Regional Comprehensive Economic Partnership Agreement and Opportunities Offered

On November 15, 2020, President Jokowi officially signed the Regional Comprehensive Economic Partnership Agreement or RCEP Agreement at the Bogor Palace. The RCEP is a comprehensive ASEAN economic partnership agreement to strengthen and expand ASEAN’s involvement and engagement with Japan, Australia, China, New Zealand, and Korea.

The agreement also aims to combine five free trade agreements or FTAs that ASEAN has held with its six trading partners. Fifteen countries are involved in the RCEP – the world’s biggest trading bloc— that comprises almost 33% of the world’s population and contributes to 30% of global GDP.

The goal of the RCEP Agreement is to build a comprehensive, modern, high-quality, high-standard, and mutually beneficial economic partnership. This mutually-beneficial RCEP agreement is to promote trades and investments in the region and support the growth and development of the global economy.

One thing leads to another, the RCEP Agreement also contributes to creating more employment and market opportunities for individuals and companies in the region.

What Significance does the Agreement Bring?

The key benefits of the RCEP agreement include at least a 92% tariff reduction on traded goods, more preferential market access for exports from member countries, enhanced trade facilitation, simplified customs process, and reduced transaction cost and time.

Furthermore, within 20 years, the RCEP would get rid of a variety of import tariffs, including provisions on telecommunications, intellectual property, e-commerce, financial services, and professional services.

Under the RCEP, parts of products from any member countries will be treated the same and enjoy the same tariff reduction. This will give businesses in the RCEP nations to do trade within their member countries, enabling businesses to gain more incentives and profits.

Scope of Agreement

The scope of the RCEP Agreement consists of the following:

• Trade in goods
• Trade in services
• Investment
• Temporary movement of natural persons
• Rules of origin
• Trade facilitation and customs procedures
• Trade remedies
• Intellectual property
• Competition
• Government procurement
• Institutional provisions

Good News for Investors Interested in Investing in Indonesia

According to the Peterson Institute for International Economics, the RCEP Agreement may boost the global national income by US$186 billion each year by 2030. In addition, member states of the RCEP will receive another 0.2% national income to their economy. This new trading bloc will be larger than both the European Union and US-Mexico-Canada Agreement.

Also, foreign direct investment (FDI) in RCEP is recorded at 29.3% of the total FDI in the entire world. Therefore, investors know that with that potential, the business will be concentrated in East Asia or the ASEAN regions.

Particularly in Indonesia, the country sees the agreement as an opportunity to boost efficiency and ease of doing business to increase its competitiveness level. Foreign investors who are to have trade deals with Indonesia can enjoy much lower export tariffs, thus increasing profits in the long run.

As of 2019, Indonesia’s imports were recorded at an estimated US$ 156.4 billion. The top 10 imports in the same year were machinery, electrical machinery and equipment, mineral fuels, plastics, iron and steel, vehicles, organic chemicals, articles of iron or steel, medical, technical and optical apparatus, and other chemical goods.

Consult with Cekindo

Known to be one of the most recognised business consulting firms in Indonesia, our expert team at Cekindo is passionate about helping you find the best investment opportunities and resolving your business challenges.

We have the core skills to help you optimise your investments and transform its performance in this rapidly-changing business environment in Indonesia.

So far, Cekindo has found the right opportunities and delivered solutions to investors in a wide range of business sectors, all of which share the same desire to enhance their return-on-investment and existing financial situation.

Organise a meeting with Cekindo and learn what the best investments are for you to pursue in Indonesia.