RCEP - Building A Brighter Future, Together
The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement (FTA) signed in November 2020 by 15 countries including Malaysia. The main objective of the RCEP agreement is to create a comprehensive economic partnership between the member countries.
What You Need To Know About RCEP?
The RCEP is considered as one of the world's largest FTAs outside World Trade Organisation (WTO), as it covers a population of over 2.2 billion people and accounts for around 30% of global Gross Domestic Product (GDP). The agreement brings together 10 ASEAN countries namely include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, and 5 of ASEAN’s major trading partners namely China, Japan, South Korea, Australia and New Zealand.
The RCEP aims to reduce trade barriers, increase market access and promote economic cooperation between member countries through the following:
(a)Progressive elimination of tariff and non-tariff barriers on a wide range of goods traded between member countries.
(b)Expansion of trade in services with deeper liberalisation in the financial services sector, telecommunications services sector and movement of natural persons.
(c)Protection and enforcement of intellectual property rights.
(d)Promotion and facilitation of electronic commerce.
(e)Economic and technical cooperation for areas such as trade-related technical assistance and capacity building.
(f)Addressing legal and institutional issues.
What Is The Impact of RCEP On Malaysia Business?
(i)Reduction in Trade Barriers
One of the significant benefits of the RCEP for Malaysian businesses is the reduction in trade barriers. The agreement aims to eliminate tariffs on 92% of traded goods, with the remaining 8% to be phased out over the next 20 years. This reduction in tariffs will help Malaysian businesses to reduce their costs and become more competitive in the global market from the perspective of customs duty planning or mitigation.
(ii)Liberalisation of Trade in Services
Chapter 8 of the RCEP sets out the provisions for the liberalisation of trade in services on 3 sectors namely financial services, telecommunications services and professional services, which will benefit Malaysian service providers. Additionally, Chapter 9 of the RCEP covers measures affecting the temporary entry of natural persons engaged in trade in goods, the supply of services or the conduct of investment.
(iii)Market Access to A Third of World’s Population
The RCEP also presents a significant opportunity for Malaysia to boost its economy and improve its trade relations with its neighbours. The agreement has provided Malaysia with a good opportunity to tap into a market of around 2.2 billion people, which constitutes around a third of the world's population. This will allow Malaysian businesses to easily expand their reach and access to new markets, leading to increased export opportunities and economic growth.
(iv)Integration of Supply Chain Within the RCEP Region
The RCEP will facilitate the integration of supply chains within the region, providing a boost to intra-regional trade and investment. This will enable Malaysian businesses to streamline their operations and increase efficiency by accessing a wider range of inputs and suppliers. By reducing trade barriers and harmonising regulations, the RCEP will promote greater trade flows and cooperation within the region, leading to a more seamless supply chain for Malaysian businesses.
(v)Promoting Greater Transparency, Information Sharing, Economic Cooperation
The RCEP agreement includes provisions to promote greater transparency and information sharing among member countries. This includes the member countries are required to regularly reporting on trade-related measures, notification of any new trade-related regulations, and the establishment of a dispute settlement mechanism which consists of two main components namely consultations and dispute settlement panel, to resolve disputes between members.
The agreement also aims to facilitate trade by reducing non-tariff barriers and promoting economic cooperation. This includes measures such as simplifying customs procedures, reducing technical barriers to trade and improving intellectual property rights protection.
The RCEP includes provisions to standardize international rules relating to e-commerce. This includes measures to promote cross-border e-commerce such as eliminating barriers to electronic transactions, promoting paperless trading and ensuring the protection of consumer information.
Overall, these measures are designed to promote greater economic integration and cooperation among the RCEP member countries, which should lead to increased trade and investment flows and greater economic growth and prosperity for Malaysia and other member countries.
(vi)Mutual Recognition of International Standards, Technical Regulations Trade
The RCEP also promotes mutual recognition of international standards and technical regulations among member countries. This means that Malaysian businesses can have their products and services certified in one member country and have them recognised in other member countries, reducing the need for duplicative testing and certification. This will result in cost savings for Malaysian businesses and promote greater efficiency in cross-border trade.
(vii)Protection of Intellectual Property Rights
The RCEP provides clarity in the protection of intellectual property rights, including patents, trademarks and copyrights, providing greater certainty and protection for Malaysian businesses operating in the region. This will give Malaysian businesses greater confidence to invest in innovation and protect their intellectual property, leading to more innovation and growth in Malaysia's economy.
Regulatory Authority In Malaysia
The regulatory authority in Malaysia for the RCEP is the Ministry of International Trade and Industry (MITI). MITI plays a crucial role in ensuring that Malaysian businesses understand the opportunities and challenges presented by the RCEP by providing information and assistance to Malaysian businesses on how to take advantage of the opportunities presented by the agreement.
Conclusion – Is Malaysia Ready For RCEP?
The Malaysian government has taken steps to prepare Malaysian businesses for the RCEP including providing information and assistance to businesses, promoting innovation and creativity and investing in infrastructure and technology. However, there is still work to be done to ensure that Malaysian businesses are ready to compete in the global market.
For instance, the RCEP poses some challenges for Malaysian businesses, particularly in terms of competition from other member countries. Another challenge is the need to align Malaysia's regulatory frameworks and standards with those of the other RCEP members. This includes the need to comply with the new rules on trade facilitation, intellectual property, e-commerce and other areas covered by the RCEP agreement.
Overall, Malaysia is well-positioned to benefit from the RCEP, with the MIDF Research predicts that the RCEP will boost Malaysia’s external trade performances in 2024 as Malaysian products can penetrate wider markets and enjoy cheaper imported goods with the RCEP is now in place. However, it will require ongoing efforts from all business players as well as the governmental bodies in Malaysia to address the challenges and take advantage of the opportunities presented by the agreement.
12 May 2023