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

Malaysia is the 19th largest trading nation in the world 23rd Most Competitive Economy in the World IMD World Competitiveness Yearbook th 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 ABOUT MALAYSIA

Area: Population: GDP Growth 330,252 sq. km 26.1 million 5.8 % ( 2007 est. 6%) –Powered by manufacturing and services sector Per Capita IncomeUS$5,498 Inflation 3.7% Labour Force11.5 million Unemployment3.5% Trade SurplusUS$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 FACTS ABOUT MALAYSIA

TRADE FACILITATION RELATED COSTS DIRECT Cost of compliance related to completing certification requirements (e.g. Import Licence, Health Certificate, CIDB Certification, 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 Charges for trade related services (e.g. trade insurance, agents’ fees, etc

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

18 THANK YOU for your attention