KUALA LUMPUR: Malaysia wants deeper economic ties with the UAE, especially in the tech and renewable energy sectors, the Southeast Asian nation’s international trade minister said, as the two sides continue their negotiations of a free trade deal.

The UAE and Malaysia agreed to begin talks in May, during a visit to Kuala Lumpur by a UAE ministerial delegation led by Sheikh Khaled bin Mohamed bin Zayed Al-Nahyan, the crown prince of Abu Dhabi.

The terms of reference for the agreement were finalized and signed last month, Malaysia’s International Trade and Industry Minister Tengku Zafrul Aziz told Arab News on Thursday.

“The ongoing negotiation for the Malaysia-UAE Comprehensive Economic Partnership Agreement holds immense potential for both nations. By fostering deeper economic integration, the CEPA can unleash a wave of trade and investment opportunities that will propel growth and innovation,” he said.

“Through reduced trade barriers, streamlined regulations and enhanced market access, Malaysian businesses can expand their reach and diversify their revenue streams by tapping into the UAE’s thriving sectors such as advanced technology, renewable energy and tourism.”

The UAE is one of the world’s leaders in developing energy transition solutions, while Malaysia is shifting from a traditional fossil fuel-based economy to a high-value green economy and plans to achieve net zero emissions by 2050.

To accelerate the process, Kuala Lumpur in July launched the first phase of its national energy transition road map.

Aziz said he was optimistic that the CEPA framework would catalyze a surge in foreign direct investment, giving a boost to Malaysian small and medium-sized companies which constitute some 90 percent of the country’s businesses.

“Businesses from both nations are expected to view investing in each other’s markets as an attractive and secure opportunity,” he said.

“These developments are poised to bring about favorable societal outcomes, especially in terms of benefiting small and medium enterprises that play a vital role in Malaysia’s economy.”

Trade between Malaysia and the UAE has been expanding since the two countries elevated their relations to a strategic partnership last year.

In 2022, two-way trade rose to $8.8 billion from $5.4 billion a year earlier, making the UAE Malaysia’s largest trading partner among west Asian countries.

According to Prof. Yeah Kim Leng, director of economic studies at the Jeffrey Cheah Institute on Southeast Asia, Malaysia’s partnership with the UAE is in line with its policies to promote direct investment and internationalize micro, small and medium-sized enterprises.

“The strengthening of the economic partnership with the UAE fits with Malaysia’s newly launched Madani economy framework,” he told Arab News.

“There are great opportunities and potential for Malaysia’s halal products to penetrate the Middle Eastern markets by leveraging on the UAE’s regional network and linkages.”

Sharmila Suntherasegarun, senior research executive at the Institute for Democracy and Economic Affairs in Kuala Lumpur, said work on the trade agreement was a “step in the right direction” for Malaysia’s efforts at diversification.

“With increased trade ties and mutual strategic cooperation, this could serve as a signal boost and create more opportunities for Malaysia to enter export markets in the Middle East, extending to North Africa and Europe,” she said.

“Given Malaysia’s strong presence in halal exports, which contributes 7.4 percent to its GDP, collaboration with the UAE should facilitate greater connectivity to global markets.

“Furthermore, with increasing demand for palm oil products from the UAE, the ongoing efforts by Malaysia to bolster and explore new palm oil export destinations can be further solidified through this trade pact.”

Suntherasegarun also highlighted the potential of UAE ties for Malaysia’s energy targets.

“The UAE’s renewable energy aspirations and its aim to triple the contribution of renewable energy, aligns with Malaysia’s green goals,” she said.

“Recent developments, such as the memorandum of understanding between the UAE’s state-owned renewable energy developer Masdar and (Malaysia’s) Citaglobal Berhad to collaboratively develop solar, energy storage and wind projects in Malaysia, suggest growing interest and potential for growth in this sector for Malaysia.”