The Regional Comprehensive Economic Partnership (RCEP) entered into force for Indonesia on 2 January this year. This means 13 of the 15 original parties have ratified the agreement.
The RCEP, which covers roughly a third of the world economy and population, is considered the world’s largest free trade agreement. It was signed on 15 November 2020 by the 10 ASEAN member states, Australia, People’s Republic of China (PRC), Japan, Republic of Korea, and New Zealand. It entered into force on 1 January 2022 for Brunei Darussalam, Cambodia, Lao People’s Democratic Republic, Singapore, Thailand, Viet Nam, Australia, the PRC, Japan, and New Zealand; on 1 February 2022 for Korea; and on 18 March 2022 for Malaysia. Myanmar and the Philippines are the only signatories that have yet to ratify the agreement.
In a news release, Indonesia’s Trade Minister Zulkifli Hasan said the RCEP is expected to increase competitiveness and strengthen production networks globally, promote regional supply chains through better market access for goods and services, reduce or remove trade barriers, and enhance technology transfer.
Satvinder Singh, Deputy Secretary-General for the ASEAN Economic Community, remarked that the entry into force of the RCEP for Indonesia at the start of 2023 is timely as the country assumes the ASEAN chairmanship. “Indonesia has been the driving force in RCEP since the conceptualization phase, and we hope more milestones, such as the establishment of the RCEP Support Unit, can be achieved during Indonesia’s ASEAN Chairmanship this year,” he said.
ASEAN expects to become the hub of production networks in Asia once the trade agreement is fully implemented.
Indonesia is the largest economy in ASEAN and the fifth largest among the RCEP parties. Its economy grew by 3.7% in 2021 to $1.186 trillion, making up 4% of the combined gross domestic product of RCEP economies. The World Bank projects Indonesia’s economy to grow by 5.2% in 2022 and 4.8% in 2023, while latest forecasts from the Asian Development Bank see it expanding 5.4% in 2022 and 4.8% in 2023.
In December, Indonesia’s Ministry of Trade issued Regulation Number 56 of 2022, which provides rules for issuing documents of origin based on the RCEP. To claim preferential tariffs under the RCEP, the private sector can choose between two types of documents: Certificate of Origin (Surat Keterangan Asal) or Declaration of Origin (Deklarasi Asal Barang).
The RCEP provides for the elimination of about 92% of tariffs among the countries over a period of 20 years. An UNCTAD study says this will boost intraregional exports by $42 billion from about $2.3 trillion in 2019 through trade creation and diversion.