Liberalistion services

1. LLIIBBEERRAALLIISSAATTIIOONN IINN SSEERRVVIICCEESS
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SSEECCTTOORR

2. 2
OOuuttlliinnee
• Overview of Malaysia’s Services Industry
• Modes of Supply
• Liberalisation of the Services Sector
• Malaysia’s Position in AFAS, WTO, FTAs
• Issues pertaining to Services

3. 3
Overview ooff MMaallaayyssiiaa’’ss SSeerrvviicceess
IInndduussttrryy
• The Services Sector has been targeted as the new
engine of growth under IMP3.
• Total share of services in Malaysia’s GDP has grown
by 9.7 per cent to 53.6 per cent in 2007 (Non-
Government 46.7%) from 52.0 per cent in 2006 (Non-
Government 45.3 %).
• IMP3 targets an increase in the GDP contribution from
50.5 per cent in 2005 to 59.7 per cent by 2020 to be
achieved through:
– an annual average investment of RM45.8 billion;
and
– an annual average growth of 7.5 per cent during
the period.

4. IIMMPP33 TTaarrggeettss
IMP3
Targets
2007 2006 2005
GDP
Contribution (%)
59.7
(Y 2020)
46.7 45.3 44.6
GDP Growth
(% p.a.)
7.5 p.a.
construction:
5.7%)
9.7 7.2 5.4
Investments
(billion)
RM45.8
(p.a.
RM65.4 RM55.5 RM57.7
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5. Trade Performance of the
Services Sector
Jan-June
2008
(RM bil.)
2007
(RM Bil.)
%
Growth
2006
(RM Bil.)
%
Growth
2005
(RM Bil.)
Total
Trade* 98.25 192.2 16.0 165.7 21.6 153.5
Exports* 49.88 96.8 7.9 79.6 10.9 71.8
Imports* 48.37 95.4 10.8 86.1 5.4 81.7
Trade
Balance* 1.51 1.4 n.a (6.5) n.a (8.6)
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*Based on DOS and covered 3 categories: travel, transport and others.

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MMooddeess ooff SSuuppppllyy ooff SSeerrvviicceess
• In the Trade in Goods, liberalisation is undertaken
through:
– reduction in tariffs; and
– disbandment of Non-Tariff Barriers (NTBs).
• In the services sector, liberalisation is undertaken
through four modes of supply:

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44 MMooddeess ooff SSuuppppllyy
MODES CRITERIA SUPPLIER
PRESENCE
Mode 1:
Cross-border
trade
Service delivered within the
territory of the Member, from the
territory of another Member. The
advancement of technology has
made this possible. E.g. internet
(e-trading) Service supplier
not physically
present within
the territory of
another Member
Mode 2:
Consumption
abroad
Service delivered outside the
territory of the Member to a
service consumer of the another
Member. It involves the consumer
traveling to the country in which
the service is produced. E.g.
tourism and education services.

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44 MMooddeess ooff SSuuppppllyy
MODES CRITERIA SUPPLIER
PRESENCE
Mode 3:
Commercial
presence
Service delivered by a service
provider of one country through
commercial presence in another
country. E.g. FDIs
Service supplier
physically
present within
the territory of
Service delivered by a service
personnel of one country who
travels to another country to
provide the service. E.g. services
provided by expatriates, business
and professionals and foreign
workers.
Mode 4: another Member
Movement of
natural
persons

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LLiibbeerraalliissaattiioonn ooff MMaallaayyssiiaa’’ss
SSeerrvviicceess SSeeccttoorr
• Liberalisation in the services sector is currently being
undertaken in:
– ASEAN: through the ASEAN Framework Agreement on
Services – AFAS (full liberalisation to be undertaken by
2015 and logistics 2013);
– WTO: through progressive liberalisation (General
Agreement on Trade in Services -GATS);
– bilateral and regional FTAs: through progressive
liberalisation and binding of commitments in GATS.

