Introduction
The United Arab Emirates and Malaysia formalized their Comprehensive Economic Partnership Agreement on January 14, 2025, during a ceremony attended by President His Highness Sheikh Mohamed bin Zayed Al Nahyan and Malaysian Prime Minister His Excellency Anwar Ibrahim. The agreement came into force on October 1, 2025, establishing a framework to accelerate bilateral trade and create investment opportunities across strategic sectors.
The CEPA builds on the close economic relationship between both nations and provides an entry point into broader economic blocs. The agreement positions the UAE as a strategic hub for Malaysian exports to the Middle East and North Africa while opening Southeast Asian markets to UAE traders and investors.
Background and Context
Trade Relations Before the CEPA
Malaysia represents the fourth-largest economy in Southeast Asia and has been one of the UAE’s primary trading partners in the ASEAN region. Non-oil bilateral trade reached USD 4.9 billion in 2023 and USD 4 billion in the first nine months of 2024. The UAE serves as Malaysia’s second-largest trade partner in the Arab world, accounting for 32 percent of Malaysia’s trade with Arab nations.
The MY-UAE CEPA marks Malaysia’s first free trade agreement with a Middle Eastern country and its first trade agreement with a Gulf Cooperation Council nation.
Strategic Importance
The CEPA programme forms a central pillar of the UAE’s foreign trade strategy, which targets USD 1.1 trillion in non-oil foreign trade by 2031. Since its launch in September 2021, the programme has successfully concluded agreements with 32 countries, providing UAE businesses access to markets comprising nearly a quarter of the world’s population.
His Highness Sheikh Mohamed bin Zayed Al Nahyan emphasized the agreement’s significance in strengthening the economies of both nations, noting that Malaysia, with its fast-growing economy and pro-trade policies, is a vital partner in Southeast Asia. His Highness noted that the agreement aims to deepen cooperation in key sectors, reinforce supply chains, unlock investment potential, and open new doors for the two countries’ private sectors to thrive together.
Objectives of the CEPA
The UAE-Malaysia CEPA is designed to achieve several strategic objectives that benefit both nations economically and commercially. The agreement seeks to accelerate bilateral trade through the reduction or elimination of tariffs, promote private sector collaboration, and create new investment opportunities in high-growth sectors.
Dr. Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade, stated that the ratification represents a significant milestone in the economic partnership, paving the way for greater collaboration and innovation. The agreement will not only enhance trade relations but also unlock new investment avenues in key sectors such as healthcare, artificial intelligence, renewable energy, and logistics.
The CEPA is projected to more than double bilateral trade, which reached USD 5.5 billion in 2024. Both nations have set a target of increasing non-oil trade to USD 13.5 billion by 2032. In the first half of 2025, bilateral trade reached USD 3.3 billion, representing a 30.9 percent year-on-year increase.
Key Features of the Agreement
Structure and Coverage
The UAE-Malaysia CEPA comprises 19 chapters and their annexes. The agreement provides market access for goods, addresses non-tariff barriers, liberalizes trade in services, opens new pathways for investment, and enhances collaboration between both nations.
Trade in Goods
The CEPA provides for the immediate elimination of tariffs on almost all qualifying goods made in Malaysia or the UAE, including those from free zones. Some products are subject to gradual tariff dismantlement with quotas over a seven-year period for Malaysia and a five-year period for the UAE, with exclusions for sensitive and prohibited goods.
For goods to qualify for preferential tariff treatment, they must meet Rules of Origin requirements that are flexible and designed to enhance two-way trade. The agreement supports the flow of goods through trade facilitation and customs cooperation arrangements, ensuring that product health and safety requirements align with international standards.
Trade in Services
The CEPA establishes clear rules to facilitate the cross-border supply of services and ensures that service providers enjoy favorable treatment across various sectors including professional services, financial services, logistics, travel and tourism, and transport services.
Digital Trade
The agreement brings greater coherence to the digital trading landscape by establishing common disciplines that enhance confidence and ensure that digital trade flows benefit both businesses and consumers.
