5:14 AM Dec 20, 1993


Penang 20 Dec (TWN/Martin Khor) -- Top Malaysian economic officials appear to be giving out mixed and even contradictory reactions to the recently concluded Uruguay Round accord.

International Trade and Industry Minister, Rafidah Aziz, said Malaysia was satisfied with the outcome of the talks, calling it "a good starting point for future international trade", and estimated the gains for Malaysia in terms of a 45 percent (weighted average) tariff reduction in its major markets which would benefit the country's manufactured exports.

She however expressed disappointment that the reduction commitments in export subsidies in the farm sector were not up to Malaysia's expectations.

Her colleague, the Minister for Primary Industries, Lim Keng Yaik, had a less generous view of the accord.

Malaysia is one of the Third World's biggest commodity producers, being a leader in exporting palm oil, timber and rubber, and Lim's Ministry oversees these exports.

He told reporters that Malaysia had sent a protest note to the United States and the European Community over the Uruguay Round accord.

"The US and EC were locked in battle until the last moment, they unilaterally agreed on the accord on their own terms and threw them on us," he said.

"As anticipated the biggest trading countries and groups such as the US, EC and Japan were slow to play their part in bringing about a more liberal and freer trade regime for the world."

Lim said his Ministry had received feedback from Geneva that the US-EC agreement on agriculture gave the US an extra allowance of subsidy of l.2 million tonnes of oil seed per year over the next six years.

"This subsidy will have a detrimental effect on our palm oil (exports) in the international market," he remarked. The developed countries were still using their financial might to provide farm and export subsidies, he complained.

A few days later, Lim called for compensation to be given to developing countries for the reduction in benefits following the US-EC agriculture accord. He said the agreement was a "setback" in efforts to liberalise the agriculture trade system, and that industrial nations had not shown willingness to reform their agriculture sector.

"We hope they will look at other alternatives to minimise the adverse implications of the agreement, particularly its adverse effect on trade in similar commodities such as palm oil."

Rafidah, whose Ministry oversees manufactured exports, may be feeling more upbeat than Lim because in the assessment of Malaysian officials the country may have obtained a better deal in access to markets for manufactured exports as compared to agricultural products.

But there is also a heavy price to be paid for this.

Rafidah announced that Malaysia's domestic trade and industrialisation policies will have to be modified to conform with Uruguay Round's agreements. For example, she said, all local content requirement measures related to investments will have to be phased out in five years and export subsidies over eight years.

The Uruguay Round agreement on TRIMs requires all local content requirement measures to be phased out by developing countries within five years of entry into force. Within the same time-span, the agreement on subsidies provides that subsidies to domestic industry contingent, solely or as part of other conditions, upon use of domestic over imported goods are to be phased out by all developing countries, other than least developed countries.

One of the most important industrial projects in Malaysia is the production of the national motorcar, Proton Saga, which is a joint venture with Japanese manufacturer Mitsubishi. The project has a target of 60 percent local content, aimed at providing spin-off business opportunities for domestic industries.

Two years ago, Rafidah had warned that the local content target for the national car project would be affected by the Uruguay Round accord on TRIMs (trade-related investment measures) and this had resulted in expressions of anxiety by segments of the local business community.

With the Round concluding, it is becoming clearer that whilst exporters may enjoy wider market opportunities abroad, producers for the local market will face fresh and perhaps unprecedented difficulties caused by foreign competition.

Only time will tell whether there will be a net overall gain or loss to the national economy, especially when all sectors (manufacturing, agriculture and services) are taken into account.