Indonesia’s parliament on Tuesday passed a law cementing the country’s membership of the China-backed Regional Comprehensive Economic Partnership (RCEP), making it the latest Southeast Asian nation to join the world’s biggest trade bloc.
Lawmakers also ratified a bilateral trade pact with South Korea, hoping to attract investment to develop the electric vehicle and batteries industry in the country.
Indonesian Trade Minister Zulkifli Hasan said the RCEP would boost trade, direct investment and increase the country’s gross domestic product growth by 0.07 percentage point.
“We describe this agreement as a toll way to enter the global market, and it is time for Indonesia to storm the international markets,” he told lawmakers.
The RCEP, which is seen as an alternative to the U.S.-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), covers nearly a third of the world’s population and about 30% of its GDP. It was initially agreed 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, entered into force on Jan. 1 this year after seven nations in Southeast Asia, and Australia, China, Japan, and New Zealand ratified the pact last year.
Under the agreement with South Korea, Jakarta and Seoul will eliminate more than 92% and 95% of tariff lines respectively. Indonesia will give preferential tariffs to support Korean investment in areas ranging from automobiles to apparel, Indonesia’s Trade Ministry said in a statement following the deal signing in 2020.
South Korean companies such as Hyundai Motor Group and LG Energy Solution are currently among top investors in the electric vehicle and battery industry in Indonesia as it looks to take advantage of its rich nickel reserves.