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PPrreeppaarraattiioonn ffoorr LLiibbeerraalliissaattiioonn ooff SSeerrvviicceess
SSeeccttoorr
• Strengthen domestic regulations
• For non-regulated sectors, self-regulation is advised
or if required, to advise the Government on
regulatory requirements
• Review regulations that impede services exports
• Identify issues that impede the growth and
development of services sub-sectors. Issues can be
addressed in the MSDC for long-term
competitiveness

11. Preparation ffoorr LLiibbeerraalliissaattiioonn ooff SSeerrvviicceess
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SSeeccttoorr
• Propose incentives that can assist the industry to become more
competitive. Incentives are currently available through MATRADE
and SMIDEC
• Undertake mergers and acquisitions to strengthen the industry
• Pursue MRAs with trading countries, in particular within ASEAN
and FTA partner countries
• Build local capacity and identify niche markets in areas where we
have comparative advantage
• Explore market access opportunities abroad through partnerships

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CCOOMMMMIITTMMEENNTTSS IINN AAFFAASS

13. AAFFAASS
• Signed in 1995
- to enhance and strengthen cooperation
among service suppliers in ASEAN;
and
- progressively liberalise trade in services
among ASEAN countries through
reduction/elimination of restrictions.
• AFAS adopts the structure and approach of General
Agreement on Trade in Services (GATS) .
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14. PPrrooggrreessss ooff SSeerrvviicceess
LLiibbeerraalliissaattiioonn UUnnddeerr AAFFAASS
• Four Rounds of Services Negotiations have been
completed:
- First Round (1996-1998):
1st Package – 1997; 2nd Package – 1998.
- Second Round (1999-2001): 3rd Package.
- Third Round (2002-2004): 4th Package.
- Fourth Round (2005-2007):
5th Package – 2006; 6th Package – 2007.
• 7th Package signed at the end of 2008.
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15. PRIORITY SECTORS
(ICT, tourism, healthcare,
air travel and logistics)
OTHER SECTORS
(including professional
services)
2008 51% 2008 49%
2010 70% 2010 51%
2013
(Logistic
70% 2015
70%
Services)
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EEqquuiittyy TTaarrggeettss aanndd PPaarraammeetteerrss
((MMooddee 33))

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SSEERRVVIICCEESS NNEEGGOOTTIIAATTIIOONNSS IINN
WWTTOO

17. SSeerrvviicceess NNeeggoottiiaattiioonnss iinn tthhee WWTTOO::
• Covered by the General Agreement on Trade in
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Services (GATS) of the WTO.
• Main objectives of GATS:
- increased transparency and predictability of
rules and regulations on trade in services; and
- promote progressive liberalisation in services
through successive rounds of
negotiations.
• Services negotiations undertaken on “request-offer”
approach, on bilateral and plurilateral
basis.
• Liberalisation of commitments of members are
multilateralised (applicable to all Members)

18. MMaarrkkeett AAcccceessss NNeeggoottiiaattiioonnss
• Developed countries seek ambitious market access
commitments and want:
- Members to bind existing autonomous
liberalisation
- foreign equity ownership of at least 51%
• Developing countries want:
- progressive liberalisation of services sectors
- market opening in sectors where they
have export interest
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19. Malaysia’s Position
• Prepared to undertake commitments under the
principle of progressive liberalisation
• Finalising the second revised Offer under Doha
Round, encompassing 11 sectors and covering 85
sub-sectors.
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20. FFRREEEE TTRRAADDEE AAGGRREEEEMMEENNTTSS ((FFTTAAss))
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21. Approach to Services NNeeggoottiiaattiioonnss
iinn FFTTAAss
• Based on the principle of progressive liberalisation,
commensurate with capacity of industry.
• WTO plus
• Based on domestic consultations – liberalisation to
benefit domestic stakeholders
• Cooperation elements added where relevant for
capacity building and transfer of
knowledge/technology
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22. FFTTAAss SSiiggnneedd
• Bilateral:
– Malaysia-Japan Economic Partnership
Agreement (MJEPA)
– Malaysia-Pakistan Comprehensive Economic
Partnership Agreement (MPCEPA)
• ASEAN + Dialogue Partners (where services
packages have been concluded):
– ASEAN - China (ACFTA) – 1st package
– ASEAN - Korea (AKFTA) – Korea yet to ratify
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23. IISSSSUUEESS PPEERRTTAAIINNIINNGG TTOO SSEERRVVIICCEESS
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24. • A need for all Ministries to prepare a road-map for
liberalisation of services under their respective purview
• A need for a coordinated approach for the development
of the services sector e.g. through Malaysia Services
Development Council (MSDC)
• To undertake outreach programmes to stakeholders
• To assist export-ready companies
• To compile comprehensive data on services
• To review of existing rules and regulations
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TTHHAANNKK YYOOUU