The RCEP and why it matters to Singapore businesses?

Recently, the Minister for Trade and Industry, Mr. Chan Chun Sing said that the RCEP is still on track for the signing by the end of 2020. So what exactly is RCEP, and why it matters to the businesses of Singapore?

A Massive 30 – 30 integrated market

The RCEP or Regional Comprehensive Economic Partnership is an ambitious proposed free trade agreement in the Indo-Pacific region, consisting of 15 negotiating member states, namely all ten ASEAN member states and another five of ASEAN’s Free Trade Agreement partners of Australia, China, Japan, New Zealand and South Korea. The pact accounts for 30% of the world’s population, and almost 30% of the world’s GDP. It aims to create an integrated market, making it easier for products and services of each of these countries to be available across this region. Areas of negotiations are primarily focused on trade in goods and services, investment, intellectual property, dispute settlement, e-commerce, small and medium enterprises, and economic cooperation.

How does RCEP benefit Singapore businesses?

This deepened integration is set to benefit Singapore as a pivotal player in the regional trade and supply chains in ASEAN. As an imports-driven economy, Singapore is particularly vulnerable to the unprecedented disruptions to international networks. The Covid-19 pandemic has proved to be a good wake-up call for businesses to re-examine the viability of its current supply chain and its resilience. Nevertheless, fresh new opportunities would also emerge from crisis.

RCEP gives Singaporean businesses improved access to a wider range of competitively priced goods and services, new technologies, and innovative practices. Many Singapore businesses, especially the SMEs have always shared their concerns about our relatively small domestic market. On the other hand, business owners are worried about the risks involved in venturing overseas, such as unfamiliar regulations and IP rights protection. The RCEP framework aims to cover such concerns, while allowing Singapore companies to benefit from bigger markets and achieve economies of scale.

Singapore has successfully built its reputation as a reliable hub or a “trusted home base” for companies to deepen their trade connections with the neighbouring Asian countries. The RCEP does not just reduce and eliminate tariffs, it enhanced the conducive environment that encourages foreign investments into the country. Businesses who continue to assume a business direction with innovative approaches should benefit from here.

Lastly, competition creates demands for talents, and with a greater integration of market, it should support a stronger talent pool accessibility. Singapore businesses are generally faced with high fixed and operational costs. With a greater integrated market, the availability of new talents driven by market demands should benefit the overall productivity of Singapore businesses’ output.

Conclusion

One main objective of RCEP is to contribute greater economic activities and job creation in Singapore, while delivering opportunities for big and small Singaporean businesses to benefit from greater trade and investment. While it is unlikely to add much to Singapore’s trade numbers in the short-term, it should benefit the economic position of Singapore in the medium to long term.