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5 December 2001
Malaysia: December 2001

The Trade Policy Review Body of the World Trade Organization (WTO) concluded its third review of Malaysia 3 and 5 December 2001. The text of the Chairperson's concluding remarks is attached as a summary of the salient points which emerged during the discussion.

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The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member countries at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including its domestic laws and regulations, the institutional framework, bilateral, regional and other preferential agreements, the wider economic needs and the external environment. A record of the discussion and the Chairperson's summing-up together with these two reports will be published in due course at the complete trade policy review of Malaysia and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992 and 1999), Australia (1989, 1994 and 1998), Austria (1992), Bahrain (2000) Bangladesh (1992 and 2000), Benin (1997), Bolivia (1993 and 1999), Botswana (1998), Brazil (1992, 1996 and 2000), Brunei Darussalam (2001), Burkina Faso (1998), Cameroon (1995 and 2001), Canada (1990, 1992, 1994, 1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996), Costa Rica (1995 and 2001), Côte d’Ivoire (1995), Cyprus (1997), the Czech Republic (1996 and 2001), the Dominican Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European Communities (1991, 1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Gabon (2001), Ghana (1992 and 2001), Guinea (1999), Hong Kong (1990, 1994 and 1998), Hungary (1991 and 1998), Iceland (1994 and 2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica (1998), Japan (1990, 1992, 1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of (1992, 1996 and 2000), Lesotho (1998), Macao (1994 and 2001), Madagascar (2001), Malaysia (1993, 1997 and 2001), Mali (1998), Mauritius (1995 and 2001), Mexico (1993 and 1997), Morocco (1989 and 1996), Mozambique (2001), New Zealand (1990 and 1996), Namibia (1998), Nicaragua (1999), Nigeria (1991 and 1998), Norway (1991, 1996 and 2000), OECS (2001), Pakistan (1995), Papua New Guinea (1999), Paraguay (1997), Peru (1994 and 2000), the Philippines (1993 and 1999), Poland (1993 and 2000), Romania (1992 and 1999), Senegal (1994), Singapore (1992, 1996 and 2000), Slovak Republic (1995 and 2001), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 and 1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein)), Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996, 1999 and 2001), Uganda (1995), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).


This TPRB Review of Malaysia has seen a frank and very informative exchange of views, stimulated both by the full and open engagement of the Malaysian delegation, and Members' active involvement in the discussion. This exchange has contributed to a much better understanding by Members, and thus their collective evaluation, of Malaysia's trade and trade-related policies. The outcome, I believe, has been a highly successful third Review of Malaysia's trade policies, practices and measures.

Members welcomed and were impressed by Malaysia's rapid growth and its remarkably quick and strong recovery from the 1997 Asian financial crisis. Members attributed this impressive economic performance to sound macroeconomic policies, structural reforms, especially in the corporate and financial sectors, and fast growth in exports. Some Members wondered about the timing and effectiveness of Malaysia's capital and exchange control measures implemented in the wake of the Asian crisis and the pegging of the ringitt to the U.S. dollar, measures that Malaysia saw as appropriate for stabilizing markets and building confidence. Members expressed the hope that “temporary” liberalization measures introduced during the review period would be made “permanent”. Members also sought Malaysia's views on the need to diversify its exports, nearly half of which involve electronics.

Members commended Malaysia for its strong support for and commitment to the multilateral trading system, and expressed their hope that it would actively participate in the Doha Development Agenda. As regards Malaysia's pursuit of trade liberalization in regional fora, particularly ASEAN, some Members noted that the gap between MFN and preferential tariff rates applied to imports from ASEAN countries constituted a potential source of trade diversion, although Malaysia did not believe that this has actually happened.

Members expressed their appreciation of Malaysia's relative openness to trade and foreign direct investment and its continued liberalization efforts in these areas. In particular, Members commended Malaysia for its efforts to reduce tariffs, simplify the tariff structure, and abolish all local-content requirements (except those for the automotive sector). At the same time, concerns were raised over the fact that about one-third of Malaysia's tariff lines were unbound and the widening gap between bound rates and applied MFN rates, which had permitted Malaysia to increase tariff protection for certain products, thereby raising the simple average of MFN tariffs during the review period. Malaysia noted that this widening gap between bound and applied MFN tariff rates was the consequence of unilateral tariff reductions and that the import-weighted tariff average had declined; some other Members felt that such a gap provided developing nations with a degree of flexibility in undertaking trade liberalization and other economic reforms. Members also urged Malaysia to reduce the scope of its non-automatic licensing system. It was noted that state-owned enterprises continued to play an important role in Malaysia's economy and that the authorities might need measures to assure a pro-competitive climate in the sectors where such enterprises were prevalent. Some Members encouraged Malaysia to accede to the Agreement on Government Procurement.

On sectoral issues, Members noted the contrast between the openness and economic performance of the electronics and automotive industries; the much more open electronics industry had performed much better than the automotive industry, which was protected by high tariffs and non-tariff measures, including import licensing. Members urged Malaysia to bring forward the abolition of local-content requirements for motor vehicles. Moreover, Members encouraged Malaysia to continue its liberalization of the services sector, particularly financial services and telecommunications.

In addition, Members also sought further clarification on, inter alia:

  • the possibility of an ASEAN — China free trade agreement;

  • effectiveness of investment guarantee agreements;

  • greater use of ad valorem import duties;

  • measures affecting exports;

  • further progress in competition policy;

  • transparency in government procurement;

  • enforcement of intellectual property rights;

  • standards and licensing concerning various agricultural products; and

  • recognition of qualifications in education and legal services.

Members expressed their appreciation of the responses provided by the delegation of Malaysia during the meeting, and looked forward to later replies to some questions.

In conclusion, this Review has provided Members with a much better understanding of Malaysia's trade and trade-related policies and of their role in fostering Malaysia's economic development and helping it to cope with shocks, such as the Asian financial crisis. Malaysia's recovery has apparently been greatly facilitated by Members' adherence to the principles of the multilateral trading system and thus their willingness to keep their economies open to Malaysia's exports. Members encouraged Malaysia to further liberalize and diversify its economy. In this context, I, along with Members, look forward to Malaysia's continued support for future efforts to liberalize the multilateral trading system.