JAKARTA, Aug 30, 2022, ST. Indonesia’s Parliament on Tuesday (Aug 30) passed a law to ratify the country’s membership into the world’s largest trade pact – the Regional Comprehensive Economic Partnership (RCEP), The Straits Times reported.
The move makes South-east Asia’s largest economy the 14th country to do so, and is expected to boost its trade and investment.
Coordinating Minister for Economic Affairs Airlangga Hartarto said joining the free trade pact among Asia-Pacific nations would increase Indonesia’s gross domestic product (GDP) growth by 0.07 percentage points by 2040. It is also expected to increase exports by US$5 billion (S$7 billion) and grow the country’s trade surplus by 2.5 times.
“RCEP gives Indonesia an opportunity for Indonesia to enhance its integration in the global supply chain, especially in the region,” he said on Tuesday.
He noted that the agreement would open new market access, especially in sectors such as plantation, fisheries, automotive, electronics, food and beverage, chemicals and machinery, in countries including China, Japan and South Korea.
Trade with the other members of the 15-nation bloc represents 60 per cent of Indonesia’s exports and 71 per cent of its imports last year, while they account for 47 per cent of foreign investment in the country, according to Mr Airlangga.
Businesses from Singapore, China, Japan, South Korea and Malaysia are among the largest foreign investors in Indonesia.
RCEP builds on existing bilateral agreements that Asean has with its key trade partners – China, Japan, South Korea, Australia and New Zealand. It covers around 30 per cent or US$26 trillion of global GDP, and 30 per cent of the world’s population.
It is also the first free trade agreement linking China and Japan, as well as Japan and South Korea.
The pact was signed by leaders of 15 Asia-Pacific nations in November 2020, and came into force on Jan 1 this year, which saw tariff cuts for about 92 per cent of goods traded.
Singapore was the first country to ratify the agreement in April last year. This was followed by six other South-east Asian nations, Australia, China, Japan and New Zealand. The Philippines is the only signatory that has not ratified the pact.
The deal includes areas such as e-commerce, government procurement, intellectual property and competition policy.
Indonesia is aiming for the RCEP to take effect in early November. The pact enters into effect for the country 60 days after it deposits the ratification instrument.
Mr Airlangga, who is visiting Singapore, said Indonesia is keen to host the RCEP Secretariat and conveyed its hope for Singapore’s support for its interest.
While in Singapore, Mr Airlangga met Deputy Prime Minister Lawrence Wong, Foreign Minister Vivian Balakrishnan, and Trade and Industry Minister Gan Kim Yong, discussing a wide range of issues, including bilateral economic cooperation and Indonesia’s presidency in the Group of 20 this year.
On the same day, Indonesia’s Parliament also ratified a bilateral trade agreement with South Korea, which may give Indonesia an investment boost, particularly in the electric vehicle and battery industry.