Investment and Integration: The Case of AEC

Sufian Jusoh, Yangon

19.2.2015

AEC Workshop - Brisbane 19 May 2014 1

Investment promotes economic growth and development by building better…

Infrastructure Goods Services

2

The Challenge of Creating New and Better Jobs

3 3

Not All Investments Are the Same, Nor Do They Have the Same Impact on Economic Development

Natural resource -seeking

Market -seeking

Efficiency-seeking

Strategicasset

-seeking

4 4

Why Does the Type of Investment Matters?

• Because each type generates different kinds of jobs.

Small-scale

household based

work

Low-skilled,

labor-intensive

work

Moderate skilled,

varied labor

intensities work

High-skilled,

technology

intensive work

Knowledge-

intensive

Agriculture Apparel Automotive IT

Hardware

Business

Services

Economic upgrading

Type of Work

Source: Gereffi, Luo, 2014. April 1, 2014, World Bank Policy Research Working Paper No. 6847

Because each type of investment creates different types of jobs

5 5

6

Single Regional Market Regional Production Base

The Peaceful, Prosperous, and People-Centric ASEAN

ASEAN Security Community (ASC)

ASEAN Economic Community (AEC)

ASEAN Socio-

Cultural Community

(ASCC)

ASEAN COMMUNITY 2015

Towards ASEAN Community 2015

Dual Track Strategy

Production/Supply Consumption/Demand

7

AEC Blueprints

Single Market &

Production Base

A highly competitive economic

region

A Region of Equitable Economic

Development

A Region fully

integrated into the Global

Economy

6

21

63

23

67

6

35

40 40

60

2 0 1 0

4

0 1

14

7

2 3 3 3 3 3 3 3 3 3 3

0

7 7 7

4 4 5 4 6

8

0

10

20

30

40

50

60

70

80

Brunei Cambodia Indonesia Lao PDR Malaysia Myanmar ThePhilippines

Singapore Thailand Vietnam

BIT

FTA

ASEAN FTA

BIT with AMS

8

Intra-ASEAN Investment

(10,000.0)

-

10,000.0

20,000.0

30,000.0

40,000.0

50,000.0

60,000.0

70,000.0

BruneiDarussalam

Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Viet Nam

2011 Intra-ASEAN

2011 Extra-ASEAN

2011 Total net inflow

20122/ Intra-ASEAN

20122/ Extra-ASEAN

20122/ Total net inflow

20133/ Intra-ASEAN

20133/ Extra-ASEAN

20133/ Total net inflow

FDI Inflow in Select Economies 2000-2013

-30000

-20000

-10000

0

10000

20000

30000

40000

50000

60000

70000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Australia

Brunei Darussalam

Cambodia

Indonesia

Lao People's Dem.Rep. Malaysia

Myanmar

New Zealand

Philippines

Singapore

Thailand

10

FDI Outflow from Select Economies 2000-2014

-40000

-30000

-20000

-10000

0

10000

20000

30000

40000

50000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Australia

Brunei Darussalam

Cambodia

Indonesia

Lao People's Dem. Rep.

Malaysia

New Zealand

Philippines

Singapore

Thailand

Viet Nam

11

ASEAN IGA

• Protection and Promotion

• Investor-State Dispute Settlement Mechanism

AIA Agreement

• Schedules (I. Facilitation, II. Promotion, III. Liberalisation), Temporary Exclusion List 5 Sectors; Sensitive List 5 Sectors

• Protocol: Temporary Exclusion List for 5 services; Sensitive Lists for services incidental to 5 sectors.

ACIA • Four Pillars, Liberalisation, 2 Annexes: Approval in writing, Expropriation and

compensation, ISDS

• Schedule: Reservation Lists; Came into force on 29 March 2012.

12

ACIA

Protection

Facilitation

Promotion

Liberalisation

13

3rd country national through

juridical person in AMS

Juridical person in

AMS

Natural person of

AMS

14

15

Manufacturing Agriculture Fishery Forestry Mining and Quarrying

16

National Treatment

Most -Favoured-Nation Treatment at pre and post-establishment

Senior Management and Boards of Directors

Freedom to operate without any performance requirement

More transparent,

consistent and predictable investment

rules, regulations, policies and procedures;

Harmonised investment

policies;

Streamlined and simplified procedures for

investment applications

and approvals; and

Dissemination of investment information,

rules, regulations, policies and procedures.

17

ASEAN Investment Website

Main Protections

19

Fair & Equitable Treatment

Full Protection

and Security

No Unlawful

Expropriation

Free Transfer of

Funds

20

Alternative Dispute

Resolutions

Mediation

Conciliation

Consultation & Negotiation

Domestic Courts

Domestic Courts

Domestic Tribunals

Arbitration

ICSID

UNCITRAL

Other Agreed Rules

Evolved Role of ACIA

ASEAN Wide Investment Agreement

Benchmarked for National Level

Investment Law

Major Policy Considerations in Negative List Approach

Standstill Roll Back

Ratchet

Promoted Sectors: Manufacturing

Automotive Philippines, Thailand,

Vietnam

Electrical and electronic Brunei, Malaysia, Thailand,

Vietnam

Iron and Steel Philippines

Machinery and equipment Malaysia, Vietnam

Petrochemicals Malaysia, Brunei

Pharmaceuticals and Life

Science

Brunei

Malaysia

Promoted Sectors: Agriculture and Mining

Agriculture Cambodia

Indonesia (including beef and fisheries)

Lao PDR

Myanmar (including fisheries)

Philippines (including fisheries)

Thailand

Mining Cambodia

Lao PDR

Myanmar

Singapore

Promoted Sectors: Services

Education Primary,

secondary, tertiary

Malaysia

Financial Services Banking Myanmar

Insurance Myanmar

Leisure and

Tourism

Tourism and

Leisure

Management

Cambodia

Lao PDR

Malaysia

Philippines

Singapore

Stakeholders’ Recommendations • Low awareness of AEC. • Business organisations seek support mechanism

for the Government to communicate AEC to business.

• Greater emphasis on trade in services. • Should promote transparency, access to

information and good governance. • Harmonisation of ASEAN investment laws and

procedures at a certain level will ensure the certainty and unity of the ASEAN investment regime and practices.

Major Policy Considerations in Negative List Approach

Standstill Roll Back

Ratchet

Juggling through the jungle: practical issues

Domestic Regulations v. Liberalisation

Facilitation v. Different Levels of Governance

Screening v. Open Policy

Transparency v. Access to

information

Access to Land/ IP Protections

Points For Research and Discussion

• Designing Optimum Investment Policies

• Encouraging Progressive Liberalisation without roll-back in policies;

• Regulatory Audit and Negative Listing;

• Making ACIA as the benchmark;

• Role of Domestic Legal System and Investment Attraction.

THANK YOU.

sufianjusoh@gmail.com