RCEP deal seen as long-term positive for signatories

PETALING JAYA: The Regional Comprehensive Economic Partnership (RCEP) agreement, which was signed on Sunday, will have a long-term positive impact on the participating countries, which will include increased market access and variety of goods and services for participants, as well as improved prospects for regional economic cooperation.

In a statement, Fitch Solutions said these will far outweigh potential negatives arising from increased competition that domestic businesses would face as a result of the Asia-Pacific trade pact.

For Malaysia specifically, the move has been lauded, as it is expected to progress Malaysia’s economic development.

Malaysia-China Chamber of Commerce president Datuk Tan Yew Sing said the RCEP integrates the three major economic blocs of Asean, Northeast Asia, and Australia and New Zealand, and will bring three major benefits to these member countries.

“Firstly, the establishment of RCEP provides a win-win platform to strengthening the regional economic equality and multilateral cooperation, includes trades, investment, services and technical cooperation in addition to decrease internal tax or even zero taxes. Such measures will be able to intensify the economic and trade activities within this region effectively,” he said.

Tan said another immediate positive is the economic integration of the related regions. For Malaysia’s economic and business activities, the huge increase in the global trade will attract more foreign investment in Malaysia.

He highlighted that Malaysian enterprises, SMEs in particular, must grasp the opportunity to strengthen their competitiveness, including the application of high technology to enhance productivity.

“Importantly, great attention must be given to market research, human resources training and emphasis of product quality.

“The Malaysian government must allocate sufficient funds to local enterprises in order to meet RCEP challenges, accept the rules of exchange data flows, operational transparency. Great emphasis must be given to performance of enterprise and meritocracy in capitalising on the RECP for recovery economic,” Tan said.

The RCEP is the world’s largest free trade agreement (FTA), covering 30% of the world’s gross domestic product and the world’s population, and 27% of the world’s total trade value in 2019, and is based on existing FTAs among its members.

The RCEP will reduce tariffs and establish rules in around 20 areas, including cross-border data flows. The trade pact will remove duties on 61% of imports from Asean members, Australia, and New Zealand, 56% from China, and 49% from South Korea.

The RCEP will simplify rules and procedures within a single arrangement for the many “Asean plus one” FTAs that currently exist. It will also solve the problem of Asean being saddled with complicated rules spanning multiple FTAs.

UOB Research said the RCEP also fits in with China’s dual circulation strategy, which capitalises its large domestic market at the core of the strategy, and interacts the domestic market with the external market through trade, investment and capital flows and its manufacturing capability.

“With nearly half of the world’s manufacturing output produced by RCEP members, the agreement will further elevate their export competitiveness and efficiency. As the RCEP integrates further the Asia Pacific economies and markets, there is a reasonable chance that China will be able to achieve the doubling of the Chinese economy by 2035.”

This will in turn reinforce the growth and economic prospects of RCEP members, UOB Research said.