Regional Comprehensive Partnership (RCEP) Agreement

January 13th, 2022 by in 2022 - April Issue, News

Introduction and Brief History

The Regional Comprehensive Economic Partnership (RCEP) Agreement is regarded as the world’s largest free-trade-agreement (FTA) thus far, with 15 member countries consisting of 10 ASEAN Member States and 5 non-ASEAN states. RCEP, which entered into force on 1 January 2022, will potentially assist the Region’s post-pandemic recovery through trade liberalisation, digital economy, liberalisation of investments and creation of a common Rules of Origin (criteria needed to determine the national source of a product) to encourage regional and global trade, investments flow as well as services trend among its member signatories.

The negotiations on RCEP were first launched at the 21st ASEAN Summit in Phnom Penh, Cambodia in November 2012, with the objective to establish a modern, comprehensive, high-quality and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment, contribute to global economic growth and development as well as to encourage market and employment opportunities for businesses and people in the region.

 

Source: Ministry of International Trade and Industry (MITI).

Scope of RCEP:

  1. 1. Tariff elimination for trade in goods, including the related chapters of rules or origin, customs procedures, sanitary and phytosanitary measures, standards, technical regulations and conformity assessment procedures and trade remedies; 
  2. 2. Liberalisation of services sectors, including financial services, telecommunications services and movement of natural persons; 
  3. 3. Promotion, facilitation, protection and liberalisation of investment; 
  4. 4. Competition policy (countries are allowed to implement national laws related to state-owned enterprises), intellectual property rights, electronic commerce and government procurement (no market access, only for information exchange and promotion of transparency measures), 
  5. 5. Economic and technical cooperation and SMEs; and 
  6. 6. Legal and institutional issues. 

(Extracted from MITI’s official website at https://fta.miti.gov.my/index.php/pages/view/rcep)

 

Benefits to Malaysia

The RCEP streamlines existing ASEAN+1 FTAs that involves Australia, China, Japan, New Zealand and South Korea. It provides transparent, specific, rules-based multilateral framework for trade and investment. thereby enabling greater participation of businesses, especially small-and-medium enterprises (SMEs) through opportunities for expansion and diversification in the greater trade ecosystem.

The RCEP Agreement officially came into force for Malaysia on 18 March 2022. According to Ministry of International Trade and Industry (MITI)’s official press release, the establishment of RCEP positions the Asia-Pacific region as the new centre of gravity for global commerce, with total trade expected to increase nearly US$42 billion. Malaysia is expected to be the largest beneficiary in terms of gains in exports, projected up to US$200 million increase. Among the benefits that Malaysian businesses will be able to gain include:

  1. 1. Increased commercial opportunities and partnerships with other signatory countries. 
  2. 2. Opportunities for domestic and foreign companies to locate in Malaysia as an ASEAN production base for economic and global value chain activities in the region. 
  3. 3. Malaysian manufacturers and suppliers will be able to source quality raw materials that can be competitively priced as well as getting a wider scope for accumulation under the calculation on Rules of Origin. 
  4. 4. Increase of trades and services arising from digitalization and e-commerce further enhancing cooperation for service industries such as telecommunications, consultancy, banking and finance. 

Opportunities to Small-and-Medium Enterprises (SMEs) and Micro-Enterprises

The small-and-medium enterprises (SMEs), including micro-enterprises in Malaysia, will have greater opportunities for participating and contributing to economic growth, employment and innovation of the country as the free trade agreement offers:

  1. 1.Large market access to a third of world’s population with nearly 30% of world’s gross domestic product 
  2. 2. Lower barriers of entry for Malaysian goods and services 
  3. 3. Streamlined rules of origins that encourage investments flow from more developed countries 
  4. 4. Integration of supply chain that opens up opportunities for SMEs to attract foreign investors 
  5. 5. Harmonisation of international standards and technical regulations including intellectual property rights / protection 
  6. 6. Technology transfer / exchange with developed countries 
  7. 7. Transparency, information sharing, trade facilitation, economic cooperation and standardisations of international rules relating to e-commerce 

 

Malaysian businesses are encouraged to respond to the opportunities and exercise due diligence that comes with the enforcement of RCEP, keep updated with the Government’s policies on technology in line with IR4.0 and digitalization as well as adapting to a greener economy to achieve ESG (Environmental, Social, and Governance) goals. Businesses are encouraged to take full advantage of the regional marketing networks, existing and new, to access into the regional and global value chains, and to continue to leverage digitalisation and its arising solutions and technologies alongside a continuous development of human resources and upskilling to maintain competitiveness. Malaysian businesses are encouraged to visit Ministry of International Trade and Industry (MITI)’s official website at https://fta.miti.gov.my/index.php/pages/view/rcep to learn more on the RCEP.

References / Further Readings

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