Malaysia-Australia Free Trade Agreement

MAFTA: the benefits

Malaysia-Australia Free Trade Agreement

The Malaysia-Australia Free Trade Agreement is another step forward for Australia in the Asian Century. The Agreement reduces trade barriers, making it easier for Australians to do business in Malaysia – our 10th largest trading partner.

The Malaysia-Australia Free Trade Agreement (MAFTA) builds on the ASEAN-Australia-New Zealand FTA (AANZFTA) to open up new opportunities for Australian investors and suppliers of goods and services, bringing our economies closer together. This high-quality free trade agreement improves access to the Malaysian market for Australian businesses and makes it easier for Australian workers and their families to live and work in Malaysia.

"MAFTA is a game changer. It's one of the best free trade agreements we've seen and AMBC is 150 per cent behind it."

Larry Gould | National President, Australia Malaysia Business Council (AMBC)

Why Malaysia?

Malaysia is one of Australia's closest regional partners and one of South East Asia's fastest-growing economies. Malaysia is our third-largest trading partner in ASEAN and our 10th largest trading partner overall. Two-way goods and services trade between our two countries was $17.2 billion in 2011‑12. MAFTA will further strengthen and expand Australia's economic relationship with Malaysia, creating export and investment opportunities for Australian businesses.

How does this FTA build on AANZFTA?

While both Australia and Malaysia are parties to AANZFTA, MAFTA will build on that agreement to further liberalise the commercial relationship between our two countries. MAFTA contains a number of 'AANZFTA-plus' elements that give Australian exporters, businesses and individuals greater flexibility and improved access to the Malaysian market. It also eliminates all remaining tariffs on Malaysian goods exported to Australia.

What will MAFTA do for Australian businesses?

MAFTA makes it easier for Australian goods exporters to enter the Malaysian market. It does this by lowering or eliminating the tariffs that Malaysia imposes on imports from Australia. This will help make Australian businesses more competitive in Malaysia. MAFTA lowers the cost of Malaysian products and inputs for Australian consumers and businesses, as no tariffs are imposed on Malaysian goods entering Australia. MAFTA gives Australian service providers better access to the Malaysian market and reduces a number of other barriers to trade. Skilled Australian workers will find it easier to take up employment opportunities in Malaysia.

How do free trade agreements benefit Australia?

Free trade agreements provide a framework for Australia's commercial relationship with trading partners, increase trade and investment opportunities, bring money into the Australian economy and help create jobs. Australia pursues high-quality, comprehensive trade agreements when they offer net benefits to Australia, are World Trade Organization-consistent, and support the global trade system.

"Malaysia forms an important part of the Asian Century story and MAFTA provides an opportunity for Australian agricultural producers to capitalise on the increasing Malaysian demand for Australia's top quality food and fibre."

National Farmers' Federation

Case Study: Harvey Fresh Milk (WA)

Founded in 1986, Harvey Fresh is a family-owned business based in Western Australia, producing a wide range of fresh juice, dairy and wine products for local and overseas markets.

The company won the Premier's Award for Excellence at the Western Australian Industry & Exports Awards in 2011, along with the award for agribusiness.

Harvey Fresh currently exports to Singapore, Hong Kong, Philippines, China, Malaysia, Taiwan, Indonesia, Bangladesh, Japan, Korea, Nepal, Maldives and Vietnam.

Every year, it exports approximately one million litres of milk to Malaysia.

Under MAFTA, Malaysia will increase the volume of its tariff-free quota of liquid milk imports from Australia each year. This will help Harvey Fresh export more fresh Australian milk into Malaysia.

Case Study: Swinburne University (VIC)

Australia's second-biggest export to Malaysia is education. Three Australian universities — Monash, Swinburne and Curtin — currently have campuses in Malaysia.

The Australian and Malaysian governments are funding mobility programs that have allowed Swinburne ICT students from Australia to work on local community projects in Malaysia. The students also visited Swinburne's Sarawak campus to meet staff and local students and share their experiences of student life in Australia.

MAFTA will pave the way for further such student programs. Under MAFTA, Australian higher education providers are able to own up to 70 per cent equity in local campuses. The equity threshold will increase to 100 per cent by 2015. Malaysia has also raised the limit on the quota of Australian lecturers allowed at a single institution, from 20 to 30 per cent of the total.

Case Study: Solahart (NSW)

Solahart is a leading Australian manufacturer of solar hot water systems, supplying more than one million households worldwide. The company manufactures its solar hot water systems and renewable energy products at factories in Sydney and Perth. Solahart exports to more than 70 countries around the world, including most ASEAN nations.

Previously, the company faced a 30 per cent tariff on its exports to Malaysia, which made them uncompetitive. Under MAFTA, this is reduced to zero. Solahart is looking to increase its sales to Malaysia.

Case Study: Hella Australia (VIC)

Hella Australia is a Victoria-based company that employs 360 people. Hella Australia designs and manufactures automotive lighting equipment and accessories for the automotive, mining and marine industries.

Hella Australia plays a role in global value chains. It imports some components, including from Malaysia, and then exports its finished products back to Malaysia, other ASEAN countries, China and South America.

Under MAFTA, virtually all Malaysian tariffs on automotive parts and components and on medium to large engine cars were eliminated on day one. For Hella Australia, this could create more opportunities to be a bigger part of the supply chain to the Malaysian automotive industry.

Top 5 imports and exports
Text alternative of this graph showing top 5 Malaysian imports and exports

"These changes will generate growth and employment in services industries in which Australia has specialist skills. Australia's expertise in professional services and financial services can now more easily be exported to Malaysia."

James Bond | President of Australian Services Round Table

Five benefits of MAFTA

  • 97.6 per cent of Australian goods currently exported to Malaysia are eligible for tariff-free treatment, rising to 99 per cent in 2017.
  • Australian investors will benefit from increases in foreign equity limits for specified services in the education, financial services, telecommunications and professional services industries.
  • MAFTA addresses non-tariff barriers to trade. For example, Australian milk exporters will benefit from a liberalised import licencing regime allowing imports of higher value retail packs.
  • MAFTA increases the number of Australian managers and specialists allowed to work in Malaysia and enables Australian workers and their families to acquire Malaysian visas more easily.
  • MAFTA allows exporters to use a simple declaration of origin to state where their goods came from when trading under the Agreement.

Information and Contacts

For more information on MAFTA
www.dfat.gov.au/fta/mafta

Department of Foreign Affairs and Trade
RG Casey Building, John McEwen Crescent,
Barton ACT 0221 | Phone (02) 6261 1111

Austrade
Information for new and existing exporters
www.austrade.gov.au | 13 28 78