Questions On Malaysia - India CECA (MICECA)

The MICECA is a comprehensive Agreement, covering Trade in Goods, Trade in Services, Investment and Economic Cooperation.

Benefits accruing from the MICECA are multi-fold, as it contains disciplines across trade in goods, services and investments that lead to progressive opening of markets by both Malaysia and India. These market access opportunities are expected to translate into freer movement of goods, investment, services and professionals between the two countries.

Specific benefits of the Agreement include:

• The MICECA's preferential nature grants advantage to Malaysian exporters and service suppliers wanting to access the Indian market, as opposed to those from other countries that have yet to enter into a preferential trading arrangement with India.
• As a comprehensive Agreement, the MICECA also addresses non-tariff barriers and mechanisms to deal with these, including through capacity building programmes aimed at enabling compliance to standards and conformance measures.
• In the area of investment, the Agreement is comprehensive as it covers the four elements of liberalization, protection, facilitation and promotion. The Agreement provides assurance that the investor and their investments will be treated fairly and protected . The various provisions such as Minimum Standard of Treatment, Compensation for Losses, Expropriation and Compensation, Transfers and Investor State Dispute Settling Mechanism also provides certainty and predictability to the investment regime in Malaysia and India.
• In the area of services, India has committed to allow Malaysian foreign equity shareholding – ranging from 49 to 100% – in more than 80 services sub-sectors. Malaysia too has reciprocated.

The ASEAN-India FTA negotiations were ongoing when the MICECA talks began in February 2008. On 13 August 2009, upon conclusion of negotiations on Trade in Goods, ASEAN and India signed the ASEAN-India Trade in Goods Agreement (AITIG). The AITIG entered into force on 1 January 2010. ASEAN and India are currently negotiating the Agreements on Investment and Trade in Services.

Compared to AITIG, the MICECA contains many pluses. These include:

i) The comprehensive nature of MICECA, i.e., it includes Services, Investment, Economic Cooperation, Customs, SPS and TBT chapters. AITIG only covers Trade in Goods. 

ii) The Exclusion List (i.e., list of products excluded from tariff concessions) of MICECA is shorter than that of AITIG. India has excluded 1,225 products under MICECA compared with 1,298 under AITIG. Malaysia has excluded 838 products under MICECA, compared with 898 under AITIG. 

iii)For Trade in Goods, MICECA has advanced the timelines agreed under AITIG, e.g.:

iv) Malaysia has been granted better concessions for palm oil and palm oil products under MICECA:

 v) MICECA contains more trade-facilitative Product Specific Rules (PSRs) compared with AITIG.

 vi) MICECA contains more stringent anti-dumping provisions compared with AITIG, which will benefit Malaysian exporters.

a) Trade in Goods

 Agreed Modality:

 i) Normal Track 1 (NT1): tariffs on all products listed in NT1 will be eliminated by 30 September 2013.

 ii) Normal Track 2 (NT2): tariffs on all products listed in NT2 will be eliminated by 30 June 2016.

 iii) Sensitive Track (ST): tariffs on all products listed in ST will be capped at 5% by 30 June 2016.

iv)Highly Sensitive List (HSL): applies to Malaysia only. Tariff cuts on all products listed in HSL will be formula-based:

v) Special Products (SP): applies to India only. Tariffs will be reduced progressively and capped at 37.5–50%(depending on the product) by 31 December 2018.

vi) Special Track: tariffs will be reduced progressively and capped at 5–20%. Timeline for reduction of tariffs range from 4 to 7 years, depending on the product.

b) Trade in Services

 In the area of services, India has committed to allow Malaysian foreign equity shareholding ranging from 49 to 100% in 84 services sub-sectors, including in professional services, healthcare, telecommunications, retail and environmental services. In return, Malaysia has made commitments to allow Indian foreign equity shareholding in 91 services sub-sectors.

MICECA also contains a dedicated chapter that facilitates the temporary entry of installers and servicers, contractual service suppliers, independent professionals and business visitors (including potential investors) from Malaysia into India, and vice versa. Among others, Malaysian engineers, accountants and IT specialists will now find it easier to gain temporary entry into India to perform contractual work.

 c) Investment

MICECA provides a framework to further facilitate cross border investments between the two countries through commitments on national treatment as well as protection of investors and investments through expropriation, transfers and subrogation provisions.

Malaysia has excluded 838 tariff lines from the tariff concession under the Exclusion List (EL). These products are excluded for health, safety and moral reasons. Among the products are firearms, bullet, tobacco and liquor.

Compliance to rules of origin is pivotal in order to benefit from the tariff concessions granted under the MICECA. In order to enjoy the preferential tariff, exporters must ensure that the finished products have undergone substantial transformation in terms of change in tariff classification at 6 digits level and fulfill the general Rules of Origin Qualifying Content (QVC) of not less than 35% or Product Specific Rules (PSR).

To benefit from the lower tariff rates, exporters will need to check whether the goods are included under the tariff reduction list. This can be done by checking the product HS Code in.

 The tariff concessions schedule of Malaysia as in Annex 2-1 .

 In order for a product exported by Malaysia to enjoy preferential treatment in India, a Certificate of Origin (CoO) issued by the Ministry of International Trade and Industry Malaysia is required. The CoO is a certificate that can be used to satisfy your buyers that the products exported originate from Malaysia.

Steps:

a) Obtain the ASEAN Harmonised Tariff Nomenclature (AHTN) or Harmonised System (HS) code from the Royal Customs of Malaysia for your product as well as every product and raw material used.

b) Check your product's eligibility under MICECA based on India's schedules of tariff elimination/reduction.

c) Product for export must fulfill the condition of the rules of origin under MICECA.

d) Download/get the Cost Analysis Application Forms i.e. BAK 1(a), BAK 1(b) and BAK 1(c). The forms can be obtained from:

2. Service Counter (Ground Floor), Block 10, MITI, Government Offices Complex, Jalan Duta, 50622 Kuala Lumpur; or
3. iMITI's branch offices in respective states.

e) Completed Cost Analysis application forms must be submitted to:

Ministry of International Trade and Industry (MITI)
Trade Cooperation and Industry Coordination Section
Ground Floor, (Service Counter), Block 10
Government Offices Complex, Jalan Duta, Kuala Lumpur

For further details, please contact:

Tel : 03 - 6286 7200
Fax : 03 – 62741266 / 7288
www.fmm.org.my

The main challenge resulting from the implementation of the MICECA will be increased competition to the domestic industry. This is particularly true in areas where India has comparative advantage.

 However, this increased competition is expected to spur our industries to increase their competitiveness through increased productivity and efficient utilisation of resources by shifting limited resources away from less economically-viable activities into areas where Malaysia has comparative advantage. In addition, the MICECA will contribute to lower costs of inputs as Malaysian industries will be able to source cheaper inputs from India.

 MICECA also allows for longer phase-in periods for tariff elimination/reduction for sensitive products. This will then allow Malaysian producers to adjust to the increased competition.

MICECA also provides strategic partnerships between Malaysian and Indian companies which can be undertaken through joint ventures, in services sectors such as tourism, construction, franchising and healthcare.

 The Malaysian business community is encouraged to take full advantage of the opportunities offered under the Agreement. MICECA creates an attractive operating environment for the business community of both countries to further strengthen their bilateral trade and economic linkages on a long term basis.

 Further information on the MICECA as well as the text of MICECA and schedule of goods is available on MITI's website at www.miti.gov.my