Malaysia in the EU

The European Union (EU) is a political and economic union comprising 28 member states. The European Union was established under the Maastricht Treaty in 1993 and evolved from the European Coal and Steel Community (ECSC) and the European Economic Community (EEC) formed by six countries in 1957. The member states of the EU are: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Republic of Ireland, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. There are also 5 official candidate countries waiting to join the union: Croatia, Iceland, Macedonia, Montenegro and Turkey.

Malaysia is officially represented in the European Union by Malaysian Embassies in 19 EU member states. This includes Austria, Belgium, Bosnia Herzegovina, Croatia, Czech Republic, Finland, France, Germany, Hungary, Ireland, Italy, Kosovo, Netherlands, Poland, Romania, Serbia, Spain, Sweden, and the United Kingdom.

The administrative set-up of the EU is unique and globally unparalleled: The countries that make up the EU remain independent sovereign nations but they pool their sovereignty in order to gain strength and influence none of them could have on their own. This pooling sovereignty means, in practice, that the member states delegate some of their decision-making powers to shared supranational institutions, so that decisions on matters of joint interest can be made democratically at European level. Generally speaking, the European Union has three core governing institutions:

  • The European Parliament, representing the EU’s citizens and directly elected by them;
  • The Council of the European Union, which represents the individual member states;
  • The European Commission, which represents the interests of the Union as a whole.

This ‘institutional triangle’ produces the policies and laws that apply throughout the EU. In principle, it is the Commission that proposes new laws, but it is the Parliament and Council that adopt them. The Commission and the member states then implement them, and the Commission ensures that the laws are properly taken on board. Other important EU institutions include:

  • European Central Bank – in charge of managing the regional monetary policies
  • Court of Justice of the European Union – arbiter in disputes about European law
  • European Court of Auditors – handling the financing of the EU

From the political perspective, the EU boasts a so-called Common Foreign and Security Policy. It primarily deals with security and defense considerations, but also includes external trade and commercial policy as well as foreign aid.

The EU is the largest economy in the world with an annual GDP of 11.9 trillion Euro in 2009 which is 26% of world GDP. Furthermore, it is the largest exporter, the largest importer of goods and services, and the biggest trading bloc with 37% of global trade. Investment-wise, the EU is setting records again: 35% of global outward FDI come from the EU, which makes it the world’s largest investor, and at the same time the EU attracts 30% of global inward FDI, which awards it the status as the world’s prime investment destination.

The EU's population is highly urbanized, with some 75% of inhabitants (and growing, projected to be 90% in 7 states by 2020) living in urban areas. Furthermore, the EU’s giant population represents the world’s most lucrative consumer market, adding on to its strategic market value.

The EU has established two core institutions which are the secret behind its unparalleled economic attractiveness: A single market and a growing monetary union. First of all, all 27 member countries form a single market across the entire. The founders of the EU shared a coherent economic policy view, with “the Treaty of Rome calling for a single internal market with no obstacles to trade and strong competition, as well as for multilateral liberalisation.” Ever since, the EU’s trade policy has been based on two pillars: Multilateral liberalisation and regional integration. The centralized decision-making process in foreign trade affairs enhances the economic attractiveness of the European Union. Beyond this, 17 of the EU member states are simultaneously part of the Eurozone, the monetary union of the EU. They use a common currency, the Euro, and have streamlined their monetary policies.

The EU’s total trade with Malaysia amounted to US$38.1 billion in 2010. Exports increased by 6.7% to US$16.8 billion while imports rose 11.2% to US$21.3 billion. Malaysia moved up to become the EU’s 14th largest import source (2009: 16th position) and the 26th export destination (2009: 27th position).

The EU contributed RM 122.85 Billion (10.5%) to Malaysia's total trade, an increase of 10.8%, thus making the EU Malaysias fourth largest trading partner. The top 5 EU trading partners were Germany (31.5%) The Nederland's (19.2%) France (10.9%) The United Kingdom (UK) (10.6%) and Italy (6.5%).

EU and Malaysia is currently negotiating a Free Trade Agreement.