Image credit: Global Times
MALAYSIAN companies are still in a wait-and-see mode when it comes to the Regional Comprehensive Partnership Agreement (RCEP) signed some nine months ago. Most small and medium enterprises (SMEs) are not fully conversant as to how they can take advantage of the regional trade agreement, seen as a significant move when discussing larger trade issues.
Hence, the government has some work to do on this front, especially in getting the SME players up and running with the agreement.
“Currently, the information about RCEP is quite limited. We propose that the government take several steps to assist the local businesses,” Malaysian-China Chamber of Commerce (MCCC) president Loo Kok Seong told a recent forum.
Speaking at the 12th Malaysia-China Entrepreneurs Conference (MCEC 2022) organised by MCCC in Kuala Lumpur on Dec 15, Loo suggested that government mobilise its machinery to provide SMEs with the latest information on procedures and measures that need changing with the advent of RCEP, as well as setting up a special task force to assist SMEs in their application processes.
In March 2022, Malaysia became the 12th signatory country to implement the RCEP agreement — joining Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Singapore, South Korea, Thailand and Vietnam — all nations that have completed their respective ratification processes.
In a nutshell, RCEP streamlines and amalgamates the Asean Free Trade Agreements (FTAs) with its dialogue partners (Asean + 1 FTAs) into a single regional trade agreement that can contribute to strengthening regional value chain activities in the region, as well make RCEP more user-friendly, especially for SMEs.
In the conference keynote address, former Bank Negara Malaysia (BNM) governor Tan Sri Muhammad Ismail said that trading bloc such as RCEP can promote interdependence in trade as it removes economic barriers, enable more trade and movement of capital. It has the potential to become a formidable force in global trade as well as create immense potential for economic growth for member countries.
“The idea is bold, creating an integrated market with major Asian countries to make it easier for products and services to be made easily available throughout member countries’ markets,” he told some 300 in-person participants and a few hundred more who followed the conference online.
The one-day conference, officially opened by Transport Minister Anthony Loke Siew Fook, was also attended by the Chinese ambassador to Malaysia Ouyang Yujin.
Lower Tariffs
To begin with, RCEP has further lowered tariff and non-tariff barriers for regional enterprises. It has also opened up new opportunities for regional enterprises in the digital and other sectors of economy.
“Before entering the RCEP market, local SMEs need to prepare themselves by optimising their supply and value chains, analysing whether their imports and exports products can benefit from the tariff reductions under RCEP, exploring new and effective strategies to face a more competitive single market, and take note of the specific information on the rules and regulations of the products’ place of origin,” said Loo.
After the RCEP agreement is officially signed, Loo noted that each RCEP member country will start the domestic approval process and gradually introduce specific detailed measures. “SMEs should also pay close attention to the latest developments,” he said.
Fair and Equitable
Dissecting the trade agreement, Muhammad told the forum participants that trade blocs work well on the assertion that collective decisions are made on rules and regulations that are mutually beneficial. The usual pitch is that economic partnerships can expand trade and investment.
“But behind this argument lies a certain nationalistic sentiment. An implied loss of control in decision-making by an individual country. A ‘loss of sovereignty’ as some populist politicians argued in rejecting and opposing trade blocs.
“This issue, based on my own unscientific observation, would not come to the fore during the early stage of an economic partnership. It will become a protracted issue later as the benefits of the trade pact do not fall evenly among member countries,” he said.
For regional trade agreements to be accepted by the general public, he said the benefits must be seen clearly and the downsides not apparent.
“In particular, income disparity and inequality between member countries and within society must be addressed sensitively and proactively before it becomes an issue and will cause a backlash against free trade. In other words, free trade must not only enhance competition and access to the market but must be viewed as fair and equitable,” he said.
Back Story
The RCEP negotiations were launched in November 2012 at the 21st Asean Summit in Phnom Penh, Cambodia, but the negotiations only formally started in 2013. Initially, RCEP was negotiated by 16 countries, consisting of 10 Asean member states and the bloc’s FTA partners — Australia, China, India, Japan, Korea and New Zealand. At the 2019 Asean Summit, Indian Prime Minister Narendra Modi announced that India could not join the RCEP in its current form.
The objective of the RCEP agreement is to establish a modern, comprehensive, high-quality and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development. Accordingly, it will bring about market and employment opportunities for businesses and people in the region. The RCEP agreement will work alongside and support an open, inclusive and rules-based multilateral trading system, according to a document shared at Malaysia’s Ministry of International Trade and Industry (MITI) website.
On Jan 21, 2022, MITI announced that Malaysia was set to become the 12th member state of the agreement on March 18, 2022. This followed the successful submission of Malaysia’s Instrument of Ratification (IOR) to the Asean Secretariat on Jan 17.
As provided under Article 20.6 of the RCEP Agreement, the agreement will enter into force 60 days after the IOR has been submitted to the Asean Secretariat. Malaysia will join 11 other signatory countries — Singapore, China, Japan, Brunei, Cambodia, Laos, Thailand, Vietnam, Australia, New Zealand and South Korea — that have completed the ratification process.
The RCEP is an economic cooperation deal that includes 15 dynamic economies with 2.2 billion people or nearly one-third of the world’s population, representing US$25.8 trillion (RM108.1 trillion) or 29.4% of the world’s GDP based on the World Bank’s 2019 data.
Studies show Malaysia is expected to benefit from the agreement which will push exports to the region worth US$200 billion, according to past reports.
The tantalising opportunity is not lost on SMEs. But they would need some hand-holding to help them make the best of the trade agreement now on the books.
Source: https://themalaysianreserve.com/2022/12/19/rcep-is-a-bold-idea-but-smes-need-hand-holding/