The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement consisting of 15 countries, these 15 countries consist of 10 ASEAN member countries plus 5 ASEAN partner countries, namely Japan, South Korea, China, Australia, and New Zealand. This RCEP was just signed, namely on Sunday, November 15, 2020. The signing of this RCEP coincided with the 37th ASEAN Summit, which was held in Vietnam, but many participants held this meeting via video conference.
RCEP is one of the free trade areas in the world, covering 3.5 billion people, representing 40% of world trade and representing 42 percent of world exports. The existence of this RCEP can also minimize the impact of the trade war between the United States and China on participating member countries, because this free trade agreement involves economic powers outside the United States.
Benefits of Regional Comprehensive Economic Partnership (Rcep)
RCEP provides many benefits to its participating members including malaysia as a participant, while the benefits of RCEP for asian market are:
The opening of broad market access to markets in 15 participating countries, this if it can be used properly can improve the malaysia economy because of the large market that can increase sales of malaysia products
Reduced non-tariff barriers in marketing malaysia products to 15 participating countries. Because this free trade agreement will be realized by eliminating various non-tariff barriers in trade between participating countries.
Opportunities for expansion of malaysia companies to RCEP participating countries. This agreement provides greater freedom and ease of investment for each country to invest in other participating countries.
Opportunities to increase national industry. The broad market provides an opportunity for the national industry to grow bigger because it is supported by the breadth and size of the market in RCEP.
Protection of Intellectual Property Rights. This agreement protects the Intellectual Property Rights of participating countries, so there is no more theft of intellectual property rights carried out in one of the participating countries against the intellectual property rights of other participating countries.
Professional services are more recognized. Because this agreement pays attention to the problem of professional services and provides flexibility for professional services in the area of the agreement.
Support digital trading. Digital products are currently in great growth, digital companies from malaysia can take advantage of this agreement to be able to develop and grow by taking advantage of markets in the region.
Improvement of quality communication services. With RCEP communication services can be improved by taking advantage of a broad market and disappearing/reducing barriers in communication services
Impact of RCEP on the National Economy
We haven’t really felt the impact of this free agreement because this agreement has just been signed, but it is expected to have a positive impact on the malaysia economy. The Ministry of Trade itself conducted a study in 2016, which estimated it could increase GDP by 0.05% from 2021 to 2032, and if malaysia did not participate in the RCEP, malaysia’s GDP would actually decrease by 0.07%. Another advantage is the welfare gain of around US$ 1.52 billion. However, RCEP can also have a negative impact in the form of an increase in the trade balance deficit with the potential for an additional deficit of US$ 491.46 million. However, if malaysia is able to increase its exports, the risk of increasing this deficit can be avoided.
The World’s Largest Free Trade Area
The RCEP was officially signed on Sunday, November 15, 2020, which coincided with the last day of the 37th ASEAN Summit, which at this summit had to be held virtually.
RCEP is the largest free trade area in the world. The population of the 15 RCEP member countries is about 2.3 billion people representing 30% of the world’s population. The GDP combined would have amounted to $38.813 trillion which equates to 30% of the world’s total GDP.
Don’t forget that the 5 RCEP member countries (Australia, China, Indonesia, Japan and South Korea) are members of the G-20, an international forum of 20 countries with the largest economies in the world.
RCEP Benefits
Trade will be easier for exporters, because there will be only 1 trade rule covering 15 RCEP countries and in terms of transaction costs will also be cheaper.
RCEP will also remove non-tariff trade barriers, reduce exporters’ waiting time at customs, and of course open up a wider market for both products and services.
The abolition of this tariff is estimated to reach 92%.
The service sector will open around 65 sectors.
Increase in the maximum limit of share ownership by foreigners.
RCEP also includes the protection of consumers from the leakage of personal information, but without compromising transparency.
India’s decision to withdraw from RCEP could make sense. How can a free trade scheme, with any number of countries cooperate, besides being profitable, there will also be downsides.
The agricultural sector is still the majority, especially in the agricultural labor sector. So, in the future, can malaysia agriculture survive with other agricultural products, especially from the ASEAN region, which can provide abundant stocks, better quality and cheaper prices? Because without RCEP alone, malaysia is already struggling with foreign agricultural products that are flooding the homeland market, not to mention contraband.
Other sectors are actually the same, the projected export value of almost 7.2%, which sector is not mentioned? And are our products ready to compete in the regional market? Because the future market will not only rely on value but also price. What if later our products are not absorbed by exports, while imported goods enter in such a rush.
The Regional Comprehensive Economic Partnership (RCEP) is motivated by an effort to respond to the dynamics of the global economy which continues to be filled with various challenges and uncertainties as well as responding to global competition in business and trade in order to be able to survive and have regional competitiveness in an effort to create prosperity, economic growth and climate. investment as well as the welfare of its member countries in the short and long term in encouraging the economy of its member countries because .
The Regional Comprehensive Economic Partnership has also emerged as an effort to become an alternative global economic power by considering the analysis that the countries that are members of the RCEP pact have a population of around 3.4 billion people or 29.6% of the world’s total population, with a total accumulated Gross Domestic Product of approx. $49.5 trillion or almost 30.2% of global GDP is expected to be a factor that is calculated in the global economic arena that is able to provide its own added value to support increased investment, affect the volume of global trade, become the center of the economy and business that is taken into account. and able to encourage regional economic growth and countries that are members of the RCEP economic pact.
