Malaysia-Turkey FTA comes into effect on August 1

The Malaysia-Turkey Free Trade Agreement (MTFTA) will come into effect on Aug 1, 2015, International Trade and Industry Minister Datuk Seri Mustapa Mohamed announced on Wednesday.

"Turkey, with a population of 74 million people, holds vast market potential. I urge the Malaysian business community to take full advantage of the opportunities offered under this FTA, which can also help strengthen bilateral trade and economic linkages on a long-term basis," Mustapa said in a statement

on Wednesday.

With the entry into force of this Agreement, exporters from Malaysia and Turkey will be able to enjoy preferential access for their products in each other's country.

"Both Malaysia and Turkey will eliminate and bind duties on 70 per cent of the tariff lines, upon entry into force of the Agreement. After a period of eight years, duties will be reduced/eliminated for almost 86 per cent of tariff lines," the minister added.

In 2014, total trade between Malaysia and Turkey amounted to US$969 million. Malaysia’s exports to Turkey totalled US$752 million, while imports amounted to US$217 million.

Key exports to Turkey comprise textiles & clothing, chemicals & chemical products, palm oil, manufactures of metal, rubber products, and electrical and electronics products.

Imports from Turkey include textiles & clothing, machinery appliances & parts, iron & steel products, chemicals & chemical products, other agriculture produce, and electrical and electronics products.

"Malaysian exports that will benefit from immediate duty-free treatment in Turkey include selected textiles and apparel, electrical & electronics (E&E) products, chemicals, iron and steel products, machinery, wood products, leather products and all rubber products," Mustapa said in urging Malaysian businesses in these sectors to ramp up their exports to Turkey.

On other strategic products, including iron and steel, both countries will phase out import duties in stages within an eight-year period, starting from the day the Agreement enters into force.

Turkey will also eliminate all existing additional duties (ranging from 20 per cent to 30 per cent) on textiles, apparel and footwear, which currently affect more than a thousand tariff lines.

For palm oil and palm products, Turkey has offered a one-off duty reduction of 30 per cent from the current most favoured nation (MFN) rate (0-46.8 per cent).

"Reduction of duties on these products essentially means that Malaysian palm oil and palm products are placed at a competitive advantage in the Turkish market, over similar products originating from other countries," Mustapa said.

The accord comes into effect after almost four years of intense negotiations between the two countries that began in May 2010.

It was agreed that the talks would initially focus on goods, with the Agreement later expanded to cover investment and services.

In January 2014, both sides closed the deal, having arrived at a mutually beneficial package.

Mustapa said Prime Minister Datuk Seri Najib Tun Razak’s official visit to Turkey in April 2014 paved the way for the signing of the Agreement on April 17, 2014.

He added that the FTA with Turkey is the 13th such FTA entered into by Malaysia.

Currently, Malaysia has implemented six regional FTAs and six bilateral FTAs that cover other ASEAN member states, China, Japan, India, Australia, New Zealand, Pakistan and Chile.

During the signing of the MTFTA in April 2014, the Prime Ministers of Malaysia and Turkey set a target of USD$5 billion in total trade by 2020.

The implementation of the MTFTA is expected to facilitate the achievement of this target.

The full text of the Malaysia-Turkey Free Trade Agreement, with schedules of commitments on goods, is available on MITI's website at www.miti.gov.my.