RCEP to boost sustainable post-COVID
The provisions related to market access and disciplines in
trade, services and e-commerce in the Regional Comprehensive
Economic Partnership (RCEP) agreement, signed on November 15
by 15 countries, are highly relevant for regional value
chains and market-seeking investment, according to the
United Nations Conference on Trade and Development (UNCTAD).
RCEP is already an important foreign direct investment (FDI)
destination. It accounts for 16 per cent of global FDI stock
and more than 24 per cent of flows. While global FDI has
been stagnant for the last decade, the RCEP group has shown
a consistent upward trend until last year, UNCTAD said in a
The pandemic will lead to a drop in FDI in the region of
about 15 per cent. However, this compares favourably to a
fall of 30-40 per cent in global FDI, and the region looks
set to lead the FDI recovery, UNCTAD said.
A key challenge for RCEP will be to follow through on
economic integration efforts at a time of global and
intra-regional geopolitical and trade tensions. The global
economic recession caused by the pandemic will also limit
the potential of RCEP to expand trade, investment global
value chains in the short term, UNCTAD noted.
A key opportunity lies in the diversity within RCEP, which
can lift investment prospects through complementary
locational advantages and catch-up development potential.
Among the members, FDI stock relative to the size of the
economy ranges from less than 5 per cent to a multiple of
GDP, the UN body said.
Intra-regional investment, at about 30 per cent of total FDI
in RCEP, has significant room for further growth. It is
relatively low compared to other major economic
partnerships. The ASEAN group, at the heart of RCEP, will
play an important role. Already about 40 per cent of
investment in ASEAN comes from RCEP members, UNCTAD said.
Likely investment policy priorities for the partnership will
include boosting investment in sustainable post-pandemic
recovery, supporting resilience-seeking FDI and promoting
investment for development.
The first one requires investment in infrastructure, clean
energy and healthcare, all of which rely on increasing
international project finance.
The need for multinational corporations (MNCs) to diversify
supply sources and strengthen regional value chains should
translate not only in shifting FDI patterns within the
region but also in renewed overall growth of international
investment in industry. Greenfield investment in
trade-exposed manufacturing in the region has decreased by
more than 40 per cent over the last decade, UNCTAD observed.
The least developed country (LDC) signatories Cambodia,
Myanmar and Lao People’s Democratic Republic respectively
receive more than 70 per cent, 80 per cent and 90 per cent
of their FDI from other RCEP members. Economic cooperation
under the partnership could further boost both project
finance in infrastructure and industrial investment to
increase their global value chain participation, UNCTAD