Time for SMEs, GLCs to take advantage of RCEP
17 Nov 2020
The post-Covid-19 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.
Therefore, the signing of the Regional Comprehensive Economic Partnership (RCEP) agreement 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, which 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 will be the engine of growth despite 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 twice before harming domestic production and employment prospects.
Once it comes 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 about 30 per cent of global gross domestic product.
Malaysia, which is in 25th spot in terms of exports globally, has considerable trade links with all the signatories of the RCEP agreement, so this will be a natural advantage. Out of Malaysia’s top 15 trading partners, 10 countries have signed the RCEP. The question will be, who will take the lead from Malaysia?
Time for small- and medium-sized enterprises (SMEs) to step up and for government-linked companies 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, taking advantage of existing market share to partner with new firms, tap new ideas and new capital to grow revenue here.
While international expansion strategies should include collaboration between designated lead companies with SMEs driving the innovation and agility while the larger companies provide the strength in resources and staying power required to successfully penetrate new markets.
This means that Malaysia is now playing a more open game in the big leagues, an opportunity 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 so potential gaps that companies will need to address include understanding the impacts on intellectual property and rules around digital economy.
While barriers will be reduced, there’s a need for increased government relations and deeper understanding of regulatory frameworks, coupled with the need to bridge language and cultural gaps. The programmes already established by the government to “upskill and reskill” those impacted by Covid-19 need to be aligned to the new reality that RCEP will usher into being.
The bigger economies will stand to gain as demographic and economic trends in Asean continue in a positive direction. Australia, already a close partner, has realised the importance of addressing technical gaps with a strong commitment of RM138 million to provide technical assistance and capacity building to eligible Asean countries. Focus on trade and business will yield long-term dividends for Australia.
As companies and individuals look to the 2021 Budget 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 employment prospects.
The preferred future is that of trade, prosperity and regional resilience. This groundbreaking agreement will open doors to new opportunities but it will be the individuals who will have to step through them and build the bridges that ensure that future becomes a reality.
*The writer is Malaysia Global Business Forum founding chairman
Source: NST Posted on : 17 November 2020
