* Talks follow negotiations with S. Korea, India, Singapore
* EU says deal would boost Malaysia GDP 8 percent by 2020
BRUSSELS, Oct 5 (Reuters) - The European Union launched formal talks for a free-trade agreement on Tuesday with Malaysia, the fourth fast-growing Asian economy with which it is pursuing a tariff-cutting, market-opening deal.
A trade agreement, which the EU estimates could take two years to complete, would "provide Malaysia with quality investment from Europe and open up new market opportunities for Malaysian and European businesses", European trade chief Karel De Gucht said in a statement.
The EU will sign a pact with South Korea on Wednesday, wants a deal with India by year's end, has launched talks with Singapore and has plans to do so with Vietnam, Thailand and Japan.
The deals highlight Europe's ambitions to tap Asia's fast-growing markets and temper the regional predominance of China, and demonstrate the growing competition among Asian trading states to expand business relations with Europe.
The EU is Malaysia's biggest source of foreign direct investment and Malaysia hopes a deal will further boost investment in its manufacturing sectors. A free trade deal would boost Malaysia's GDP by 8 percent by 2020, according to the EU.
Malaysia also hopes to pressure the EU into easing environmental rules that frustrate Malaysian sales of palm-oil-based biofuel to the European bloc. Malaysia disputes EU science that deems its biofuel production unsustainable.
The EU in turn wants access to Malaysia's fast-growing financial sector, where foreign ownership is currently limited to 20 percent. Foreign ownership in other sectors is limited to 30 percent -- another rule the EU would like eased.
The EU also hopes to pry open Malaysia's industrial markets, notably pulling down barriers protecting Malaysia's struggling car maker Proton, as well as its market in alcoholic drinks -- a sensitive area in the predominantly Muslim country.
The EU has agreed to tread softly and negotiate gradual market openings. But it will press Malaysia to adopt European standards on competition law, investor and intellectual property protection as well as climate change.
"We have no intention to dictate rules or impose our standards, but we are firmly convinced that trade can no longer take place in isolation from the wider objective of sustainable development," the EU said in a statement prepared for the launch of the trade talks.
Malaysian Prime Minister Najib Abdul Razak this week brushed aside concerns that his country may not meet the human rights requirements Europe attaches to its trade agreements, saying other EU trade partners have worse records.
The EU bloc had hoped for a single regional agreement with the Association of Southeast Asian Nations, but postponed this plan last year in favour of simpler individual bilateral agreements. (Reporting by Juliane von Reppert-Bismarck; additional reporting by David Chance in Kuala Lumpur; Editing by Peter Graff)