The Investment Regime in ASEAN Countries⁽¹⁾

Dr. Lawan Thanadsillapakul *

Introduction

The analysis in this article offers a clear picture of the interaction of legal and economic factors in FDI policy, and the international investment regime, focusing on BITs and the emerging concept to establish multilateral rules governing international investment in the form of a MAI. Within these episodes of evolution and development ASEAN countries have gone through the process of FDI policy changes and legal adjustments to accommodate the changing global legal and economic environment. The pace of investment liberalisation taken by these countries was clearly influenced and affected by the interaction of legal and economic factors in the international sphere, and by a combination of their economic relations outside the region and their own economic policies.

In this article I will focus on analysing ASEAN countries' investment regimes i.e. national investment laws, BITs, and regional investment agreement based on the theoretical background analysed in the previous section. This will show how national laws of the ASEAN countries actually further the process of open regionalism, or how they need to adjust their laws and policies in order to facilitate the achievement of such aims. I will firstly discuss the ASEAN countries' national investment laws followed by the analysis of the actual ASEAN BITs entered into with the European countries and the US, the main home countries of inflow investment to the region, and compare them with the ASEAN regional investment agreement. The comparison among the ASEAN BITs, and also with ASEAN regional investment agreement emphasises the nature of the BITs as a lex specialis that allows flexibility of ASEAN countries in liberalising investment. However, as mentioned in earlier, the feasibility of a MAI prompts ASEAN countries to adjust their laws and policy to comply with its standard if ASEAN countries would accept a MAI that would establish a new and higher multinational standard of investment liberalisation and protection. This might be seen as an instrument accelerating the process of an open regionalism.

Since the 1980s ASEAN countries have embarked on significant reforms of their investment regimes. These investment liberalisation initiatives were undertaken unilaterally⁽²⁾. They have occurred due to the recognition of the benefits of a degree of liberalisation and competition in response to change in the international climate, rather than due to the requirements of regional or international agreements. However, by 1995 ASEAN countries were conforming to the Agreement on Trade-Related Investment Measures (TRIMs) to eliminate trade-related performance requirements. Controls of FDI in ASEAN countries, however, remained quite extensive and complex⁽³⁾. The policy instruments include the following:

		restrictions on entry and establishment;
		restrictions on the level of foreign ownership permitted;
		special treatment of foreign investors;
		operational restrictions such as local content requirements and minimum export levels;
		investment incentives such as tax concessions.

In addition, there are many other policies that influence FDI such as tariff and other trade barriers, the lack of competition rules and policy, and the degree and type of protection of intellectual property rights.

Table 1 summarises the regulations of FDI in ASEAN countries and shows the main characteristics of investment regulations of these countries, on which the analysis of ASEAN national investment laws is based.

Table 1

Summary of the Regulations of FDI in ASEAN Countries

Source: Compiled by the author from national legislation.

Part 2

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(*) Assistant Professor, Dr., School of Law, STOU. She holds LL.B and LL.M. (Thammasat University, Thailand), LL.M. (Vrije Universiteit Brussels, Belgium), and Ph.D. (Lancaster University, UK)

(1) The analysis in this chapter is by the author based on the compilation of ASEAN laws by varoius sources i.e. CCH Asia, APEC, ESCAP and ASEAN Secreatariat. There is a paucity of up-to-date secondary literature in this topic.

(2) All ASEAN countries gradually liberalise investment regulations step by step, aspect by aspect, and sector by sector without entering into any agreement for each liberalisation at the time. For instance, Indonesia launched various liberalisation packages: the January package of 1984: tax reform; the April package of 1985: shipping and customs reform; the May package of 1986: import and investment reform; the October package of 1986: sole importer and duty reform; the December package of 1987: opened up the tourism sector to foreign investors and relaxing the extension of divestment programme and relaxed the equity share of foreign investors in joint venture companies which export at least 65% of their production; the October and December package of 1988 : banking, capital markets, import and export reforms; the policy of May 1989: re-issued negative list which more open; the May of 1990: simplification of licensing and permit procedures; the June package of 1991: trade and investment reform; the July package of 1992: investment, trade, financial and manpower reform; the May package of 1993: banking reform; the June package of 1993: trade, industry and investment reform; the October package of 1993: trade, investment and environment; and the June package of 1994: simplification of the license and permit procedures.

(3) The analysis in this section is based on national investment laws of ASEAN countries, country study on investment regime of APEC member economies, and a study of the relevant national laws, also a study compiled in Doing Business in Asia. Published by CCH Asia Limited. The individual ASEAN country's laws in this loose-leaf are provided by (a) Indonesia: William A. Sullivan; (b) Malaysia: Yoong Nim Chor; (c) The Philippines: Sycip Salazar Hernandez & Gatmaitan; (d) Singapore: Drew & Napier; (e) Thailand: Baker & Mckenzie (Thailand)