LIBERALISATION IN

SERVICES SECTOR

c
 Outline

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

a
 Overview of Malaysia¶s Services
Industry
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. þ
 IMP3 Targets

IMP3 2007 2006 2005

Targets
GDP 59.7 46.7 45.3 44.6
Contribution (%) (Y 2020)
9.7 7.2 5.4
GDP Growth 7.5 p.a.
(% p.a.) construction:
5.7%)
Investments RM45.8 RM65.4 RM55.5 RM57.7
(billion) (p.a.

s
 Trade Performance of the
Services Sector
Jan-June
2008 2007 % 2006 % 2005
(RM bil.) (RM Bil.) Growth (RM Bil.) Growth (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)


 þ 

'
 Modes of Supply of Services

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:

±
 s
SUPPLIER
MODES CRITERIA
PRESENCE

Service delivered within the

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

Service delivered by a service

Mode 3:
provider of one country through
Commercial
commercial presence in another
presence
country. E.g. FDIs
Service supplier
physically
Service delivered by a service present within
personnel of one country who the territory of
Mode 4: another Member
travels to another country to
Movement of
provide the service. E.g. services
natural
provided by expatriates, business
persons
and professionals and foreign
workers. Ò
 Liberalisation of Malaysia¶s
Services Sector
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.

V
Preparation for Liberalisation of
Services Sector
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
c
 Preparation for Liberalisation of
Services Sector
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

cc
ca
 AFAS

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) .

cþ
 Progress of Services
Liberalisation Under AFAS
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. cs

 Equity Targets and Parameters
(Mode 3)

PRIORITY SECTORS OTHER SECTORS

(ICT, tourism, healthcare, (including professional
air travel and logistics) services)

2008 51% 2008 49%

2010 70% 2010 51%
2013
(Logistic 70% 2015 70%
Services)

c'
c±
 Services Negotiations in the WTO:
Covered by the General Agreement on Trade in
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 ³request-
offer´ approach, on bilateral and plurilateral
basis.
Liberalisation of commitments of members are
c
multilateralised (applicable to all Members
 Market Access Negotiations
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

cÒ
 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.

cV
a
 Approach to Services
Negotiations in FTAs

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
ac
 FTAs Signed
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

aa
aþ
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

as
THANK YOU

a'