Malaysia Set to Sign Free Trade Pact with UAE in June, Confirms Official

Malaysia is on the verge of finalizing a free trade agreement with the United Arab Emirates (UAE), with plans to sign the deal in June, according to statements from Malaysia’s trade minister, Tengku Zafrul Aziz. In an interview with Reuters in Abu Dhabi, Aziz disclosed that both parties are currently in the final stages of discussions. The potential agreement is seen as a strategic move that could position Malaysia as a key hub for UAE investments in Asia.

The negotiations for a Comprehensive Economic Partnership Agreement (CEPA) between these 2 nations commenced in May of the previous year. CEPA is a type of free trade deal designed to deepen economic ties between strategic partners globally. The UAE has been active in signing such agreements, having inked deals with India, Israel, Indonesia, Turkey, and Cambodia in recent times.

Although the economic relationship between Malaysia and the UAE is not of massive scale, bilateral trade has witnessed significant growth in recent years. During the first half of 2023, excluding oil imports, bilateral trade amounted to $2.2 billion. UAE Trade Minister Thani Al Zeyoudi highlighted that the UAE constitutes 32 percent of Malaysia’s trade with Arab countries, making it Malaysia’s second-largest trade partner in the Middle East and the 17th-largest globally. Investment flows between the two nations are also notable, with UAE investments in Malaysia standing at $220 million and Malaysian investments in the UAE at $150 million.

Upon the signing of the CEPA, Malaysia anticipates a boost in UAE investments across various sectors, including energy, electric vehicles, and microchips. Notably, the Mubadala Investment Company, a sovereign wealth fund based in Abu Dhabi, already holds investments in Malaysia, particularly in the energy sector through its subsidiary Mubadala Energy.

The impending CEPA underscores Malaysia’s efforts to strengthen economic ties with the Middle East, particularly with the affluent and dynamic economies of the Gulf region. Since assuming office in late 2022, Prime Minister Anwar Ibrahim has expressed a commitment to enhancing relations with the Middle East and positioning Malaysia as a vital economic bridgehead in the Asia-Pacific region. The focus on improving ties with Saudi Arabia, marred by the 1MDB corruption scandal, is part of this broader strategy.

Negotiations for a free trade pact between Malaysia and the Gulf Cooperation Council (GCC), which includes Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman, have also been initiated. However, progress has been slow, and the talks currently appear to be on hold.