The post COVID19 global economy is going to be more about critical supply chains and securing resources that will fuel economic growth. While some countries are cautiously considering what life looks like beyond the health crisis created by a pandemic that has cost many lives, in all estimations the economic fallout will be felt for years to come. The recent signing of the Regional Comprehensive Economic Partnership Agreement (RCEP) will go a long way in establishing both a framework for cooperation and a spark of hope for an earlier economic recovery.
Looking to the future, strategic onshore production will also increase as many countries who were caught off guard by their inability to secure products during the early months of the pandemic will not forget the question marks raised around resilience for critical materials especially in the food, agriculture and healthcare sectors. This will require significant investments and technical expertise something that is covered in RCEP.
Central to the success of RCEP will be ASEAN. The grouping of ten nations that started their collective journey some 53 years ago will be the engine of growth despite the larger economies like China, Japan, Australia, South Korea and New Zealand bringing massive amounts of production, capital and population to the table.
Increased trade should lead to increased regional stability, which is a good thing for business. Greater integration of value chains throughout the region’s economies will see the threat of conflict between neighbours reduced as leaders will think more than twice before harming domestic production and the employment prospects of the growing middle class.
Once coming into effect, it will be hard to understate the importance of a common set of rules in terms of trade across the 15 signatory nations which make up 30 per cent of the world’s population and approximately 30 per cent of global GDP.
Malaysia, which is currently in 25th spot in terms of exports globally has considerable trade links with all the signatories of the RCEP agreement, this will be a natural advantage. Out of Malaysia’s top 15 trading partners 10 countries have signed up to RCEP, which bodes well for Malaysia as there are strong existing trade ties and considerable existing cross border investments. The question will be who will take the lead from Malaysia?
Time for SME’s to step up and for GLC’s to stand up, both will need to gear up as the rules of the game will change. Malaysian businesses should see this as an opportunity for international expansion and domestic consolidation. Domestic consolidation, taking advantage of existing market share to partner with new firms, with new ideas and new capital to grow revenue in Malaysia. While international expansion strategies should include collaboration between designated lead companies with SME’s driving the innovation and agility while the larger companies providing the strength in resources and staying power required to successfully penetrate new markets.
At the same time this means that Malaysia is now playing a more open game in the big leagues. It will be an opportunity for Malaysia to improve on the country’s competitive ranking, a catalyst for investment attraction from countries outside the agreement looking to take advantage of the new trading arrangements.
It will take several years for the agreement to come into force, this lag should be used to prepare. Potential gaps that Malaysian companies will need to address include understanding the impacts on intellectual property and rules around digital economy. While barriers will be reduced; there will still be a requirement for increased government relations and develop deeper understandings of regulatory frameworks coupled with the need to bridge language and cultural gaps that exist. The programs already established by the Malaysian government to “upskill & reskill” those impacted COVID19 need to be aligned to the new reality that RCEP will usher into being.
The bigger economies represented will stand to gain as demographic and economic trends in ASEAN continue in a positive direction. Australia, already a close partner with Malaysia and ASEAN has realized the importance of addressing technical gaps with a strong commitment of RM138 million (AUD46 million) to provide technical assistance and capacity building to eligible ASEAN countries. Putting the trade and business agenda at the centre of the table will yield long term dividends for Australia as a partner in progress for the broader Asia Pacific region.
As many Malaysian companies and individuals look to Budget 2021 for signs of future economic growth the broader picture of high growth regional markets that RCEP brings into focus should be part of the near to medium term strategic horizons for business expansion and even employment prospects.
The preferred future is that of trade, prosperity and regional resilience, this ground breaking agreement will open doors to new opportunities but it will be the individuals who have to step through them and build the bridges that ensure that future becomes a reality.
Comments on this subject were also featured in the following media:
RCEP a stride towards regional resilience – Malay Mail
RCEP harapan Malaysia capai pemulihan ekonomi lebih cepat – Sinar Harian
RCEP: Manufacturers, SMEs urged to stay competitive – Focus Malaysia
RCEP A Stride Towards Regional Resilience – Thoughts
RCEP a stride towards regional resilience – The Sun Daily
RCEP provides hope for Malaysia to achieve faster economic recovery – New Straits Times
Time for SMEs, GLCs to take advantage of RCEP – New Straits Times