Strategies for firms to embrace RCEP trade opportunities

THE Regional Comprehensive Economic Partnership (RCEP) stands as the largest free trade agreement globally, encompassing 15 countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, South Korea, Australia and New Zealand.

It functions as a comprehensive framework for promoting free trade among its members, offering a unified set of rules and procedures to access preferential tariffs throughout the region.

For instance, it harmonises diverse rules of origin, facilitating eligibility for preferential duties across multiple countries.

The aim of the RCEP is to create a contemporary, extensive, top-tier economic alliance that enhances current Asean bilateral agreements with its free trade agreement (FTA) partners, fostering mutual benefits and advancing global economic progress and development.

Specifically, RCEP's objective is to establish a modern, comprehensive, high-quality and mutually beneficial economic partnership that builds on existing bilateral Asean agreements with its FTA partners and contributes to global economic growth and development.

This modern approach is evident as the RCEP builds on the existing Asean Plus One FTAs (the grouping's FTAs with the five partners) and accounts for emerging trade realities, including electronic commerce; the potential of micro, small and medium enterprises; the interdependency of regional value chains; and the complexities of market competition.

Furthermore, the RCEP is comprehensive both in coverage and in depth of commitments, comprising 20 chapters that span traditional areas such as trade in goods, rules of origin, customs procedures and trade facilitation, as well as trade in services and investment and temporary movement of natural persons.

It also enhances emerging areas such as competition policy, intellectual property rights and ecommerce covered by existing Asean Plus One FTAs and includes newer areas such as government procurement.

Additionally, the RCEP contains provisions that go beyond the existing Asean Plus One FTAs in selected areas and support the parties’ engagement in global and regional supply chains.

Moreover, the RCEP agreement consolidates and brings together a single rulebook to facilitate the development and expansion of regional supply chains among parties.

The RCEP brings together countries with diverse levels of development, including technical cooperation and capacity building, to support the subsequent implementation of the agreement; as well as provisions to ensure that economies with different levels of development, businesses of differing sizes, and the broader stakeholders can all benefit from it.

However, the Investment, Trade and Industry Ministry (Miti) is struggling to encourage local companies to make more use of the RCEP, despite this agreement being in effect since 2022.

One possible reason is that it takes time for local companies to understand the import duty reduction and identify the products that would benefit the most from the reduction of duties under the agreement.

To enhance understanding of the opportunities and advantages presented by the RCEP, Miti is actively organising engagement sessions with the industry.

Last year, it conducted over 20 such sessions with diverse industry bodies, encompassing chambers of commerce and industry associations.

Furthermore, the Malaysia External Trade Development Corporation (Matrade) also facilitates the connection of high-quality foreign buyers from RCEP member countries with local companies at international trade fairs held in Malaysia, such as Oil & Gas Asia (OGA), Mihas, Defence Services Asia (DSA), and the International Greentech & Eco Products Exhibition and Conference Malaysia (IGEM).

When assessing RCEP benefits, the government evaluates them by issuing Certificates of Origin (CO) to Malaysian producers.

These COs enable Malaysian producers to receive preferential treatment, including reduced or duty-free import tariffs, in RCEP trading partner markets.

As of Nov 30, a total of 2,624 COs worth RM897.99mil had been issued for RCEP.

During the first 10 months of last year, the bilateral trade between China and Malaysia soared to US$155.73bil (RM743.68bil), constituting 20.8% of China's total trade with Asean during this period.

In November last year, Chinese authorities issued 19,834 COs under the RCEP agreement, totaling US$568mil (RM2.71bil). This issuance, covering 3,434 enterprises, marked a 12.41% increase compared to the previous year, and is anticipated to slash tariffs for Chinese products by US$9mil (RM42.9mil) in RCEP importing nations.

China remains steadfast in its commitment to the high-quality implementation of the RCEP, aimed at fostering regional economic integration.

Undoubtedly, the RCEP serves as a conduit for other member countries to tap into China's development opportunities.

Moving forward, to address the issue of companies missing out on RCEP trade opportunities, a few strategies are suggested.

First, the government should launch comprehensive awareness campaigns to educate companies about the RCEP's benefits and opportunities. This could include workshops, webinars, seminars and industry-specific conferences.

Second, providing training programmes and capacity-building initiatives to enhance the understanding of RCEP trade regulations, tariffs and procedures. This could involve collaboration with industry associations, chambers of commerce and academic institutions.

Third, establishing a centralised platform or portal containing relevant information, guidelines and resources related to RCEP trade agreements. Companies should have easy access to updates, news and insights on market trends and opportunities within RCEP member countries.

Fourth, offer financial assistance, grants, or incentives to companies willing to explore and capitalise on RCEP trade opportunities. This could include support for market research, trade missions, participation in international exhibitions, and investment in technology upgrades to meet regulatory standards.

Fifth, provide tailored advisory services to assist companies in understanding their market potential, identifying suitable export/import opportunities, navigating regulatory requirements and developing market entry strategies within RCEP member countries.

The robust China-Malaysia trade shows the need for collaboration. RCEP aims for smoother trade among members, and China-Malaysia trade aligns with its goals.

Companies must seize RCEP opportunities and by doing so, tap into regional growth potential. Failure risks lagging in global trade.

Proactive Malaysia-China collaboration is essential for the RCEP's continued success, which in turn will provide stability amid global challenges, fostering regional integration and opportunities.

Dr Lee Hui Shan is an Associate Professor at Universiti Tunku Abdul Rahman. The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the South-East Asia Research Centre for Humanities (SEARCH) and Tunku Abdul Rahman University of Management and Technology (TAR UMT), in conjunction with the 10-year anniversary of the Belt and Road Initiative.