Back to Blogs

RCEP to boost Indonesia's economy

Indonesia expects double-digit growth bumps in exports and investment and a long-term boost in economic growth after Asean and its five trading partners signed the world's largest regional free trade pact on Sunday.

Asean member countries with China, Japan, South Korea, Australia, and New Zealand signed the Regional Comprehensive Economic Partnership (RCEP) during the 37th Asean Summit that concluded on Sunday. The deal combines the existing free trade pacts among the 15 countries into a single platform, eliminating up to 90 percent of the tariffs on imports over the next 20 years.

The RCEP would spur Indonesia's deeper involvement in the global supply chain and accelerate its post-Covid-19 economic recovery. Trade ministry data showed Indonesia's exports to RCEP signatory countries have increased by 7.35 percent in the past five years. In 2019, total non-oil and gas exports to the RCEP area reached $84.4 billion or 57 percent of Indonesia's total exports. Indonesia's imports from those countries reached $102 billion, or 66 percent, of the archipelago's total imports last year, excluding oil and gas.

While it tends to book deficits in trading with the RCEP countries, Indonesia also managed to attract more foreign direct investments from the region.  The trade pact would benefit Indonesia business, as it opens up a huge market that comprises 30 percent of the world's population, 32 percent of the world's gross domestic product (GDP), 30 percent of the world's FDIs and 27.4 percent of the world's trade. In comparison, the European Union comprises close to 30 percent of the global trade.

According to the ministry study, the trade deal would generate a welfare gain of around $1.52 billion for Indonesia. The welfare gain comprises the consumer's saving resulted from paying lower prices and producers' profit from selling above their offering price.


(Source: The Jakarta Globe)

Contact Us