ECONOMIC INTEGRATION
With RCEP, is post-pandemic recovery for ASEAN in sight?
The pandemic situation in ASEAN is easing in many countries. A recovery plan is needed for ASEAN, especially in the economic area. Many people have high hopes that the Regional Comprehensive Economic Partnership (RCEP), a new free trade agreement signed on 15 November 2020 can become a solution for ASEAN’s economic recovery. However, some are skeptical about it.
After eight years of discussion, the RCEP agreement was reached during the ASEAN virtual meeting in Hanoi, Vietnam. ASEAN as an alliance, with a total population of around 622 million and the fourth largest economy in the world, has been in the spotlight for potential investors. But the COVID-19 pandemic has caused lots of problems to ASEAN as for the rest of the world, from health risks to economic recession. To put the recovery plan into practice, the Institute for Democracy and Economic Affairs (IDEAS) hosted an online panel discussion on 24 November 2020 to talk about the role of RCEP towards the recovery of ASEAN as a whole.
The current situation is diverse: Some ASEAN members like Indonesia and the Philippines are still struggling to flatten the curve of infection, while countries like Thailand and Vietnam already have it under control. The containment policy is creating a problem: the recession of economy. Dr. Jayant Menon, senior fellow at The Institute of Southeast Asian Studies (ISAS) and IDEAS stated: “While the recession was made worse by containment policies, it can still be mitigated by a sound economic policy.” Economic rescue packages are needed to address the economic recession. States like Singapore, Malaysia, and Thailand are able to provide disaster relief packages to their citizens during this hard time while states like Myanmar cannot implement the same due to the lack of government budget.
Dr. Menon suggested a solution for post pandemic recovery by opening borders: the idea of the multilateralism can be applied, and travel bubbles can be expanded. This is where both parties open international tourism without imposing quarantine, but maintaining strict health checking procedures on both ends. This can be done between ASEAN member states and other RCEP members. The fact that many states in ASEAN have eased their domestic travel guidelines, the border restriction should be narrowed down as well. Dr. Menon mentioned, for example, the mutual recognition of quarantine, or exemption based on residency that can increase intra and extra regional tourism flows. The process could start within the states that have managed the spread of the virus well and non-ASEAN members like Australia, New Zealand, and China. The other states could recognize visitors on a non-reciprocal basis, thus turning the bilateral travel bubble into the regional travel balloons.
On the goal of achieving regional value chains, deepening economic integration, and enabling digital economic growth, Juan Sebastian Cortes-Sanchez, Associate Director of Asian Trade Centre, was not as keen on RCEP. According to Cortes-Sanchez, the fact that there were many overlapping free trade agreements in the region such as ASEAN+1, CPTPP, RCEP and ATIGA, companies would have challenges choosing the best arrangements where they can optimize tariff schedules and rules of origin, including certificate compliance. The post pandemic world of ASEAN might not get benefits from the RCEP agreement. For example, trade facilitation and procedural obstacles are widening the development gap between countries like Singapore and South Korea, and the less economic competitive ASEAN countries like Cambodia, Laos, and Myanmar.
The hurdles in digital economy were also floated where Asia was characterized by divergent domestic approaches when it comes to the regulation of the digital economy. With RCEP in place, a middle ground has to be identified especially concerning digital security. First, ASEAN member states have to find a common ground to stand on so the development gap can get narrower for all ASEAN states. Mr. Cortes-Sanchez concluded that “the geographical scope of RCEP makes it a unique forum to continue to develop common standards for open digital trade.”
Asia-Pacific Economic Cooperation (APEC) Executive Director Dr. Rebecca Sta-Maria has supported RCEP from the start. She believes that it is the right agreement for supply chains to be more connected in the region. At the online discussion, she shared that the work of bringing parties to talk on the same table took years to accomplish as they did not have an FTA between each other. “The important aspect of reviewing and taking on board development, the dynamic nature of international trade are keys in the document itself. It is a living document,” said Dr. Sta-Maria.
RCEP is the model for development for ASEAN member states. Significant reforms such as non-tariff barriers, and domestic economic structural changes are needed to develop ASEAN as a whole. For RCEP to succeed, Dr. Sta-Maria recommended including provisions on investment protection, and domestic regulation on services. She pointed out that RCEP member states should cooperate closely with the business community in the region as they are the ones who would be affected by any restrictions.
Whether the RCEP would bring about regional travel balloons, and increase regional tourism flows as Dr. Menon suggested, or maintain the development gap given the challenges of a digital economy as Mr. Cortes-Sanchez raised only time will tell. We can cling on to Dr. Sta-Maria’s statement that RCEP is a living document, and will continue to develop over time.
Replay the discussions here - https://www.facebook.com/IDEASMalaysia/videos/1051985715318918
Husai Chantarawirod is the Regional Program Officer in FNF’s Regional Office for Southeast and East Asia.