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Taking benefits from the RCEP
Indonesian companies will benefit from the RCEP through lower tariff rates for their exports, better access to cheaper or better-quality imports for making their products and a more open and more transparent business environment for trade in goods, services, investment, and movement of people.
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Virtual summit: Leaders of ASEAN and its strategic partners attend the fourth Regional Comprehensive Economic Partnership (RCEP) Summit as part of the 37th ASEAN Summit held online from Hanoi on Nov. 15, 2021. (Reuters/Kham)
T
he House of Representatives should speed up the ratification of the Regional Comprehensive Economic Partnership (RCEP) that came into force last week otherwise Indonesia will be left out of the economic integration process of the Indo-Pacific region, which is badly needed to strengthen the economic recovery.
As the largest economy and leader of the 10-member ASEAN, as well as the 2022 president of the Group of 20 strongest economies (G20), Indonesia should show its strong commitment to a fair and open multilateral trading system for the benefit of the people in the region and the world. Seven ASEAN members and five other partners, China, Japan, South Korea, Australia and New Zealand – which account for 30 percent of the world’s economy – have ratified the RCEP.
The RCEP eliminates tariffs on about 90 percent of traded goods and standardizes many customs, investment, IP and e-commerce regulations. By creating a single set of trade rules and simplifying complex issues such as rules-of-origin (CoO), the RCEP will unfetter the development of regional value chains. Under its regional certificate of origin regime, Indonesian exports will be able to move more smoothly across the 15-member trade bloc.
Indonesian companies will benefit from the RCEP through lower tariff rates for their exports, better access to cheaper or better-quality imports for making their products and a more open and more transparent business environment for trade in goods, services, investment and movement of people.
These changes in the region’s trade patterns are crucial for Indonesia as it has yet to capture a significant share of the production and investment moving out of China as a result of the US-China trade war. Indonesia’s full-fledged participation in the RCEP will bolster its economic recovery from the COVID-19 pandemic.
While a quick national political consensus for our participation in the regional economic grouping is quite vital, our own regulatory and bureaucratic reforms are equally imperative to improve the competitiveness of our economy within the 15 member countries. The preferential trade and/or investment agreements will work only if Indonesia improves its regulations and procedures for exports, imports and investment. The government should simplify the procedures to obtain a certificate of origin.
Put another way, infrastructure development to improve the physical connectivity across the world’s largest archipelago country and bureaucratic and regulatory reforms to enhance the institutional connectivity within the government should be continued.
Fortunately, all the needed reforms and policy instruments vital to attract foreign investment and boost domestic investment have been stipulated in the 2020 Jobs Creation Law, which amends more than 70 laws to make it much easier to do business and address the inequality of development among the various islands. The law aims to remove virtually all long-standing complaints of foreign and national investors on conducting business in the country.
Unfortunately, the full-fledged enforcement of the omnibus jobs law has to wait for the completion of the revision of the law as ordered by the Constitutional Court last November.
Hence, part of the most urgent homework for the government and the House is to speed up the amendment of the jobs law and to see to it that the bold reforms friendly to businesses are not affected by the revision.
