Malaysian 'add-on' deal strengthens links with Asia

A Malaysian free trade agreement may be just an "add-on" to existing trade deals, but exporters see it as positive for the region.

Trade Minster Tim Groser signed the Malaysian FTA on Sunday, strengthening New Zealand's links from the deal struck under February's Asean free trade agreement, which comes into force in January.

Wellington Regional Chamber of Commerce chief executive Charles Finny said the latest FTA was a useful building block on top of the Asean deal. The inclusion of services in the agreement benefited Wellington in particular.

The deal will phase out tariffs on kiwifruit by 2012, erasing a 15 per cent extra cost to exporters.

Zespri chief executive Lian Jager said the $8 million Malaysian market had grown to be one of the company's most important markets in Southeast Asia.

"Sales have grown over 80 per cent in the past two years and next year we're aiming to sell over 1 million trays."

Kiwifruit was New Zealand's seventh largest export to Malaysia.

"Malaysia presents significant future growth opportunities for our industry and we already have plans to boost our staff presence there to help educate Malaysian consumers." Mr Jager said kiwifruit consumption was relatively low in Malaysia, as it was not grown locally and therefore had not traditionally been part of the diet.

"As the specific nutritional benefits become more widely known, we anticipate further double digit sales growth."

New Zealand Kiwifruit Growers president Peter Ombler said lower tariffs meant gains that would flow straight through to improved prices for growers. "This is a great thing for exporters."

Federated Farmers president Don Nicolson said the increasing desire for dairy products in Malaysia made the sector a winner even before the FTA was signed.

"The challenge is to promote New Zealand products in a sophisticated retail market dominated by major domestic and international retailers, such as France's Carrefour, Japan's AEON and Britain's Tesco."

Health food exporter New Image Group chief executive Stephen Lyttelton said Malaysia accounted for more than half of their total revenues of just under $100m in the year to June.

New Image's main Malaysian export, a powdered daily breakfast drink, would benefit from the elimination of a 5 per cent tariff.

"You can see tariff reductions there will have a beneficial impact on the group's bottom line."

Meat Industry Association trade and economic strategy manager Dan Coup said while the Malaysian FTA was an "add-on" to the Asean deal it included valuable improvements.

"It's a very important market for the meat industry so anything they can do is positive."

One of the tangible benefits in the new deal was the guaranteed 48 hour cross-border processing, which meant goods going into Malaysia would not incur unreasonable charges sitting around waiting to be given a rubber stamp.

Hamilton plastic manufacturer Proform was excited about the tariff-free status due in Thailand, another recent FTA. The Malaysian deal made the Asian area a more attractive option.

Spokesman Nick Smith said reducing the 30 per cent tariff to zero hugely boosted business prospects in the region.