Members of the largest free trade agreement in the world, despite being at different stages of their growth, will benefit from and embrace a more digitalized future in trade and finance, experts said at a forum in Hong Kong on Thursday.
They discussed it during the session named “Fostering Trade and Investment Connectivity in RCEP”, on the second day of the seventh Belt and Road Summit. The Regional Comprehensive Economic Partnership, a free trade agreement signed by 15 Asia-Pacific countries, covers roughly 30 percent of the world’s gross domestic product, trade and population.
Karen Ng, managing director and head of China Opening and RMB Internationalization at Standard Chartered, said the sheer size and diversity of the combined RCEP economies have the potential to “reshape the whole regional supply chain, and boost the collective consumption behavior”.
Since the trade pact came into force on Jan 1 this year, its impact on the regional economy can be seen already, Ng said. The aggregate numbers in import and export volumes between China and other RCEP members recorded close to a 6.9 percent first-quarter growth, year-on-year, representing 30 percent of China’s total foreign trade.
She said that one of the major features of RCEP is that its members comprise markets at different stages of economic development, with some like Singapore, South Korea and Japan specializing more in services, technology, green industries, while some of the markets in the Association of Southeast Asian Nations are more consumer goods manufacturer-centric. This means “a wide spectrum of goods and services across the scope of RCEP” are on offer.
Given the various stages of economic development, financial liberalization will bring different degrees of diversity and cost efficiency to these counterparties, Ng said.
As financial innovation, digitalizing trade in itself mitigates the risk of international trade and drives better efficiency by more paperless adoption, Ng said. “It is a common priority to focus (on) among these ASEAN markets especially to embrace the increased economic and cross border activities.”
Tang Heiwai, professor of economics at the University of Hong Kong, highlighted the speed of growth and expansion of middle-class markets in this region.
He said that RCEP is called a “free trade agreement or FTA in Asia for Asia” for a reason, as the largest consumer market is going to be in this region, and the growth rate of the middle-class households is also going to be the fastest in this region.
“So you’re really talking about close to one billion middle-income individuals who are going to spend the money to buy goods and services,” Tang added.
Moreover, “we should think about data flows,” he said. “We should also think about all sorts of business opportunities that will arise from trade-related activities, for example, digital trade finance.”
Ridha Wirakusumah, CEO of the Indonesia Investment Authority, said that places like Hong Kong, the Chinese mainland, Taiwan, Japan, and South Korea are more developed and richer than their Southeast Asia counterparts. However, the latter make up for their shortcomings with “exciting growth”.
“The youth demographic of Indonesia’s population is actually 30 years or younger, and that is similar across Southeast Asia as well,” he noted.
Wirakusumah said the Southeast Asian region will appreciate not only capital from the Hong Kong Special Administrative Region and elsewhere, but also expertise and technologies. He said it can also provide an unbelievable market for many other Asian countries’ advancements in technologies including the digital ones.
Eduardo Francisco, president of BDO Capital and Investment Corporation, said he sees RCEP as being beneficial for ASEAN financial institutions from smaller countries. Despite the different situations the members are in, for example, the Philippines being very consumer-driven, everyone will benefit from it, Francisco added.
“I totally agree that we would like to make Asia the center of gravity,” he said, “So this is a win-win for everybody, all the countries regardless of the economic development stages we are in.”
Stephen Wong Yuen-shan, senior vice-president and executive director of public policy institute Our Hong Kong Foundation chaired the session.
