It wasn't an easy negotiation to get Malaysia's tariffs with the United States down to 19% from 25% earlier, but Tengku Datuk Seri Zafrul Abdul Aziz says final discussions swung the pendulum in Malaysia's favour at the last minute.
An interview with StarBiz 7 revealed that the Investment, Trade & Industry Minister and his team faced significant challenges, as they effectively negotiated with one hand tied behind their backs.
00:05First of all, you said $70 billion in relation to investment for 10 years.
00:11That investment is in shares or in factories? What sort of investment?
00:17Well, first of all, I think you cannot just narrow into that, right?
00:21You have to understand that this negotiation is very different from any other negotiation.
00:27This is not a typical FTA negotiation where you're given 12 to 18 months.
00:3312 months is the record that we've done, right?
00:36To look at all the aspects and in any negotiations,
00:41both countries have to go towards an agreement where we feel it's fair, right?
00:47In this case, we have to look at what other countries are doing, right?
00:53So, if you want to look at what we get out for the 19%, you look at what the other countries got for their 19%, right?
01:01You can look at what Indonesia gave, for example.
01:03I don't like to make the comparison because these are all my colleagues, right, in my other countries.
01:08So, you look at that comparison.
01:10You must understand that for Malaysia, we have challenges.
01:14Because I have as a negotiator for the country, not all are under my jurisdiction.
01:21So, we coordinate for the country.
01:23That means I need to talk to Jakim for Halal.
01:26I need to talk to Kementerian Digital.
01:29I need to talk to MOF, of course.
01:32I need to talk all.
01:33I need to talk all.
01:34And I need to get their agreement and their understanding and then bring to cabinet to look at the big picture.
01:39Because, of course, naturally, every ministry will say no to everything, right?
01:42Because they feel that this is their turf and we shouldn't give in, right?
01:47Unless they give in, right?
01:48But in this case, there is no unless they give in.
01:51It's like, the thing is, this negotiation is, what can you give then?
01:55I'll decide, Tarif.
01:56So, we have to go into the negotiation table and say, look, what exactly are your red lines, right?
02:02So, they said, no, we don't have any firm red lines.
02:06Why don't you give your best offer?
02:08So, of course, we came in with our best offer.
02:11And as I expected, in any negotiation, that wasn't our best offer.
02:16It's our initial offer, right?
02:18So, then they said, okay, if that's the offer, then you might even get more.
02:22Then you have 25% that we, or at that time, 24%, right?
02:26So, you better give a proper offer, which we feel that's justifiable for us to bring to their president.
02:35So, this is both Secretary of Commerce, as well as the US Trade Representative.
02:40And they are Chief Negotiator as well.
02:42They will be very professional, because they don't force us to do anything.
02:45It's basically, what you put on the table, you will bring it up to Trump and recommend what is the right rate,
02:51based on the offer on the table.
02:53And, ding dong, ding dong, until, you know, to be fair, then they shared with us their advice.
02:58They said, look, this might not be good.
03:01This is sensitive to the president.
03:02This is sensitive for the US.
03:04This is national security.
03:05This is economic security under those six chapters.
03:08So, then we said, okay, we understand that we submit proposal.
03:12We also showed all our red lines.
03:15You know, our red lines on the Mumim Putra issue.
03:17Our red line on the government procurement.
03:18Our red line on the strategic interest.
03:20Our red line on excise duty.
03:21Our red line on halal.
03:23Our red line, I mean, just name it, right?
03:26I mean, no other.
03:27Even on tariff line, the first chapter, we say 98% we give on reduction and zeroing, right?
03:38Reduction and zero tariff.
03:41But how many percent of that is zero tariff?
03:4461%.
03:45I don't understand the other countries.
03:47You know what they are.
03:48There's 99 or 100.
03:50If you are in America, honestly speaking, would you give us the 19%?
03:54You know, it's not easy, right?
03:56Because we have to look at where we are.
03:58Because we need to be competitive.
03:59We know the other countries are at 19 and 20.
04:02Do you know the other countries give 100%?
04:03Do you know the other countries have no extra limit?
04:05We know the other countries don't have a big trade deficit like us.
04:10You know, so you must understand when you sit on the US side, you look at Malaysia.
04:15What are you doing?
04:16You really want to get 25 or 30%, is it?
04:18Right?
04:19So back to that number.
04:20Okay.
04:21So what do we do?
04:22We have to be smart about it, right?
04:24So we say, look, reducing the trade deficit since that's your major issue.
04:28One is the moeing.
04:30So we had ordered 30, and we're committing, not committing, we have an option to buy another 30.
04:36Of course, to be fair, they can say easily, like, look, you already committed any much.
04:44There's nothing new.
04:45But we say, still, we will help reduce the deficit.
