Indonesia’s parliament on Tuesday passed a law formalizing the country’s membership of the China-backed Regional Comprehensive Economic Partnership (RCEP), making it the latest Southeast Asian country to join the world’s largest trading bloc. .
Lawmakers also ratified a bilateral trade pact with South Korea, hoping to attract investment to develop the country’s electric vehicle and battery industry.
Indonesian Commerce Minister Zulkifli Hasan said RCEP would boost trade, direct investment and boost the country’s gross domestic product growth by 0.07 percentage points.
“We describe this deal as a paid way to enter the global market, and it’s time for Indonesia to take international markets by storm,” he told lawmakers.
RCEP, seen as an alternative to the US-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), covers almost a third of the world’s population and around 30% of its GDP. It was initially endorsed by leaders of 15 Asia-Pacific countries in November 2020.
The RCEP initiative was launched by the Association of Southeast Asian Nations in 2012.
The pact, which does not include the United States, came 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 eliminate more than 92% and 95% of tariff lines respectively. Indonesia will grant preferential tariffs to support Korean investment in areas ranging from automobiles to clothing, Indonesia’s Ministry of Commerce said in a statement following the signing of the agreement in 2020.
South Korean companies such as Hyundai Motor Group and LG Energy Solution are currently among the top investors in Indonesia’s electric vehicle and battery industry as it seeks to tap into its rich nickel reserves.