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Contributed by GATS Committee
 On Friday 11 July 2008, representatives from the Ministry of International Trade
and Industry ("MITI") and MATRADE briefed members of the Bar on the government’s
commitment in liberalising the legal services sector.
About 30 members of the Bar attended this open briefing. MITI
made two presentations: the first entitled “Services Liberalisation – Legal
Service” was given by Mr Shukrie Mohamed Daud, Director of Services Sector
Development Division; the second entitled “Liberalisation of Services Sectors
in ASEAN” was given by Mr P Ravidran, Senior Director of ASEAN Economic
Cooperation Division at MITI.
Mr Shukrie informed the audience that Malaysia was targeting the services sector
as the new engine of growth under Industrial Master Plan 3 (IMP3). Under IMP3,
the government had established the Malaysian Services Development Council and
Malaysian Logistics Council as the agencies to monitor and coordinate the
development of the services sector. Liberalisation in the services sector was
currently being undertaken within the Association of South-East Asian Nations
(ASEAN) via the ASEAN Framework Agreement on Services (AFAS), which targeted
full liberalisation by 2015, and through the World Trade Organisation
(WTO)/General Agreement on Trade in Services (GATS) via progressive
liberalisation.
There were four modes of delivery of services: cross border trade, consumption
abroad, local commercial presence and movement of natural persons. The latter
two modes were the more controversial modes as they involved the entry and
presence of foreign firms and foreign professionals in the Malaysian services
market.
Mr Ravidran highlighted current developments in negotiations in ASEAN,
emphasising the importance of the ASEAN Economic Community (AEC). The AEC would
allow free flow of goods and services within the region to attract consistent
foreign direct investment (FDI). All ASEAN countries depended on FDI for
sustainable economic growth and the region had also emerged as a fast growth
market for service providers.
Mr Ravidran identified 2 issues: (1) regulation vs. liberalisation - as Malaysia
moved towards a globalised era, the Attorney General’s Chambers had to address
the issue of amending old regulations and the services sector was encouraged to
give feedback on amendments to the regulations; (2) the government and the
services sector must work hand-in-hand to look for opportunities outside
Malaysia and the services sector was encouraged to give feedback to MITI in
negotiating terms for liberalisation with other countries.
During the Question and Answer (Q & A) Session, members were active in posing
questions to MITI on the issue discussed. The Q & A Session was chaired by Mr
Andrew Khoo, Deputy Chairman of GATS Committee, who suggested that MITI and
MATRADE should encourage Malaysian exporters to bring their Malaysian lawyers to
foreign countries when negotiating business deals and promote the use of
Malaysian law as the law of the contract. This would allow Malaysian lawyers to
offer more legal services in foreign countries.
Q: What was the current situation with liberalisation? Were foreign firms
allowed to open firms in Labuan and other parts of the country? What were future
plans?
MITI: The legal services market in Malaysia was not liberalised. Foreign
law firms could only set up entities in Labuan to advise on international law
and offshore Malaysian law to companies incorporated in Labuan as part of the
Labuan Offshore Financial Centre. One of the aims of the briefing session was
for MITI to get feedback from the legal sector as to the possible conditions to
be inscribed in liberalising the legal services sector. The government would
like to impose conditions that would benefit both local and foreign firms.
Q: What was the timeline to liberalise?
MITI: 2015 was the timeline to liberalise within
ASEAN. Under WTO, the timeline was based on each negotiating round. The current
DOHA Development Round had not been concluded because of conflicting positions
taken by developing and developed countries. WTO would be holding a “Green-Room”
meeting on 21 July 2008 to reach a consensus and conclude by December 2008.
There was no timeline under various bilateral FTAs. As the services sector was
complex, the government had to liberalise sector by sector.
Q: Was it possible to make available data on the services sector at one
centre, instead of going to different ministries or government agencies?
MITI: The Services Sector Development Division was
working on collating and verifying data for the services sector, currently being
individually kept by the respective ministries. All data would be centralised
under the Malaysian Services Development Council. MITI was also working with the
Department of Statistics to collect data on services.
Q: Was it possible for small legal firms to form a consortium to market their
legal services as a one-stop legal centre as this would attract large clients
especially multinational corporations that were looking for a legal centre with
a variety of expertise?
MITI: There was no issue with this as long as the
foreign country allowed Malaysian law firms to establish themselves in this way
in that particular foreign country.
Q: Why would a foreign firm be interested to come to Malaysia if Malaysia
only allowed them to hold between 10% – 20% equity? The market abroad was
already saturated, and it would be difficult for Malaysian lawyers to offer
their services abroad.
MITI: If there was a niche area available, foreign
firms would still be interested to come in.
Bar Council (BC): In talks for example with the Law
Council of Australia, we have been told that Australian firms were interested to
tap into niche areas in Malaysia and not all practice areas. Also, there were
many other countries in the region where markets were not yet saturated – for
example Cambodia, Laos and Vietnam.
Q: If BC opened up certain areas, would BC envisage foreign law firms
associating with local firms and would they be able to advise on Malaysian law?
BC: Foreign firms would be permitted to form joint law
ventures (JLVs) with Malaysian law firms. Such JLVs would work only in permitted
practice areas, but within those permitted practice areas they would be able to
advise on Malaysian law
Q: When would this happen?
BC: We have made proposals since 2004. Now however
Bank Negara Malaysia (BNM) wanted to open up the Malaysian market for Islamic
Finance. BNM had proposed to allow certain foreign law firms to set up in
Malaysia on a “stand-alone” basis as it believed these law firms had the ability
to draw Islamic Finance business into Malaysia. BC was of the view that all
foreign law firms should come into Malaysia on a similar basis, which was the
JLV model. BNM wanted to push through this initiative by the end of 2008.
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