Indonesia’s parliament on Tuesday approved a law cementing the country’s membership in the China-backed Regional Comprehensive Economic Partnership (RCEP), becoming the latest Southeast Asian country to join the world’s largest trading bloc. Lawmakers also ratified a bilateral trade pact with South Korea, hoping top attract investment to develop the Southeast Asian nation’s electric vehicle and battery industries. Indonesia’s Trade Minister Zulkifli Hasan said the RCEP will boost trade, direct investment and increase the country’s GDP growth by 0.07 percentage points. “We describe this deal as a tolled way to enter the global market, and it is time for Indonesia to attack international markets,” he told lawmakers.
RCEP, which is seen as an alternative to the US-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), covers nearly a third of the world’s population and about 30% of its gross domestic product. It was originally agreed upon in November 2020 by the leaders of 15 Asia-Pacific countries. The pact, which does not include the United States, entered into force on January 1 this year after seven Southeast Asian countries and Australia, China, Japan and New Zealand ratified it last year.
Under the agreement with South Korea, Jakarta and Seoul will remove more than 92% and 95% of the tariffs respectively. Indonesia will grant preferential tariffs to promote Korean investment in areas ranging from automobiles to clothing, Indonesia’s trade ministry said in a statement after the agreement was signed in 2020. South Korean companies such as Hyundai Motor Group and LG Energy Solution are currently among the leading investors in Indonesia’s electric vehicle and battery industries as they look to tap into its rich nickel reserves.
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