UAE and Malaysia sign Cepa to increase bilateral trade

Brendan McDermid/Reuters

• UAE’s 12th Cepa agreement
• Eliminates or reduces tariffs
• Gateway to the Asean market

The UAE and Malaysia have signed a free trade deal, bringing the number of deals the Gulf state has agreed with foreign governments to 12.

The comprehensive economic partnership agreement (Cepa) will seek to eliminate or reduce tariffs, lower trade barriers, increase private sector collaboration and create new investment opportunities, the two countries said in a joint statement. 

Non-oil trade between them surpassed $4.9 billion in 2023. In the first half of this year, non-oil trade reached $2.5 billion, a 7 percent increase on the same period last year. 

The UAE is Malaysia’s second-largest trade partner in the Arab world, representing a third of Malaysia’s trade with Arab countries.

Dr Thani bin Ahmed Al Zeyoudi, the UAE’s minister of state for foreign trade, said the partnership will increase trade and targeted investment between the two countries.

“Malaysia offers substantial opportunity for our exporters, industrialists and business leaders, especially in high-growth sectors such as energy, logistics, manufacturing and financial services,” Al Zeyoudi said. 

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The trade deal is Malaysia’s first with a GCC nation. Tengku Zafrul Aziz, minister of investment, trade and industry for Malaysia, said he expects trade in certain goods to grow once the tariffs are removed. 

“We view the UAE as a strategic hub for Malaysian exporters to access markets in the Middle East, North Africa and certain parts of Europe, particularly as Malaysian exports such as electronics, machinery, jewellery, prepared foodstuff, tropical fruits, palm oil, cocoa and rubber would immediately enjoy zero import duties when this agreement comes into force,” Aziz said.

He said the Cepa agreement will give UAE-based companies an opportunity to use Malaysia as a gateway into the Asean market, which he expects will provide opportunities for local businesses – particularly SMEs.

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The UAE-Malaysia relationship is part of growing ties with the wider Asean bloc of 10 countries that also incorporates Brunei, Cambodia, Indonesia, Laos, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

In May 2022, the UAE signed a Cepa with Indonesia, which came into force in September 2023, while a similar agreement with Cambodia was activated at the end of January.

Negotiations are also well under way with the Philippines and Vietnam, the latter finalising terms on a deal to build on bilateral trade worth nearly $9 billion.

The UAE has signed 12 such agreements with countries across the world so far since launching its Cepa programme in September 2021. The programme aims to increase the country’s non-oil foreign trade to AED4 trillion ($1 trillion) by 2031.