John Key says the signing of a free trade deal with Malaysia is another vital move towards a "step change" for the New Zealand economy.

The agreement, signed in Kuala Lumpur yesterday, will boost New Zealand's kiwifruit industry, provide a bigger market for liquid milk exports and open further the door to the Malaysian market for the providers of educational services from New Zealand.

"This is where the action is," said the Prime Minister.

"If we're going to make a step change in the economy - certainly if we're going to lift exports as a percentage of GDP - the fastest and most effective place to target that growth is Asia."

The Malaysian deal builds on the free trade agreement that New Zealand and Australia jointly signed this year with the 10 countries of the Association of South-east Asian Nations (Asean).

Tariffs on manufactured goods, including some steel lines, paints, varnishes and plastic products, will be eliminated under the Malaysian pact at a faster pace than under the Asean agreement.

Malaysia has also agreed to give greater access to New Zealand exporters of services such as waste-water management and tourism, veterinary, management and maritime services, including cargo handling.

"Ninety-five per cent of goods will be immediately duty-free, and within seven years to all intents and purposes tariffs will be phased out," said Mr Key

"From New Zealand's point of view this is a fast-growing market - it's a billion-dollar market, but it's expanded by 80 per cent in the last four to five years."

At a briefing for the 60 members of the Kiwi business delegation accompanying the Prime Minister in Kuala Lumpur, Trade Minister Tim Groser said the Malaysian deal was the "cream on the top" of the Asean agreement.

It is the latest in a string of free trade agreements that New Zealand has signed with Asian countries including China, Thailand, Singapore and the Asean group.

"It creates a basis for engagement across the board," said Mr Groser.

"It demonstrates that New Zealand can be a natural and constructive participant in further regional integration

"It also underlines New Zealand's commitment to being 'open for business' and to a liberal global trading regime."

One big advantage of the Malaysian deal is a "most favoured nation" clause which means Malaysia will automatically extend to New Zealand exporters the benefits of any other concessions it makes in subsequent free trade deals with other partners.

In essence, the Malaysian deal fast-tracks many of the tariff cuts in the Asean pact.

Zespri, which exports $8 million of kiwifruit to Malaysia each year and has increased sales by more than 80 per cent in the past two years, expects a renewed surge when the 15 per cent tariff is removed.

Zespri's kiwifruit are available throughout Malaysia in large supermarket chains.

"We're aiming to sell more than one million trays through out local distribution partners next year," said Zespri chief executive Lain Jager. "It's one of our most important markets."

The Prime Minister also opened expansions for two New Zealand companies in Kuala Lumpur - a $12 million extension to Fonterra's Dairymas cultured foods plant and an expanded call-centre operation for Datacom.

* Facts and figures

Malaysia is NZ's eighth-largest market.

NZ exports to it were worth $1 billion last year.

Trade is up 80 per cent since 2004.

* What's in the deal?

99.5 per cent of NZ exports will be duty free within seven years.

Zespri is the big winner - kiwifruit exports will be duty free next year.

Education gets greater market access.

48 hours customs clearance for NZ goods.