KUALA LUMPUR: Trade and investment linkages between Malaysia and China reached another significant milestone recently with the signing of 11 memorandums of understanding involving a potential investment of RM13.2 billion.
However, while these economic initiatives must translate into practical projects soonest possible, economists have emphasised that equitable benefits must be ensured for all parties concerned, especially the domestic private sector.
There has also been a suggestion that there should be a "national rate of protection" for local vendors and the domestic ecosystems like what many developed economies are doing.
Economist Dr Nungsari Ahmad Radhi said Beijing is set to maintain its position as Malaysia's largest trading partner and Malaysia is well-positioned to capitalise on the immense opportunities arising out of the Chinese economy, which is projected to become the world's largest economy.
Nungsari identified green technology and sustainability, agro-food industries as well as manufacturing as among several sectors that can be explored further as new growth areas Malaysia and China can work on more closely. "Malaysia just needs to build capacity to participate meaningfully," Nungsari, who is also a member of the Policy Advisory Committee to the Prime Minister (PMAC), told Bernama.
He said the global trade dynamism has undergone a rapid transition, transitioning from the free trade regime of the post-World War 2 era to the era of multilateral free trade agreements.
"Even (now) the United States is actively engaged in protecting its domestic industries and imposing punitive tariffs. Therefore, Malaysia needs to negotiate more bilateral agreements with its major trading partners such as China and among neighbouring countries in the region to become more economically integrated with them," he added.
He said that increased bilateral relations could increase market access for local firms to go beyond Malaysia's relatively small domestic market, while it augurs well for investment flows as well.
Trade and investment relations between both countries have deepened since 2009 and Malaysia's trade with China made up 17.1 per cent of Malaysia's global trade, valued at US$98.80 billion, or RM 450.84 billion.
Chinese Premier Li Qiang is on an official visit to Malaysia, which also marked his first visit to the country as premier, in conjunction with the 50th anniversary of diplomatic relations between Malaysia and China.
On the second day of Li's visit, a total of 14 MOUs were signed between government agencies, signalling a tighter government-to-government collaboration in various areas.
Yesterday, the Ministry of Investment, Trade and Industry (MITI) facilitated the exchange of 11 memorandums of understanding (MOU) between Malaysian and Chinese entities with a total potential investment of RM13.2 billion.
Malaysia and China have agreed to implement another cycle of a five-year programme for economic and trade cooperation, which will run from 2024 to 2028, aiming to deepen cooperation in existing areas such as trade and investment, manufacturing, agricultural infrastructure, the digital economy, logistics, and the development of small and medium enterprises.
Senior lecturer at Universiti Utara Malaysia's (UUM) School of Economics, Finance and Banking, Muhammad Ridhuan Bos Abdullah, has suggested that a "national rate of protection" be introduced to protect local vendors with regard to trade with China.
"In terms of competition (cost efficiency), we cannot compete with the manufacturing sector in China. So, with the national rate of protection, it gives an advantage to local firms on factors of economic growth and industrial organisation or agglomeration. If (they) can't use local products, at least the labour is local," he explained.
Citing an example, Muhammad Ridhuan said the United States is leveraging on a percentage of national rate protection, while Germany is using its competition policy to protect local industry while attracting investors.
One thing that Muhammad Ridhuan and Nungsari both agreed on is the development of human capital and education.
Nungsari highlighted that Malaysia ranked high in terms of prices (second), basic infrastructure (10th) and tax policy (11th), however, it was less competitive in the areas of education (44th), business legislation (50th), and productivity and efficiency (53rd). "Our schools and universities must be better (and) so should the government bureaucracy," he said.