As reported by the Straits Times, Malaysia recently ratified the Regional Comprehensive Economic Partnership (RCEP) – a free trade agreement that aims to establish an integrated trade market within ASEAN, while also facilitating regional and global economic development. Since fellow ASEAN member states have also ratified the RCEP, Malaysia’s participation will boost their own economic development as the agreement implicates approximately 30% of the global population.
While the government has proactively explored domestic outlets to accelerate the recovery of post-pandemic business in Malaysia, the role of cross-border agreements like the RCEP will significantly bolster current efforts. Read below to understand how businesses can benefit from cross-border agreements in Malaysia.
The Benefit of Cross Border Agreements
Generally, cross-border agreements strengthen international relations and improve trade relations between participating member states. Most importantly though, international partnerships present promising economic advantages. To better understand the dynamic that cross-border agreements bring forth, it is important to first contextualize the RCEP and its implications within Southeast Asia.
Specifically, it is essential to identify areas in business that should be prioritized to effectively promote post-pandemic recovery. Further, by recognizing these sectors, businesses and professionals will also be able properly to develop strategies that effectively utilize the benefits brought about by the RCEP.
Business Outlook in Malaysia
In the YCP Solidiance white paper Road to Recovery: Post Pandemic Business Outlook in Southeast Asia, several relevant areas for post-pandemic business development are identified and discussed.
Digitalization – Given that the pandemic accelerated the digitalization efforts of businesses, 2021 witnessed the internet economies of ASEAN-6 countries grow at a 49% year-on-year rate as compared to 2020. For Malaysia, by 2025 specifically, the country is expected to account for 35% of the predicted ASEAN-6 digital economy value of 363 billion USD.
As such, businesses should focus on integrating their services with industries that engage heavily with digital spaces like e-commerce and financial technology. Doing so will assist businesses to increase their presence in untapped digital markets. More importantly, investing and adopting practices related to digitalization will help businesses build a foundation for the future, especially as we move toward the fourth industrial revolution.
Scaling Up SMEs – Within Southeast Asia, small and medium-sized enterprises (SMEs) comprise 97% of all enterprises, while also accounting for 69% of the workforce and 41% of the region’s GDP. Considering that SMEs have fewer resources as compared to large corporations, the pandemic took a significant toll on their operations.
To help scale SMEs in a post-pandemic setting, concerned parties focus on three key steps: (1) leverage digitalization and the accessibility it provides to maximize capability in areas like skill, opportunity, operations, etc.; (2) design, plan, and decide based on adaptability to foster a dynamic that is built on flexibility in the event of situations like the pandemic; and (3) prioritize internalization so as to have a solid foundation that can support growth and recovery.
With these steps in mind, the role of cross-border agreements in Malaysia will undoubtedly play a key role as the impending increase in international collaboration serves to accelerate the digitalization and scaling of SMEs as realistic possibilities. Further, as international players seek to strengthen their investments in Malaysia, potential partnerships with Malaysian businesses will also trend.
Overall, cross-border agreements such as the Regional Comprehensive Economic Partnership (RCEP) will not only enhance ASEAN trade relations but more importantly, will bring about an improved post-pandemic business outlook in the region. As major players position to capitalize on such activity, businesses and professionals in Malaysia should equally prime themselves to take advantage.