The signing of Regional Comprehensive Economic Partnership (RCEP) makes Association of Southeast Asian Nations (ASEAN) countries an even more attractive destination for companies to set up manufacturing units.
The exodus from China
The COVID-19 lockdown has taught countries and companies alike the age old lesson against putting all eggs in one basket i.e. China.
As a result, multi national companies such as Apple, Samsung, Hasbro etc have been establishing new manufacturing units in ASEAN countries and India, and recalibrating their supply chains to effectively reduce their dependence on China.
The global lockdown has also forced many companies to completely move their manufacturing out of China to reduce their operational costs. Many of these companies have chosen Vietnam and Cambodia as their new home.
RCEP and the rise of ASEAN
The signing of RCEP makes ASEAN countries the most attractive manufacturing destination in the world.
On one hand, RCEP assures companies that have moved or are seeking to establish manufacturing units in ASEAN countries easy access to the Chinese market, the largest in the world in terms of population.
On the other, ASEAN’s free trade agreement with India gives companies manufacturing in the ASEAN region easy access to the the second largest market in terms of population, along with rest of the Indo-pacific region.
Companies would definitely like to exploit the advantageous position ASEAN is in today, thus leading to rapid development of the region.
A word of caution
As the ASEAN countries are expected to become more developed monetarily as well as strategically, more coercion from China is to be expected.
While China, by signing RCEP has accepted to give away some of its business to ASEAN countries, it certainly would like these countries to be subservient to the Chinese interests.
Any of the ASEAN countries resisting China in either economic or geopolitical sphere should expect more strategic or economic arm twisting.
Comments