Key Points:
- Malaysia and India plan to upgrade their Free Trade Agreement to enhance economic cooperation.
- The new FTA will cover various sectors, including the digital economy, semiconductors, AI, and infrastructure.
- Bilateral trade reached US$16.5 billion in 2023, with shifts in export-import composition reflecting changing trade dynamics.
- Both countries see significant potential for collaboration in the semiconductor industry, combining Malaysia’s hardware expertise with India’s software prowess.
Malaysia and India are set to enhance their economic partnership through an upgraded Free Trade Agreement (FTA) following Malaysian Prime Minister Datuk Seri Anwar Ibrahim’s recent visit to New Delhi. During bilateral talks, Anwar and Indian Prime Minister Narendra Modi explored deeper cooperation in several key sectors, including the digital economy, semiconductor manufacturing, artificial intelligence, infrastructure, food security, and tourism.
Investment, Trade, and Industry Minister Datuk Seri Tengku Zafrul Abdul Aziz, who accompanied Anwar on the trip, emphasized the need to elevate existing collaborations to a more comprehensive level. This upgrade will focus on the Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA), initially signed in 2011 to primarily address trade and investment.
Tengku Zafrul stated that both prime ministers set a three-month deadline to identify the specific focus areas and establish parameters for enhancing the agreement. This upgrade aims to cover a broader range of sectors, creating significant opportunities for business in emerging technologies, renewable energy, chemicals and petrochemicals, and manpower development.
Trade between Malaysia and India reached an impressive US$16.5 billion (RM72 billion) last year. India is currently Malaysia’s 11th-largest export destination and 12th-largest source of imports. Recent trade trends show a shift in the composition of exports and imports between the two nations.
Malaysia’s exports to India, particularly electrical and electronics products, have grown substantially. At the same time, the share of primary commodities has decreased from two-thirds of exports two decades ago to just one-third today. Meanwhile, Indian exports to Malaysia have seen a rise in petroleum products and engineering goods, replacing agricultural items that previously dominated the trade.
During his visit, Anwar highlighted the immense potential for collaboration in the semiconductor sector, noting Malaysia’s status as the world’s sixth-largest semiconductor exporter. He emphasized Malaysia’s expertise in assembly, testing, and packaging within the semiconductor value chain while acknowledging India’s unparalleled capabilities in software development.
