THE Regional Comprehensive Economic Partnership (RCEP) agreement has been ratified by Malaysia, signalling an important part of the trade liberalisation process for the country.
The agreement is noteworthy because it includes 30 per cent of the world's population.
The 15 member countries of the agreement jointly have a gross domestic product that amounts to US$29.7 trillion, or 30 per cent of global GDP.
It is strategic for Malaysia to be a part of the agreement since RCEP brings Asean closer to its main trading partners.
It is estimated that the agreement will benefit RCEP members by as much as US$174 billion in real income by 2030.
RCEP comes at a time when the nation needs to spur growth and development.
The ongoing Russia-Ukraine conflict may add to the growth-dampening effects of the Covid-19 pandemic.
Thus, a countervailing influence is required.
In these circumstances, we have an opportunity with RCEP to propel growth through greater engagement in trade and investment with our trading partners.
It is to be noted that RCEP is expected to raise trade among its members by US$428 billion.
RCEP will be an improvement over the pre-existing bilateral and multilateral trade agreements that already exist in the region, helping to minimise the "noodle bowl" effect.
Companies have to adhere to many processes and procedures in the existing environment, and simplifying the rules will go a long way towards making the regulatory framework easier.
It remains to be seen how Malaysia will position itself to reap the gains from this free trade agreement (FTA).
Some of the steps that need to be taken include positioning Malaysia as a regional hub, drawing greater participation from small- and medium-sized enterprises (SMEs), and taking advantage of new business models and technologies.
Having taken the important step of ratifying RCEP, it is now necessary to consider how the agreement can be fully utilised.
A real problem that is often encountered with trade agreements is the utilisation of these FTAs.
FTA utilisation is not a problem with the multinational corporations (MNCs) and those companies in the main production areas, like Penang and the Klang Valley.
But, it is a challenge to get other companies to take advantage of the FTAs.
The SMEs, particularly those that are smaller, do not participate for many reasons.
It could be that firms are not aware of these FTAs, the benefits they offer and how to take advantage of them.
Often, smaller firms are not aware of the processes and procedures involved in taking advantage of FTAs.
They are not aware of the documentation that accompanies FTA utilisation or the standards that must be complied with. These things act to the disadvantage of those firms that are not MNCs.
RCEP holds excellent promise for Malaysia, in particular for SMEs.
So, ways have to be found to bring SMEs into the fold. This will make Malaysia the hub for trade and investment.
RCEP takes the issue of intellectual property rights seriously, and it pays due attention to digitalisation.
E-commerce has received attention in RCEP. This is a significant development and something that must be capitalised upon.
There are two reasons why this is important. Firstly, it will help SMEs to participate and take advantage of the Asean market.
Since SMEs contribute so much to economic development, it stands to reason why they should be encouraged to participate in regional trade and investment.
Secondly, in Asean, there are many unicorns or privately held start-up companies valued at more than US$1 billion.
It is reported that there may be as many as 35 of them in Asean.
RCEP, therefore, gives an opportunity for companies in Malaysia to use digitalisation to their advantage and harness the power of e-commerce.
This will also help us grow our own unicorns.
In realising the benefits that can be gained from RCEP, we have to put in place the right enablers.
For instance, our domestic ecosystem should be better equipped with the necessary infrastructure to accommodate digitalisation. The 5G rollout is a necessary part of this process.
An import element in our preparation to take advantage of RCEP is how successfully we can upgrade SMEs and make them more trade-oriented.
More specifically, they have to be encouraged to use RCEP.
Malaysia has taken the momentous step of ratifying RCEP. Our participation in the FTA may just turn out to be a dizzying boost to our recovery plan .
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