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RESTRICTED WT/TPR/S/366 20 December 2017 RESTRICTED WT/TPR/S/366 20 December 2017 (17-7097) Page: 1/137 Trade Policy Review Body TRADE POLICY REVIEW REPORT BY THE SECRETARIAT MALAYSIA This report, prepared for the seventh Trade Policy Review of Malaysia, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Malaysia on its trade policies and practices. Any technical questions arising from this report may be addressed to John Finn (tel: 022 739 5081); Usman Ali Khilji (tel: 022 739 6936); and Zheng Wang (tel: 022 739 5288). Document WT/TPR/G/366 contains the policy statement submitted by Malaysia. Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Malaysia. This report was drafted in English. WT/TPR/S/366 • Malaysia - 2 - CONTENTS SUMMARY ........................................................................................................................ 8 Economic Environment ........................................................................................................ 8 Trade Policy Framework ....................................................................................................... 8 Trade Policy Developments .................................................................................................. 9 Sectoral Policy Developments ..............................................................................................10 1 ECONOMIC ENVIRONMENT ........................................................................................ 12 1.1 Main Features of the Economy .....................................................................................12 1.2 Recent Economic Developments ...................................................................................13 1.2.1 Balance of payments ................................................................................................16 1.3 Developments in Trade and Investment ........................................................................18 1.3.1 Trends and patterns in merchandise and services trade ................................................18 1.3.1.1 Composition of merchandise trade ..........................................................................19 1.3.1.2 Direction of merchandise trade ...............................................................................20 1.3.2 Trends and patterns in FDI .......................................................................................21 2 TRADE AND INVESTMENT REGIMES........................................................................... 23 2.1 General Framework ....................................................................................................23 2.2 Trade Policy Formulation and Objectives ........................................................................23 2.2.1 Structure of Trade Policy Formulation .........................................................................23 2.2.2 Trade policy objectives .............................................................................................25 2.2.3 Trade laws and regulations .......................................................................................26 2.3 Trade Agreements and Arrangements ...........................................................................26 2.3.1 WTO ......................................................................................................................26 2.3.2 Regional and preferential agreements ........................................................................29 2.3.2.1 ASEAN .................................................................................................................29 2.3.2.2 New RTAs ............................................................................................................30 2.3.3 PTAs ......................................................................................................................33 2.3.4 Other agreements and arrangements .........................................................................33 2.4 Investment Regime ....................................................................................................33 2.4.1 Overview ................................................................................................................33 2.4.2 Foreign investment regime .......................................................................................36 3 TRADE POLICIES AND PRACTICES BY MEASURE ........................................................ 38 3.1 Measures Directly Affecting Imports ..............................................................................38 3.1.1 Customs procedures, valuation, and requirements .......................................................38 3.1.2 Rules of origin .........................................................................................................39 3.1.3 Tariffs ....................................................................................................................40 3.1.3.1 Applied MFN tariff .................................................................................................40 3.1.3.2 Duty concessions/exemptions .................................................................................43 3.1.3.3 Tariff preferences ..................................................................................................43 3.1.4 Other charges affecting imports .................................................................................44 WT/TPR/S/366 • Malaysia - 3 - 3.1.5 Import prohibitions, restrictions, and licensing ............................................................44 3.1.5.1 Prohibitions (first schedule) ....................................................................................45 3.1.5.2 Import licensing (second, third, and fourth schedules) ...............................................45 3.1.5.2.1 Second schedule ................................................................................................45 3.1.5.2.2 Third schedule ...................................................................................................46 3.1.5.2.3 Fourth schedule .................................................................................................47 3.1.6 Anti-dumping, countervailing, and safeguard measures ................................................49 3.2 Measures Directly Affecting Exports ..............................................................................51 3.2.1 Customs procedures and requirements .......................................................................51 3.2.2 Taxes, charges, and levies ........................................................................................52 3.2.3 Export prohibitions, restrictions, and licensing .............................................................52 3.2.3.1 Export prohibitions (first schedule) ..........................................................................53 3.2.3.2 Export licensing (second and third schedules) ...........................................................53 3.2.4 Export support and promotion ...................................................................................54 3.2.4.1 Export support ......................................................................................................54 3.2.4.2 Tariff and tax concessions ......................................................................................55 3.2.4.3 Free trade zones and other measures ......................................................................55 3.2.4.4 Export promotion ..................................................................................................55 3.2.5 Export finance, insurance, and guarantees ..................................................................56 3.3 Measures Affecting Production and Trade .......................................................................57 3.3.1 Taxation and incentives ............................................................................................57 3.3.1.1 Tax structure ........................................................................................................57 3.3.1.1.1 Indirect taxes ....................................................................................................57 3.3.1.1.2 Direct taxes .......................................................................................................58 3.3.1.2 Tax incentives ......................................................................................................59 3.3.1.2.1 Main incentives ..................................................................................................59 3.3.1.2.2 More favourable incentives ..................................................................................60 3.3.1.2.3 Incentives on indirect taxes .................................................................................61 3.3.1.3 Other support measures, and SMEs .........................................................................61 3.3.2 Standards and other technical requirements ...............................................................62 3.3.3 Sanitary and phytosanitary requirements ....................................................................64
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