Home Business Enhancement & Opportunities #Exportability: Utilize FTAs to maximise market penetration
#Exportability: Utilize FTAs to maximise market penetration

#Exportability: Utilize FTAs to maximise market penetration

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Now that the potential markets have already been studied and identified, it is time to make things legal.

Plus, exporters can take advantage over these legalities to lower the cost of their export business.

Exporting involves building a relationship with another country and for that to happen smoothly, the exporter must be able to produce required documents, such as a Certificate of Origin (CO).

Before we go into detail regarding CO, let’s talk about Free Trade Agreements (FTA).

 

What is an FTA?

FTA is an international agreement between two or more countries to reduce or remove trade barriers and bring closer economic integration.

Members of a free trade area usually do not have to comply to external tariffs. This means they have specific quotas and customs taxes – depending on the conditions of the FTA.

Some FTAs even impose specific policies that can be of advantage between the members of the particular FTA.

 

Types of FTAs

 

 

There are two common types of FTAs – bilateral FTA and multilateral FTAs.

  1. Bilateral FTA
    • A trade agreement between two countries
    • Example: Malaysia-Japan
  1. Multilateral FTA
    • A trade agreement between several countries
    • Example: ASEAN – India

There are 13 concluded and implemented FTAs between Malaysia and other countries as listed below:

  • AFTA / ATIGA
  • ASEAN-China
  • ASEAN-Rep. of Korea
  • ASEAN-Japan
  • ASEAN-India
  • ASEAN-Australia-New Zealand
  • Malaysia-Japan
  • Malaysia-Pakistan
  • Malaysia-New Zealand
  • Malaysia-Chile
  • Malaysia-India
  • Malaysia-Australia
  • Malaysia-Turkey

*The list above is obtained from MITI’s official website. (Updated 13th March 2019)


How does FTAs benefit export businesses?

  • FTA offers lower or zero tariff (tariff concession) on exports of goods and components assigned under the particular FTA. Due to the tariff concession, products exported from FTA partner countries are more, as compared to exports from non-FTA partner countries.
  • Hassle-free custom procedures which results in a more relaxed or removal of quantitative import restrictions.
  • Most importantly, FTAs provides easier access into foreign markets, allowing businesses to expand their operation areas and build connections.

 

In the next article, we will go into detail regarding CO and how they can help export businesses fully utilise on existing FTAs to reduce cost and attract foreign investors. Till then, stay tuned!

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