Burma

What Does the RCEP Trade Agreement Mean for Myanmar?

By Nan Lwin 16 November 2020

YANGON—Myanmar has joined China, Japan and 12 other nations in forming the world’s largest free trade zone—accounting for about 30 percent of global GDP—hoping the deal will boost trade by drawing investment to the region, expand local SMEs’ access to global manufacturing networks and support the country’s post-COVID-19 economic recovery.

A long-delayed accord, the Regional Comprehensive Economic Partnership (RCEP) was signed on Sunday by China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations (ASEAN). The accord aims to liberalize trade and investment across the Asia-Pacific region by removing and reducing tariffs, especially on industrial and agricultural products, and setting out new rules on government procurement, competition policy, e-commerce, trade, data transmission and intellectual property.

Myanmar State Counselor Daw Aung San Suu Kyi, who witnessed the virtual signing ceremony, said, “The landmark trade pact will serve as a strong signal to the world that we are committed to maintaining the credibility of regional cooperation architecture, retaining the trust of the business community and contributing to the regional economic recovery.”

RCEP countries account for 30 percent of the global population and the deal is expected to cover 2.2 billion consumers.

Daw Aung San Suu Kyi said the RCEP would provide a new driving force that will accelerate the facilitation of trade and investment as part of a well-functioning, highly efficient, rules-based multilateral trading system.

She promised that Myanmar would exert the utmost effort to realize the full implementation of the provisions contained within the RCEP Agreement.

What does RCEP mean for Myanmar?

Proposed in 2011, the accord is the result of eight years of negotiations between the member countries. According to RCEP documents, the deal is expected to take effect one-and-a-half to two years after the member countries ratify the agreement.

The signatories agree to eliminate tariffs on up to 90 percent of trade in goods between them within 20 years of the accord coming into effect. However, given that the country is one of the region’s least developed, questions have arisen as to Myanmar’s readiness to join the new pact and what preparations the government has made to implement the new rules required of signatories.

U Than Aung Kyaw, a director general of the Ministry of Investment and Foreign Economic Relations (MIFER), told The Irrawaddy that the signatories agreed to give special privileges to the group’s least developed countries, including Myanmar. Moreover, they also agreed to provide additional concessions to the least developed countries as called for by the UN, as well as the terms of the treaty.

He has served as an RCEP trade coordinator on Myanmar’s 16-member Trade Coordinating Committee since 2019, leading the relevant working group members in the negotiations.

Under the agreement’s provisions on tariff elimination, Myanmar, Cambodia and Laos will enjoy more privileges than other countries, U Than Aung Kyaw said, adding that RCEP member states are required to abolish tariffs on 65 percent of trade in goods tariffs between signatories once the accord takes effect. However, Myanmar, Cambodia and Laos are only required to eliminate tariffs on 30 percent of trade in goods due to their development status.

Myanmar State Counselor Daw Aung San Suu Kyi witnesses the virtual signing ceremony for the RCEP in Naypyitaw, the capital of Myanmar, on Sunday. / MIFER

The signatories also agreed to eliminate tariffs on 80 percent of trade in goods between them within 10 years of the accord coming into effect, but Myanmar and the other two nations will have 15 years, U Than Aung Kyaw said.

Moreover, under the agreement on e-commerce, intellectual property and competition policy, the nations agreed that the transition period for Myanmar should be from a minimum of three years to a maximum of 10 years. It also gives Myanmar a transition period of up to 15 years for the trade sector. In the government procurement section, Myanmar will be exempt from the contractual obligations and will only need to abide by an agreement to cooperate on transparency between member countries.

Critics have warned that the RCEP could harm the domestic market by failing to protect small businesses. U Than Aung Kyaw said Myanmar and almost all of the signatories have had various free-trade agreements among themselves for more than 10 years, adding that the RCEP simply integrates this process at an advanced level. He insisted that it would in no way harm local businesses.

He said, “We will liberalize only 30 percent of our market, while the others have to liberalize 65 percent. We have more privileges than the other countries. We need to grab such chances.”

U Than Aung Kyaw said that under the accord, Myanmar will have enough time to prepare to fully integrate into the agreement, including adapting to the international standards of the framework and its procedures, and enhancing the capacity of government and private sector organizations to international levels.

According to the MIFER, Myanmar government officials whose task it is to prepare for the implementation of the accords plan to hold discussions with local businesses including drawing up plans to seek new markets for local products.

U Than Aung Kyaw said, “We will inform local businesses to prepare products to be exported from our country. We have a plan to invite investors here to produce value-added products for export.”

MIFER said the agreement would help to revive Myanmar’s economy in the post-COVID-19 period by supporting exports.

The ruling National League for Democracy (NLD) secured enough seats in the Nov. 8 election to form Myanmar’s next government. Its 2020 election manifesto contains an eight-point economic program including the promotion of the role of SMEs, more responsible and better-quality investment, steps to ease the economic impacts of COVID-19, and measures to revive the country’s economy and seek new markets.

MIFER said the RCEP agreement would provide a large market for Myanmar’s exports and opportunities for responsible, high-quality investment inflows.

U Than Aung Kyaw said preparations to develop the necessary infrastructure are under way, including in the areas of electricity and connectivity.

“We have enough time [to prepare for and fully integrate the accord], so we have to make the best preparations to make the most of this opportunity,” U Than Aung Kyaw said.

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