Academic journal article IUP Journal of Applied Economics

The Influence of Malaysian FTAs on Trade and Investment, with Special Reference to Malaysia-India FTA

Academic journal article IUP Journal of Applied Economics

The Influence of Malaysian FTAs on Trade and Investment, with Special Reference to Malaysia-India FTA

Article excerpt

(ProQuest: ... denotes formulae omitted.)

Introduction

The most important development that has taken place in the past two decades is that the major developing countries with their strategies have begun to integrate more actively with the global economy. Every developing and emerging economy continues to undertake vibrant economic policies for higher economic growth, attracting inflow of private foreign investment and boosting trade. Malaysia is not an exception to this. Ever since the inception of economic liberalization and opening of its political boundary, particularly in the later part of the 1960s, Malaysia's economic relations with major countries have shown a considerable improvement. As Malaysia demonstrates the economic and the technological capacities to compete in the 21st century with an aim to feature amongst the developed nations, it is important to see how closer it has come to the major economic powers and emerging economies on several fronts. The most prominent of them is its involvement in several commercial and economic relations with various countries of economic importance. This involvement serves as an effective measure to judge, from an outsider's perspective, its policies as it allows the trading partners a base to initiate and negotiate their bilateral trade and investment activities with Malaysia.

The era of globalization has seen many countries throughout the world either signing Free Trade Agreements (FTAs) or trying to negotiate and contemplate new bilateral free trade and investment agreements. The heating up of preferential trade and investment deals with the developing Asian countries by industrialized countries has made FTA enormously popular amongst the Asian governments. This stepping stone towards a global free market economy is undertaken as an important tool with the expectation that it would stimulate economic growth, boost trade and investment, reduce poverty and increase employment. Keeping this in mind, a considerable number of countries, including Malaysia, have completed bilateral free trade and investment agreements with many developed and emerging countries, and more deals are presently underway.

Malaysian economy has remained fairly open to trade and foreign investment in the last two decades. Despite being a small economy, Malaysia, the Trade Policy Review (2001 and 2006) reveals, has been placed amongst the top 20 most globalized economies and 20th largest trading nations in the world by the globalization index. In fact, the total trade of Malaysia remained higher than that of Indonesia, New Zealand, Poland and Turkey. Malaysia's trade policy continued to aim at creating a more liberalizing and fair global trading environment to attract international attention. Looking at its growing trade and investment in the recent decades, which ultimately helped in the process of economic growth, Malaysia began to negotiate more FTAs with several countries over the years. One such prominent agreement with India came into force on July 1, 2011. The primary aim was to provide a platform for negotiation to achieve a quicker and higher level of liberalization that would create an effective market access between two countries. The trade statistics show that Malaysia is amongst the largest trading partners of India, and has recently emerged as India's second largest trading partner in the Association of South East Asian Nations (ASEAN), after Singapore. Similarly,^India is Malaysia's largest trading partner among countries of the South, excluding ASEAN and China. Spectacular progress of the Malaysian economy since the late 1980s and the liberalization of the Indian economy since 1991 have triggered new dimensions in bilateral, commercial and economic relations between the two countries. Looking at the long-standing commercial links, Malaysia and India established the Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) on September 24, 2010, which came into force on July 1, 2011. …

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