Investment Facilitation
The CEPA reaffirms each partner’s commitment to the protection of investment under the 1991 Bilateral Investment Agreement and establishes a Technical Council to promote and enhance investment flows, identify opportunities for expanding investment, overcome investment impediments, and engage with the business community.
Islamic Economy Chapter
The agreement includes a dedicated chapter on the Islamic Economy. This provision encourages greater cooperation to promote and facilitate the development of the Islamic Economy in areas such as Halal products, financial services, and tourism.
Small and Medium-Sized Enterprises
The CEPA recognizes the specific needs of small and medium-sized enterprises and seeks to make it easier for SMEs and entrepreneurs to grow their businesses and attract investment by providing information and establishing joint platforms to assist in developing linkages and building capacities.
Economic Cooperation
The agreement promotes cooperation and collaboration to support stronger economic ties. Areas of cooperation include manufacturing industries, agriculture, forestry and fisheries, tourism, energy, global value chains, trade and investment promotion, intellectual property, information and communication technology, capacity building and technical assistance, competition, and SMEs.
Impact and Benefits for the UAE
Enhanced Market Access
The CEPA provides UAE exporters with greater market access through preferential tariff rates. Some products will be subject to zero tariffs from the start, while others will see tariff reductions over time. UAE exporters can now benefit from improved access to Malaysia’s market and, by extension, the broader ASEAN market, which boasts a GDP of more than USD 2.9 trillion and a population of 647 million people.
Strategic Gateway to Regional Markets
The agreement solidifies the UAE’s position as a strategic hub for Malaysian exports to the Middle East, North Africa, and beyond, while simultaneously opening the Southeast Asian markets to UAE traders, entrepreneurs, and investors. This dual gateway function strengthens the UAE’s role as a global trade hub connecting high-growth economies.
Investment Opportunities
The CEPA unlocks new investment avenues in key sectors. The agreement enhances investment prospects in sectors such as healthcare, artificial intelligence, renewable energy, logistics, manufacturing, and financial services.
Trade Diversification
The agreement contributes to the UAE’s economic diversification strategy by reducing dependence on oil revenues. With CEPAs already in force with Indonesia and Cambodia, the UAE-Malaysia CEPA bolsters ties to the ASEAN region and consolidates the UAE’s status as a global trade hub.
Supply Chain Strengthening
The CEPA aims to reinforce supply chains between the two nations. By streamlining trade procedures and enhancing customs cooperation, the agreement reduces trade barriers and creates more efficient logistics networks.
Private Sector Growth
The agreement opens new doors for private sectors to thrive together. By removing or reducing tariffs, enhancing market access for service exports, and promoting collaboration, the CEPA creates opportunities for businesses to expand internationally and develop new commercial relationships.
Progress Toward National Objectives
The Malaysia CEPA contributes directly to the UAE’s goal of driving non-oil foreign trade to AED 4 trillion (USD 1.1 trillion) by 2031. The CEPA programme has successfully enhanced trade relations with partner countries across the globe.
The UAE-Malaysia Comprehensive Economic Partnership Agreement represents a strategic milestone in bilateral economic relations. Signed on January 14, 2025, and entering into force on October 1, 2025, the agreement establishes a robust framework for enhanced trade and investment cooperation between the two nations.
The CEPA is projected to more than double bilateral trade from USD 5.5 billion in 2024 to a target of USD 13.5 billion by 2032. Through the elimination or reduction of tariffs, streamlining of trade procedures, and enhancement of market access across goods and services, the agreement creates tangible benefits for UAE exporters, investors, and businesses.
For the UAE, the agreement delivers enhanced market access to Malaysia and the broader ASEAN region, unlocks investment opportunities in high-growth sectors including healthcare, artificial intelligence, renewable energy, and logistics, and strengthens the UAE’s position as a strategic gateway between the Middle East and Southeast Asia.
The UAE-Malaysia CEPA exemplifies how strategic trade agreements can foster mutual economic growth, create opportunities for private sector collaboration, and build bridges between regions. As the agreement continues to be implemented, both nations stand to benefit from deepened economic ties, enhanced cooperation across key sectors, and expanded opportunities for businesses and investors.
