QUANTIFYING BARRIERS TO TRADE IN SERVICES THROUGH COMMERCIAL PRESENCE: SELECTED SERVICES IN MALAYSIA

Abstract

The services sector in Malaysia is slowly liberalising in terms of equity ownership. However, trade and investment barriers in the services sector are difficult to measure since it is not easily quantifiable. Previous studies were mainly macro-level, multi-country cross-sectional assessments while there are no country level studies over time. This paper has two objectives. The first is to measure barriers to trade in services carried out through commercial presence (Mode 3) in Malaysia in several industries over time. The second objective is to assess the policy implications of the measurement obtained. Based on available data, the industries covered in this study include communications, construction, distribution, higher education, financial, healthcare, tourism and transportation and logistics services from 2001-2010. This assessment is important as Malaysia hopes to attract more foreign direct investment (FDI) into its services sector. Information is gathered through surveys, focus group discussions and content analysis of secondary sources. Restrictive policies on FDI are transformed into an index to measure the extent of liberalisation for each subsector. Based on the index, it can be seen that the liberalisation process is still slow. To facilitate further progress in liberalising the services sector, it is important to liberalise barriers beyond mere equity ownership