The European Union and Malaysia Sign Partnership and Cooperation Agreement

The European Union (EU) and Malaysia signed a Partnership and Cooperation Agreement (EU-MY PCA) in December 2022. The PCA provides an overarching framework that aims to strengthen bilateral cooperation, particularly in the areas of trade and investment, finance, and energy. Further, the EU-MY PCA can help restart discussions on the EU-Malaysia free trade agreement, which reached an impasse in 2012.

On December 14, 2022, the European Union and Malaysia signed a Partnership and Cooperation Agreement (EU-MY PCA) during the inaugural ASEAN-EU Commemorative Summit held in Brussels, Belgium.

The PCA provides an overarching framework that aims to strengthen EU-Malaysia bilateral cooperation. The agreement contains over 60 articles in areas such as trade and investment, energy, finance, and politics, among many others. Malaysia is the sixth country from ASEAN to sign a PCA with the EU, the others being Indonesia, the Philippines, Vietnam, Singapore, and Thailand.

Notably, the EU-MY PCA helps lay the groundwork to recommence discussions on the EU-Malaysia free trade agreement (MEUFTA) whose negotiations have stalled since 2012.

Total bilateral trade between the two countries reached an estimated US$48 billion in 2021 with Malaysia enjoying a US$20 billion surplus. This was dominated by electric and electrical products (US$16.3 billion), rubber products (US$3.89 billion), and palm oil products (US$ 2.49 billion).

Highlights of the EU-MY PCA

Reduce the technical barriers to trade

Both parties will promote the use of international standards and exchange information on technical regulations within the framework of the WTO Agreement on Technical Barriers to Trade.

Customs

Malaysia and the EU hope to increase the security of international trade while providing a balanced approach between trade facilitation and the fight against fraud. To achieve this goal, both parties will share their experience in regard to the following:

• Simplifying import and export procedures;
• Ensuring the transparency of customs and trade regulations;
• Establishing mutual administrative assistance mechanisms; and
• Developing other areas of customs cooperation.

Investments

Both parties aim to encourage a greater flow of investments by enhancing cooperation on investment issues and promoting open and non-discriminatory rules for investors.

Trade in services

The parties shall promote trade in services between them, including through e-commerce, as well as promote access to capital and technology.

Intellectual property rights

Under the PCA, Malaysia and the EU will establish the appropriate measures t0 ensure the effective protection of intellectual property rights. Greater protection of intellectual property rights can contribute to the promotion of technological innovation and the dissemination of such technology, to the mutual advantage of users and producers from both parties.

Financial services

The parties will strengthen their cooperation to achieve closer common rules and standards for the banking, insurance, and other parts of the financial sector, including for Islamic financial services.

Organized crime and corruption

The parties will cooperate in combatting organized crime, financial crime, and corruption. Both parties will implement the standards set by the UN Convention against Transnational Organized Crime and its implementing protocols.

Small and medium-sized enterprises

Malaysia and the EU will promote industrial cooperation to improve the competitiveness of small and medium-sized enterprises (SMEs). This includes providing information on good practices on access to finance, the transfer of soft and hard technologies, joint research and innovation projects, and promoting sustainable consumption and corporate social responsibility.

Cybersecurity

Malaysia and the EU will cooperate on cybersecurity through the exchange of information in the fields of education and training, research and development, and new policies and best strategies.

Science, technology, and innovation

The PCA encourages cooperation in the field of science, technology, and innovation such as ICT, cybersecurity, nanotechnology, biotechnology, space technology, and renewable energy, among others.

Other forms of cooperation include developing partnerships between scientific communities, universities, and research centers, and the training and exchange of researchers.

Energy

Under the PCA, both parties aim to cooperate to diversify the supply, channels, and sources of energy to strengthen energy security. Further, the EU and Malaysia will cooperate to develop renewable forms of energy, including biomass, biogas, and biofuels.

Tourism

The parties shall develop cooperation to enhance the positive contribution of the tourism sector and mitigate the negative impacts of tourism. This will be done through developing eco-tourism, improving training, and respecting the interests of local communities.

EU-MY PCA paves a promising path toward a free trade agreement

The EU-MY PCA can help restart discussions for an EU-Malaysia free trade agreement. The negotiations reached an impasse in 2012.

If the FTA is concluded, it is expected to cover market access for goods, services, investments, and intellectual property rights, among many other areas. Importantly, the EU will have access to the world’s largest free trade zones through Malaysia’s membership in the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP). This would mean access to a market of over 2.3 billion people, covering over 15 countries.