KUALA LUMPUR: Malaysia signed a Comprehensive Economic Partnership Agreement with the UAE on Tuesday, its first with a GCC country.
The countries started negotiations over a CEPA in 2023. It will lower tariffs, reduce trade barriers, promote private-sector collaboration, and create new opportunities for investment.
The deal was signed on the sidelines of the Abu Dhabi Sustainability Week, in the presence of Malaysia Prime Minister Anwar Ibrahim.
“The Malaysia-UAE CEPA will open up deeper economic cooperation opportunities, including the elimination or reduction of tariffs and enhanced market access, which will drive exports and create new investment opportunities for key sectors,” Anwar said, after witnessing the signing ceremony with UAE President Sheikh Mohamed bin Zayed Al-Nahyan.
Besides the UAE, Malaysia has signed CEPAs with India and Pakistan. It also enjoys free trade agreements with Australia, Japan, Chile and Turkiye.
For the UAE, it is the third such pact in Southeast Asia, after it signed similar deals with Indonesia in 2022 and Cambodia in 2023.
The immediate effect of the Malaysia-UAE CEPA is that for both countries it “opens up inter-region trade and increases access to non-traditional Western markets,” Dr. Lim Kim Hwa, director of the public policy think tank Penang Institute, told Arab News.
“The agreement will enhance trade, boost investments, and deepen Malaysia-UAE economic ties, providing both countries with clear clarity on tariff-free trade in the era of Trump 2.0. This provides both countries with market access certainty, thereby reducing the cost of business and diversify market access,” he said.
“Malaysia views the UAE as a strategic hub for Malaysian exporters to access markets in the Middle East and North Africa, particularly as Malaysian exports, such as electrical and electronics, machinery, jewelry, prepared foodstuff, tropical fruits, palm oil, cocoa and rubber, will immediately enjoy zero import duties when the CEPA agreement comes into force.”
The UAE is Malaysia’s second-largest trade partner in the Middle East, after Saudi Arabia, and contributes 32 percent of the Southeast Asian nation’s trade with the region.
The economic relationship is not massive but is growing rapidly. It stood at $8.61 billion in the first 11 months of 2024, registering growth of 8.6 percent on an annual basis for that period, according to data from the Malaysian Ministry of Investment, Trade and Industry.
It “means there’s room to grow,” said Lee Heng Guie, executive director at the Socio-Economic Research Center in Kuala Lumpur. He expects the CEPA to spur more economic activity with the whole region.
“It’s a breakthrough,” Lee told Arab News. “Malaysia can use this CEPA to make more trade partners with other Middle Eastern countries, expand our economic ties with the Islamic world.”
Expanding economic ties with the Middle East — especially GCC countries — is a part of the Malaysian government’s policy. Since assuming office in late 2022, Anwar has committed to enhancing the country’s relations with the region and positioning it as a key economic gateway to the fast-growing Asia-Pacific.
As this year’s chair of the Association of Southeast Asian Nations, Malaysia will be hosting the 2025 ASEAN-GCC and ASEAN-China summits.
“Hopefully, that can spark more future strategic collaborations between the three blocs,” Lee said.
“Hopefully, this forum will have a further follow-up. Not just trade (and) investment, but people connectivity. Given the current geopolitical trade conflicts it’s good for this part of Asia and Middle East to come up with this kind ... of collaboration.”