25 - Malaysia: strategies for the liberalization of the services sector

Summary

As Malaysia begins to position itself strategically in the knowledge-based economy, the services sector has been earmarked as its next engine of growth. This idea, in its rudimentary form at least, has been bounced around the discussion circles of policy-makers, policy scholars and various other intellectuals involved in influencing national policy for more than a decade now. Indeed, the importance of the services sector to further Malaysia's economic growth has been increasingly highlighted in the country's various development plans.

The services sector in Malaysia: a brief update

The tradability of services is set to be enhanced further by the development of new transmission technologies facilitating the supply of services (e.g. electronic banking, tele-education, tele-medicine), the deregulation of monopolies (e.g. voice telephony), and the gradual liberalization of hitherto regulated sectors such as financial services and transport combined with changes in consumer preferences. The share of services in the Malaysian gross domestic product (GDP) has expanded from 48.8% in 1987 to 60.8% in 2003, if construction services are included. This simple picture of services growth, painted by existing statistics, can only become more vivid in the near future.

In terms of WTO commitments, Malaysia has signed the agreement under the single undertaking rule and General Agreement on Trade in Services (GATS) as part of the whole package. Under GATS, which follows a positive list approach, Malaysia is expected to identify services sectors or sub-sectors and the modes of supply in which it is willing to make commitments through the process of ‘scheduling’, as well as to indicate any limitations on market access and national treatment.