The ministry, in a statement released on Monday night, said foreign investors could bring the Government to the Investor-State Dispute Settlement (ISDS) for breach of any obligation under the Investment Chapter of TPPA.
However, if Malaysia signs the TPPA, but then decides to withdraw, the protection under the Investment Chapter would be inapplicable to foreign investors.
“Malaysia’s withdrawal in effect would release it of its obligation to accord protection to investments under TPPA.
“For example, if Malaysia withdraws from TPPA, no company which is already established in Malaysia can take the Government to dispute under ISDS unless if there was an actual breach during the times when we were still a party (again, withdrawal in itself is not a breach) and cannot bring an ISDS action (which is no longer available anyway with the withdrawal) solely because it suffers loss of profit,” the ministry said in a response to an article by former premier Tun Dr Mahathir Mohamad.
On Dec 31, Dr Mahathir said that Malaysia could technically get out of the TPPA anytime it wanted but such a move would bankrupt the country due to litigation costs.
Dr Mahathir, in his blog chedet blog, cautioned that it would not be so easy for the country to extricate itself from the treaty as was said by International Trade and Industry Minister Datuk Seri Mustapa Mohamed.
He explained that all parties who would lose profit, even future profit, from such a decision would be able to sue the Government as part of the treaty’s agreements.
The ministry added that the Government could be sued for breach of the Investment Chapter of the TPPA, and if the breach is proven, compensation may have to be paid.
However, withdrawal from TPPA does not constitute a breach of TPPA.
The Ministry said participation in the TPPA would not constrain them from participating in other regional trade arrangements.
“We will continue to promote free trade policies and economic growth with a balanced approach which will provide us the flexibility to safeguard sensitive areas, such as our Bumiputera policies," it said.
“Indeed, Malaysia was once the 17th largest trading nation but we should also bear in mind that the external environment at that time was less challenging – there was not much competition for our commodities and we were accorded with preferential treatment under the Generalised System of Preferences (GSP) by the United States.
“The United States’ GSP provides preferential duty-free treatment for over 3,500 products from a wide range of designated beneficiary countries, including many least-developed beneficiary developing countries,” it said.
The TPPA is a multi-lateral free trade agreement that encompasses 12 countries – Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, Vietnam and Japan.
Under the TPPA, Malaysian businesses will have access to other TPPA countries’ markets while companies from those places can also apply here.
Concerns have been raised that such a treaty would limit Malaysia’s sovereignty and its ability to protect its local businesses and the rights of its workers.
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