Optimistic outlook for RCEP trade pact to boost hiring in 2021?
The Regional Comprehensive Economic Partnership Agreement (RCEP) was signed in November 2020 and is expected to be implemented latest in end 2021. According a recent publication, the trade pact promises to add $209 billion annually to world income and $500 billion to world trade by 2030.
These gains will mainly benefit RCEP members - China, Japan, South Korea, Australia, New Zealand, and 10 Southeast Asian countries - who could form world’s most powerful trading hub.
We spoke to Joel Foo, our front office banking expert who shared how this trade pact will bring optimism in the hiring space.
But first, we look at what this trade pact entails, and its impact in the Asia Pacific region, and Singapore.
What is the deal with RCEP?
RCEP, along with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), will reduce trade costs and create a framework for cooperation among the region’s trade officials. Members will link their strengths in technology, manufacturing, agriculture, and natural resources. Their economies will become more efficient individually and, as a cohesive group, more competitive globally. East Asia will also become more attractive to investors and trade partners from Europe and Latin America.
How will this agreement impact financial hubs like Singapore?
- Rules of origin in our favour
With the RCEP, you will need to have just 40 percent of a product produced not just in Singapore, but anywhere in the RCEP region. The other 60 percent could still come from another country like United States, but 40 percent, at least, should be produced in Singapore or any one of the 15 countries. With this low threshold, various manufacturing companies locally can use various ways of calculating origin to satisfy the origin rule and still have the product made domestically.
- Cost savings within companies and Singaporeans
Based on the rule of origin state above, the resources bought from the other RCEP countries are considered as originating in Singapore when determining their origins to enjoy preferential tariffs. Perishable goods can also be cleared by Customs as swiftly as within six hours of arrival. On the ground, Singaporeans will also be able to enjoy cheaper goods when the cost savings are passed on to them. Ultimately, RCEP will improve market access for goods and services within the region.
How the RCEP impact hiring in 2021 and beyond?
Joel shared that the RCEP signing will continue to make Singapore a key financial hub for cross-border trade. To support this, companies will need to ramp up their hiring pipelines to support the increase in cross-border trade.
“Current employees can strategise in two ways:
- Continue to work for a big organisation and specialize in cross-border trade functions.
- Move into a smaller organisation where they take on more responsibilities.
Depending on how other industries such as commodities, manufacturing and some others react, there may be a potential demand for Trade Finance Specialists and Relationship Managers who can work hand in hand to structure the best cross-border deals for clients.”
Businesses will also require the assistance of trade experts who can help them map out the most feasible regional expansion options, considering the improved, if still uneven, tariff landscape. They will also be able to utilise their knowledge, and support companies in reviewing their supply chains, distribution channels, and operations to capitalise on favourable trade concessions.
Government procurement issues and digital trading are expected to generate work for compliance, legal and risk experts who support and facilitate cross-border transactions and flow of capital. As such, trade counsels and other trade compliance specialists will be in high demand to aid companies in ensuring that companies maximise the benefits available for their current operations under RCEP and the CPTPP.
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With the RCEP coming into force in July 2021 at the earliest, before taking full effect by the end of 2021, corporations may also envisage new investments throughout the region, while reducing costs and time for importing raw material, and exporting manufactured goods to customers in the region.
The RCEP is meant to be make the ‘Asian Century’ a reality and change the geo-economic and geopolitical map. Covering a third of the world population and global GDP, to form the biggest trade bloc in the world, we envision great optimism in the region as well as Singapore in the coming years.
If you are looking to expand and enhance your organisations’ capabilities in terms of headcount, or if you are a specialist that can apply your trade know-how in this space, reach out to us via the form below or connect with Joel directly on LinkedIn. For more updates on the market, do visit our blog and follow us on LinkedIn.