RCEP to enter into force on March 18
New Straits Times - 22 January 2022
RCEP to enter into force on March 18
By Ayisy Yusof
The Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement, will finally be effective for Malaysia on March 18.
This followed the submission by Malaysia of its Instrument of Ratification (IOR) to the Asean Secretariat on Jan 17, according to the International Trade and Industry Ministry.
RCEP covers 15 countries with 2.2 billion or nearly a third (29.5 per cent) of the world’s population.
This represents US$25.8 trillion or 29.4 per cent of the world’s gross domestic product (GDP) based on the World Bank’s 2019 data.
Malaysia will be the 12th signatory country, joining 11 others namely Singapore, China, Japan, Brunei, Cambodia, Laos Thailand, Vietnam, Australia, New Zealand and South Korea that have completed the ratification process.
The RCEP officially took effect on January 1 this year.
The ministry, in a statement today, said prior to the submission, the Cabinet had given the mandate on Jan 12 to issue the IOR.
"As provided under Article 20.6 of the RCEP agreement which stipulates that the agreement will enter into force after 60 days of the IOR submission, the RCEP agreement will enter into force for Malaysia on March 18 2022," it added.
Economists said trade bloc was the new game to boost economies globally, and Malaysia was making a strategic move by joining RCEP.
Juwai IQI chief economist Shan Saeed market access, new demands and exchanging of expertise would uplift the masses at the macro level.
"I can foresee that RCEP would be one of the growing trade blocs in the next three to five years because of growing China.
"China is growing at a very fast pace despite global economic fragilities in advanced economies," Shan told the New Straits Times.
He said Malaysia was an important player in the Asean region in the areas of manufacturing, information communication and technology and commodities (oil and palm oil).
Aligning the trade and commerce strategy in the new bloc was going to boost Malaysia’s growth outlook in the next three to five years, he added.
"China’s exports and imports respectively hit 29.9 per cent and 30.1 per cent growth in the full year of 2021.
China trade surplus hit US$676 billion in 2021, with its trade with countries along the routes of the Belt and Road Initiative in 2021 expanding 23.5 per cent.
"Trade between China and Asean countries is expected to hit a new high under the RCEP. The Chinese currency is set for a second straight year of gains, on course to rise about 2.5 per cent against the dollar.
"That would make it the best performing emerging market currency in 2021, underpinned by robust exports, a growing trade surplus and ample dollar liquidity," Shan said.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said any multilateral trade agreement should be positive for the Malaysian economy.
It would open up new markets to be accessed by the businesses, be it listed entity, non-listed corporation and even for the micro SME firms, he added.
"While we are promoting a free trade environment, what really matters is the fairness among the developing countries who participated in such agreement.
"Obviously, each member countries would have different state of economic development and therefore, it has to be tailor made in order to allow sufficient time and resources to upgrade their skillset and technology.
"Member countries who are already reaching a developed status may have the upper hands as they are more efficient and has the right economies of scale " Afzanizam added.
Malaysian Rating Corp Bhd (MARC) chief economist and head of research Firdaos Rosli said total trade between Malaysia and RCEP countries slightly declined, hovering around 58 per cent 59 per cent since 2011.
"The RCEP will likely support trade by 1.0 or 2.0 percentage points higher in the middle term. Malaysia’s participation in RCEP will also increase the trade intensity between Malaysia and its members, cementing the increasing agglomeration process of the region along the way," he told the NST.
Firdaos said participants could also reap many macroeconomic benefits from the further easing of the supply chain in the region.
"In practice, the RCEP will eventually lead to much wider benefits to both Malaysia and other RCEP member countries," he said.
He concurred that the agreement would open up the door to follow through with the ratification of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and progress with other high-quality bilateral trade agreements with strategic countries. such as with South Korea.
"If Malaysia is ambitious enough, perhaps with the United Kingdom, the United States and the European Union as well."
He said the RCEP would eventually be the foundation for the Free Trade Agreement of the Asia Pacific, which would further boost trade among the region with the participation of Hong Kong and Taiwan in the agreement.
Firdaos said higher trade between Malaysia and China would be higher than between Malaysia and the United States.
"Owing to the trade war, we are getting closer to China instead of further away from it," he added.