The Lubricant for the Giant Wheel: The Role of Business Education Institutions in RCEP

July 18, 2022

Deddi Tedjakumara, CEO of Prasetiya Mulya Executive Learning Institute

Deddi Tedjakumara has been a faculty member of Prasetiya Mulya Business School (now known as Prasetiya Mulya University ) since 1997. After completing his tenure as Associate Dean, he was appointed CEO of the Prasetiya Mulya Executive Learning Institute in 2009, which focuses on executive education, corporate learning, and business consulting. In this field, he is actively involved in designing and implementing customized learning programs for large corporations in Indonesia. In the field of teaching, he has expertise in strategic management and strategic leadership. In addition to his professional activities, he is a board member in several non-profit organizations in Indonesia.

The Regional Comprehensive Economic Partnership (RCEP) is considered a major free trade agreement (FTA) as it covers about one-third of the world’s population and 30% of the world’s GDP, worth about USD 25.84 trillion in 2019. Over the next 20 years, tariffs will be eliminated on 92% of goods and 65 service sectors will be opened to foreign investment by increasing the foreign ownership cap. It is estimated that this free trade agreement will add up to USD 186 trillion in value to the global economy. Participating countries are expected to benefit from the opportunities to increase economic activity. On the other hand, there are also skeptics who believe that the benefits of RCEP will not be as great as they have been calculated.

Opportunities are not the same as prospects. Prospects arise because of opportunities and the ability to take advantage of those opportunities. Big waves are a good opportunity to surf. However, this opportunity is a prospect only for those who have a surfboard and the ability to surf. For those who do not have that, this wave is just an opportunity and they can only watch it.

To use the metaphor above: Macro policies, such as the elimination of tariffs, certainly create a ‘big wave’. But whether these big waves are used for surfing or are just a pretty sight depends on the extent to which businesspeople manage to make it a prospect for themselves. It is the prospect that makes economic and business actors move to take advantage of the opportunities, and that is also an important factor in the success of a free trade agreement.

The opportunities may be the same, but the prospects for each RCEP participating country may be different because the ability to take advantage of those opportunities varies. For example, requirements for quality standards for products and services, which vary widely from country to country, have often become obstacles that characterize many FTAs. Establishing fair standards that all interested parties can agree on is very important. This, of course, will help create opportunities. However, even more critical to creating prospects for all parties involved in this RCEP is the ability to produce products and services that meet the agreed upon standards.

Equality of capabilities among economic and business actors is an important factor in enabling them to take advantage of RCEP opportunities. The wide gap in capabilities leads to a sense of threat, and this is the main enemy of free trade. This sense of threat will be even stronger if the FTA is seen only as lifting barriers to competition and opening a larger market, and is implemented on a “winner takes all” basis.

This is an area where business education institutions can play a role. Building equity in business skills requires cross-national and cross-cultural collaboration among business education institutions. This collaboration can take many forms. Projects involving students from different universities and countries, or joint teaching and research programs are good examples of building equal skills and a spirit of collaboration. Consistent collaboration also builds trust. Equal capabilities and trust are the antidote to feelings of threat. Other creative activities with similar goals can be undertaken to reach graduates of educational institutions who are currently in the business world.

The next question is whether this also requires the presence of a business education institution that also crosses national boundaries. Indeed, the presence of business education institutions in different countries can be realized in the form of a physical presence in different countries to take advantage of the opportunities that also exist under RCEP. Apart from natural barriers such as language and purchasing power, the presence of cross-border educational institutions can be defined in several ways.

If the “product” of a business education institution is knowledge, then the presence of knowledge that crosses national boundaries is a manifestation of the presence of a business education institution. In the academic tradition, knowledge exchange is a free and fluid exchange that has long occurred even without free trade agreements.

If the ‘product’ of a business education institution is its graduates, then the presence of graduates crossing national borders is an indicator of the ‘success’ of educational institutions present outside their national borders. How to produce ‘products’ that have the quality to cross national borders must be a major concern for any business education institution.

If the ‘product’ of a business education institution is measured not only by output (graduates) but also by outcome (what the graduates do), then the presence of a business education institution can also be measured by how many graduates produce products and services that cross national borders, i.e. how many graduates really benefit from this RCEP.

Regardless of how one defines their presence in different countries, business education institutions play an important role in ensuring that RCEP maximizes all of its benefits. This role is critical because they are the lubricant for the giant wheel of FTAs like RCEP.