A visionary economic alliance titled “Regional Comprehensive Economic Partnership (RCEP)” launched on 15 November 2020 grouping 15 countries appears to be a force for the economic prosperity of the member states. Bangladesh may benefit from joining the group.
In the historical pact, majority members are ASEAN countries — Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam. The other signatories are — Australia, China, Japan, the Republic of Korea and New Zealand.
RCEP, also known as the world’s largest free trade area, is set to bring economic prosperity to the region. What should be noted that RCEP initiative was basically launched in November 2012 and the negotiations of the agreement started in May 2013?
After nearly one decade of negotiations, the group was formed aiming to ensure the flow of trade, investment and services as well as promoting development cooperation across signatory states. RCEP covers 2.2 billion people with a combined GDP of $ 26.2 trillion. RCEP will create the world’s largest trade bloc, with 30.0 per cent of world population, Gross Domestic Product (GDP) and goods export.
RCEP is 4.5 times the population covered by the Comprehensive and Progressive Agreement of the Trans-Pacific Partnership grouping which includes Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It is also more than five times that of the European Union ( EU).
By 2030, RCEP is projected to add about 0.2 percentage points to GDP growth in the region. It is also expected to boost exports of the members by over 10.0 per cent by 2025.
The RCEP agreement was signed by three categories of economies.
Three members — Cambodia, Laos People’s Democratic Republic and Myanmar — are among the least developed countries (LDCs); China, Indonesia, Malaysia and Thailand are middle-income countries and Australia, Japan, the Republic of Korea, New Zealand and Singapore are high-income economies. So, it can be said that RCEP is the first ever alliance to enhance trade flows among signatory countries, no doubt. The region is a manufacturing powerhouse. The group accounts for nearly 50.0 per cent of the global manufacturing output. About 50 per cent of global automotive and as much as 70 per cent of electronics production are done in RCEP. Among the members, the share of exports in GDP ranges from less than 10.0 per cent to more than one third, and FDI stock ranges from less than 5.0 per cent to a multiple of GDP. The group accounts for 26.0 percent of world global value chains (GVC) trade volume (including goods and services). The volume of GVC trade of RCEP countries was increased by 34.0 percent between 2010 and 2018. GVC trade among RCEP members amounted to $ 1.5 trillion in 2017.
The United Nations Conference on Trade and Development (UNCTAD) sources said about 70.0 percent of FDI inflows in RCEP are from non-RCEP economies. RCEP is a major source of investment to the rest of the world. RCEP is a major global FDI destination. RCEP accounted for 24.0 percent of global FDI flows in 2019. Growing annual inflows brought FDI stock in the group from $ 2.7 trillion in 2010 to $ 5.7 trillion in 2019, an average growth rate of 9.0 per cent per year. FDI inflows in RCEP are concentrated in five countries ( China , Singapore, Australia, Indonesia and Vietnam). These countries accounted for 84.0 percent of FDI inflows in RCEP in the last five years ( 2015-2019). RCEP is also a major and growing source of FDI for the world. the group accounted for 36.0 percent of global FDI outflows in 2019, up from just 17.0 per cent in 2010. The rise in outflows pushed up outward FDI stock of RCEP economies from $ 2.4 trillion in 2010 to $ 6.5 trillion in 2019. Intra-regional investment accounts for just over 30.0 per cent of FDI in RCEP.
From the Bangladesh perspective, I have some observations and ideas.
A newspaper report suggests that Bangladesh was not invited to sign the pact. But, Asia’s third-largest economy — India was offered to join the bloc. India did join the ceremony to become a member of RCEP.
As an emerging economy— Bangladesh should join in this economic grouping. It is widely known that India’s GDP will contract by 10.3 per cent and per capita income by 11.2 per cent in 2020-21 while Bangladesh GDP will increase by 3.8 per cent and per capita income will reduce by 2.9 per cent, according to IMF projection made recently.
In nominal US dollars, India’s per capita GDP is projected to be US $ 1,877 in 2020-21, compared to US$ 1,888 for Bangladesh. Besides, India with 1.3 billion population is in unemployment problem to a great extent due to COVID-19. Proudly saying, Bangladesh was able to show better performance in containing coronavirus in South Asia region. Bangladesh along with India should have been invited in the RCEP signing ceremony considering current economic indicators.
Bangladesh exports to RCEP countries are nominal. In 2019, Bangladesh export to RCEP countries was recorded $ 3.50 billion where Vietnam did $ 110.54 billion. Vietnam, one of the signatory countries of RCEP, is now a competitor of Bangladesh in respect of apparel issue among others. Centring RCEP member, Vietnam is hoping to make a place among developed economies.
Bangladesh exported $ 600 million worth of goods to China. Vietnam export to China stood at $ 64 billion last year. In 2019, Vietnam’s trade volume stood at $ 520 billion. Of them, the export amounted to around $ 264.61 billion. In contrast, Bangladesh global trade volume stood at $100 billion last year and the export was only $40.53 billion. In the last two decades, Vietnam inked 26 trade deals. Of them, 13 comes into effect. On the other hand, Bangladesh had been working on an implementation of 13 trade agreements but it could take advantages from only three-developing Eight ( D-8), the Asia-Pacific Trade Agreement ( APTA) and the South Asia Free Trade Area (SAFTA). With the exception of Japan, all RCEP members, including ASEAN as a group, have FTAs with one another.
Mainly high tariff issue has caused uncertainty to become RCEP member for Bangladesh. Bangladesh’s average tariff is 14.8 per cent which has to be lowered to an average of 1.0 per cent to 2.0 per cent if it wishes to sign a free trade agreement ( FTA) with ASEAN member states. The average tariff rate of Brunei is 0.2 per cent, Cambodia 11.1 per cent, Indonesia 8.1 per cent, Laos 8.5 per cent, Malaysia 5.6 per cent, Myanmar 6.5 per cent, the Philippines 6.2 percent, Singapore 0.0 percent, Thailand 9.6 percent and Vietnam 9.5 percent. Bangladesh’s annual revenue loss would be nearly US$ 1.03 billion if FTA is signed. According to media report, the concerned ministry is doing ground works regarding inclusion of RCEP. Despite having some problems, Bangladesh should now move for signing Free Trade Agreement with many economies for greater interest of economy. FTA with Nepal and Bhutan brings a little economic benefit. So, inclusion of RCEP for Bangladesh would be a timely decision.
Nevertheless, Bangladesh is now seeking Foreign Direct Investment and joining the RCEP will likely help to quickly address its economic gap with the developed countries.