RCEP: The door is opening, but is the house ready?
The recommendation was later approved at the fifth RCEP Ministerial Meeting held in Manila, the capital of the Philippines.
Bangladesh, Chile, Sri Lanka and Hong Kong have applied to join the Regional Comprehensive Economic Partnership (RCEP), a 15-country trade bloc in the Asia-Pacific region. At a meeting of the RCEP Joint Committee in Manila on 21 September, a recommendation was made to form special working groups on the applicant countries.
The recommendation was later approved at the fifth RCEP Ministerial Meeting held in Manila, the capital of the Philippines. This is an important development for Bangladesh. However, there is no scope to view this as being on the threshold of membership; rather, a difficult phase of preparation and negotiation is now beginning.
If Bangladesh can join RCEP, it could create opportunities to access new markets, enter regional supply chains and diversify exports. In the context of losing some of the existing trade benefits after graduation from LDC status, establishing institutional trade relations with major Asian markets will become increasingly important for Bangladesh.
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But it would be a major mistake if we only look at the size of the market and not the level of competition. RCEP will open markets for Bangladesh; at the same time, Bangladesh will also have to open its market to member countries. Competitive products from China, Japan, South Korea and ASEAN could then enter Bangladesh's market more easily. For domestic industries with weak productivity and high costs, that will be a difficult test.
Bangladesh's real problem, therefore, is not obtaining permission to enter RCEP; the problem is building the capacity to compete after entering. Exports remain excessively dependent on ready-made garments. An ineffective trade policy, inefficiencies at ports and customs, logistics costs, energy uncertainty, a complex tax system, limited use of technology and a skills shortage are all obstacles to competitiveness.
Reforming trade policy must therefore be given priority in the list of reforms. Alongside high tariffs, para-tariffs, such as supplementary duties, regulatory duties and other import-related charges, need to be reduced to establish a transparent, simple and predictable tariff structure. At the same time, customs and port systems must be modernised, supply chain costs must be reduced and reliable energy must be ensured. Alongside increased investment in skills, technology and research, export capacity needs to be developed in sectors such as pharmaceuticals, leather, agro-processed products, light engineering and ICT beyond garments.
RCEP is not just a trade agreement for goods; its broader objective is regional integration in services and investment. Therefore, the opportunities for Bangladesh are not limited to exporting goods.
To attract investment from RCEP countries, Bangladesh's investment environment also needs to be made competitive. Without reforms in areas such as land, reliable electricity and gas supplies, predictability in the tax system, transparency in the repatriation of profits and capital, contract enforcement and coordination among regulatory agencies, it will be difficult to realise the aspiration of becoming a regional hub for production and investment.
Most importantly, negotiations must be based on data, not emotion. Without preparation on which products need rapid tariff benefits, which sectors require longer transition periods and how domestic industries can be given temporary protection, trade agreements could instead create pressure.
RCEP is therefore not just a door to new markets for Bangladesh; it is a test of capacity. The door is opening, but the biggest question now is whether the house has been prepared well enough to compete and attract investment on the other side.
Dr Selim Raihan is a professor of Economics at Dhaka University and executive director of the South Asian Network on Economic Modelling (Sanem).
