Trade deals provide welcome boost for Malaysian economy

Malaysia's economy will be boosted by two large trade deals, analysts say. Greater economic integration between the 10- members of the Association of Southeast Asian Nations (Asean) was agreed last month, while another initiative that will help the country's exporters - the Trans-Pacific Partnership (TPP) - was signed in October.

At its summit last month in Kuala Lumpur, Asean's rotating chair Malaysia's Prime Minister Najib Razak announced the Asean Community would be established on December 31. Intra-Asean trade has been liberalised over the years, with tariffs removed, and the creation of this single market that will encompass major regional economies such as Thailand, Indonesia and the Philippines will ease this process further.

Malaysian exporters, already benefiting from a weak ringgit, will gain from the country joining TPP. The deal, which opens up trade between 12 Pacific-Rim countries, including Singapore, the United States and Vietnam, was completed after seven years of negotiations.

According to HSBC analysts, a wide range of Malaysian exporters will find it easier to sell inside and outside Asean following the TPP announcement.

"Think electronics, rubber and palm oil exports. The chemical sector should also receive a boost," says Su Sian Lim, an economist at HSBC.

Malaysia accounts for 44 per cent of worldwide palm oil exports, with companies such as Sime Darby among the top producers.