimulate
and encourage economic growth through
business competition. Most First World countries
have pursued this as their economic model;
whilst Third World countries arguably have no
choice but to follow to remain competitive in
attracting foreign investments and capital. The
opposite of liberalisation is a self