The heavily anticipated ratification of the Regional Comprehensive Economic Partnership (RCEP) in 2021 is expected to usher in a new era of trade as the newly minted trade bloc will be the largest in the world, accounting for a third of the world’s entire population and close to 30 percent of the global GDP.
Economists noted the deal, which includes Malaysia as part of the 10 Asean member countries, as well as China, South Korea, Japan, Australia and New Zealand, is expected to translate into an additional US$200 billion (RM803.4 billion) annually to the global economy by 2030.
With the global economy still suffering from the effects of Covid-19 lockdowns, many economists have stated the importance of pushing back against trade protectionism and anti-globalisation forces.
“As seen in the tremendous expansion in trade and investment under the Asean-China FTA between 2010 and 2020, the new regional pact when implemented in 2021 is expected to provide Asean economies with a new growth impetus in the coming years,” said Dr Yeah Kim Leng, a professor of economics at Sunway University Business School.
The RCEP is expected to be an essential component in Asia’s recovery from the Covid-19 pandemic. Experts have also noted that Malaysia should complement its abundant land and natural resources by continuing investment in good quality physical and digital infrastructure. By doing so, regional production centres and logistics and distribution hubs will benefit greatly, thus allowing for local and foreign investors to benefit from agglomeration effects and economies of scale.
Additionally, Dr Yeah stated that most manufacturing and primary commodity industries will face increased competition in import and export markets, but Malaysia’s trade openness for most products suggests that the new trade pact will not be disruptive.
AmBank Research chief economist Anthony Dass noted that most RCEP countries already have bilateral free trade agreements (FTAs). As such, the impact of RCEP on trade is likely to be mainly on the countries that currently don’t have bilateral FTAs, that is, China-Japan, and Japan-South Korea.
Domestically, he foresees this could possibly benefit a wide range of manufacturing and service sectors, from banking & finance, ICT, electrical & electronics, chemical & chemical products, rubber products and plastic products as well as machinery & equipment.