04:48So they accept, although it's not new.
04:51They say, what is new, right?
04:53I said, well, Petronas, the LNG commitment, that's new.
04:58Yeah.
04:59But we all know that the LNG have to buy anyway.
05:02And then we say that, okay, we call all their JLCs through MOF, and then we call all their MNCs.
05:07What are your commitments?
05:09Right?
05:10So they give us the list of your commitments.
05:12Then we say, okay, these are what Malaysian-based companies, Malaysian-based companies, not really Malaysian companies, are committing to buy, which will help reduce the deficit.
05:20Right?
05:21Does this affect our fiscal position?
05:23Zero.
05:24There's no government spending.
05:25Nothing.
05:26So if the fiscal deficit is at 3.8%, it will continue to be at 3.8%.
05:30There's no single set of government money.
05:32Where is that 70 billion?
05:33That 70 billion is the 7 billion US over the next 10 years.
05:36That is commitment from the JLCs.
05:40I think it's better that you ask them how much they have now, but it's nothing out of the ordinary of what they have already there today.
05:47Right?
05:487 billion US, commitment a year for a fund of 2 trillion ringgit.
05:57All together, it's not much.
05:59And if they can afford it, and in fact, 2 US that's small.
06:04So they look, but they say, fine, that's what your best offer, okay.
06:07But they did say, come on, we know what's your GDP size, we know what's your GLIC fund, this is.
06:13And then they say, by the way, you already have X amount, already, which is nearer to that number anyway.
06:20So, you know, we said, yeah, but it still will help.
06:23And our deficit is still narrowing.
06:25We used to be 40 billion a few years ago, now it's 25.
06:28And this will further reduce.
06:29Isn't that what you want?
06:30Right?
06:31And they say, okay, fair.
06:32So that's how we get to the number.
06:35But again, not a single cent is from a budget.
06:39So, you know, Prime Minister, I know everyone said that defending jobs was the main reason they did the deal with the US.
06:46And I think you explained as to the reason why.
06:48I mean, they would have had a knock-on effect on future DDI and FDIs.
06:51So job creation is important for the government because it's one of the main forces of government, isn't it?
06:59But job creation only happens if companies are successful.
07:02So it's all the whole thing.
07:03I mean, from the large to the SMEs.
07:05Because the jobs can only come from SMEs.
07:08And SMEs still the biggest employers.
07:10And the multinational give jobs to SMEs.
07:12SMEs give jobs to the people.
07:14And the people who have jobs, then great.
07:16If you look at our GDP calculation, consumption is still high.
07:19I mean, that drive the GDP numbers.
07:21So if people don't consume, meaning people don't have salary, they don't have work, then it's all a knock-on effect.
07:29You can see the linkage.
07:30And that's why I explained to my counterpart.
07:32I said, automotive, I have to protect.
07:34Because one is China.
07:35Secondly, I've got 700,000 people in automotive industry.
07:38We cannot just switch off like that.
07:40You open.
07:41Well, on the other sectoral issue, which we are finalizing now.
07:45Because the step is now the joint statement we're finalizing.
07:48Because we've got many countries, so we'll do.
07:50And the next step is the agreement.
07:52So the agreement, the one that's not under 232.
07:56Which like palm oil, like rubber, like cocoa.
08:00They all verbally has agreed.
08:02We're not producing it.
08:03We give you zero.
08:05Right?
08:06We're not competing.
08:07But the one that's competing, 19 lah.
08:09But the one that is not even that list, like steel.
08:12I think steel what?
08:13For TV there's a different, different.
08:15That one's remain lah.
08:16But luckily we don't export steel lah.
08:18So some countries, kena lah.
08:20What are the chances of Malaysia self-conducting exports remaining tariff-free to the US?
08:25It's hard to predict lah.
08:27We don't know.
08:28Because they have until December to finish the investigation on the impact.
08:34But what I can say is that during this discussion they have been very practical.
08:39Right?
08:40Because they know where the red lines are.
08:43But they also know how we play India's supply chain.
08:47So in the semiconductor, if we continue to show that we complement the needs for semiconductor in the US,
08:57we need to show.
08:59Which we have done.
09:00We have done.
09:01And to be fair, I must thank the US companies lah.
09:05The MSIA in the US, the Semiconductor Association in the US, they were with us.
09:12They showed everything they showed to the US.
09:14Because Malaysia is one of their largest partners for semiconductors.
09:17So is there a high risk that they will connect on everything?
09:20As a government official, I would say, no lah.
09:23They will not.
09:24You all have to make your own assessment.
09:26You can see.
09:27But I am optimistic lah.
09:29That we are a small country.
09:31Hopefully we don't do anything that diminish the trust.
09:35Because so far at the working level, they have been very professional.
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