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PTA’s INVESTMENT CHAPTER: THE JUXTOPOSITION OF THE INVESTMENT
LIBERALISATION PROVISIONSufian Jusoh
Institute of Malaysian and International Studies (IKMAS)
Regional Dialogue On “ENHANCING THE CONTRIBUTION OF PREFERENTIAL TRADE AGREEMENTS
TO INCLUSIVE AND EQUITABLE TRADE”, 21-22 June 2017
United Nations Conference Centre, Bangkok
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Contents
• Investment Liberalisation and effect on ASEAN Economies
• Liberalisation from 3 different perspectives
• Implementing Investment Liberalisation post-PTA: Investment Law v. PTAs (case of Myanmar and Lao PDR)
• Conclusions and recommendations
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ASEAN MEMBER STATES AND ECONOMIC POWERHOUSES – The Power of Investment Liberalisation?
ASEAN MEMBER STATESIN TOP 40 ECONOMIES (popul)
% OF GLOBAL GDP 2017
Nature of FDIs
Indonesia (250m) 1.16% Market seeking, natural resources
Thailand 0.53% Market seeking, efficiency seeking
Malaysia (30m) 0.4% Efficiency seeking, natural resources, strategic assets
Singapore 0.39% Efficiency seeking, strategic assets
The Philippines 0.39% Market seeking
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ASEAN Investment Inflow 2011-2015
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Brunei, 173.2433396
Cambodia, 1700.968602
Indonesia, 15508.16
Lao PDR, 1219.82
Malaysia, 11121.49738
Myanmar, 2824
Philippines, 5234.027
Singapore, 65262.39608
Thailand, 10844.63932
Viet Nam, 11800
ASEAN, 125688.7517
0
20000
40000
60000
80000
100000
120000
140000
Brunei Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Viet Nam ASEAN
ASEAN FDI Inflow, 2011-2015 (in USD Million, UNCTAD)
Sources of FDI Inflows into ASEAN
ASEAN, 22,232.2
European Union (EU), 20,127.6
Japan, 17,559.4
USA, 13,646.0
China, 8,256.5
Republic of Korea, 5,710.4
Australia, 5,246.7
Hong Kong, 4,542.9
Taiwan, Province of China, 2,807.0
New Zealand, 2,241.2
-
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
30,000.0
ASEAN European Union (EU) Japan USA China Republic of Korea Australia Hong Kong Taiwan, Province ofChina
New Zealand
source: ASEANStat, 2016
All top 10 investors have FTAs with ASEAN or bilateral with ASEAN Member States, apart from Chinese Taipei and Hong Kong. Hong Kong is negotiating with ASEAN.
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Investment Liberalisation
National Treatment and MFN at pre-
establishment
Liberalised Sectors (positive/negative)
and NCM
NAFTA/TPP Model: Linkages between
Investment, Services, SOEs and GP Chapters
Level of Liberalisation: Ratchet; Stand-still, No Roll Back; Progressive
Liberalisation
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Real Meaning of Liberalisation: Negotiator v. Implementor v. Businesses (case of TPP)
Negotiator Implementor Busineses
To meet the mandate: what level of liberalization does the mandate say. Investment Chapter as a bait for bigger objectives?
How to implement the black letters of the Agreement requiring proper translation of the PTA into domestic legal system
At the receiving end. Benefits of FDI spill over v. fear of competitions
What are the level of policy space: weak and strong negotiators
Can I change the Law and policies at the later stage?
Big businesses may be able to influence negotiations.
Negotiation strategies may be de-linked from actual business needs/implementors’ capacity
Post PTA, evidence of implementorsbreach the PTA (lack of understanding, show of domestic power)
MSMEs are often left out unless there is strong leadership
How to deal with objections from within the Government (eg SOE and GP Chapters)
Inter-agency co-ordination and rivalries
Need for an effective SME Chapter,NCMs.
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Advantages of Myanmar
In the Middle of India and China, Bangladesh.
ASEAN and 40% of world population
Neighbours economies worth USD 15 trillion or
20% of world’s GDP
Big Domestic MarketRich in Natural
Resources, fertile land
Dynamic and enthusiastic Population
Inclusive Reform Process – Increased
transparency and public participation
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Myanmar FTAs: ASEAN ANZ, China, India, Japan, Korea, (RCEP).
New Myanmar Investment Law 2016
Policy Pillars Reform
Facilitation • One Stop Service Centre• State and Regional Offices Centre• Encourage domestic investments• Information sharing
Promotion • The role of Myanmar Investment Commission to promote investment• Structure investment promoted sectors
Liberalisation • Reduce negative list through consultations and notifications• Promoted Sectors
Protections • National Treatment and Most Favoured Nations• Transfer of Funds• Conditions for expropriation and indirect expropriation• Fair and Equitable Treatment• Transparency
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Potential Impact of Investment Reforms in Myanmar on Jobs
10
0
10
20
30
40
Textile & garment Food Wood, furniture & other manuf. Hotel & restaurant Retail & wholesale Other services
Net job creation share Share of the stock of employment
(WBG Enterpise Survey 2014)
But Investment Chapter is only one part of the solutions
Myanmar Economic
Transformation
Legal and Reg. Reform
Trade and Investment
(PTA linked)
Access to Finance
(Financial services ch)
Human Capital
(MNP/ Mode 4)
State and Private
Enterprise
(SOE Ch)
• Constraints of MSMEs
• Access to credit and access to land. Only 25 percent of domestic oriented SMEs in Myanmar had checking accounts compared to 75 percent average in East Asia.
• Access to reliable power is also a constraint for domestic oriented SMEs.
• Limited culture among SMEs in Myanmar to use internet to communicate with customers and suppliers to secure orders.
(Rahadja, Jusoh et.al, WBG 2017, forthcoming)
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Challenges in implementing the Investment Chapter vis-à-vis the Investment Law
Making Economic v.
Political Decision (best?
Effective?
Review of domestic law v.
WTO, AFAS, PTA, ACIA
Usage to systemize economy,
signaling & policy space
Framing the NCM, domestic
v. PTAs
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Criteria/ Considerations for Inclusion in the Negative List
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Polic
y O
bje
ctiv
e
Is this the best policy instrument?
The scope has to be limited
Co
st a
nd
Ben
efit
An
alys
is Is the policy going to create the net benefit for the country?
Inte
rnat
ion
al C
om
mit
mem
ts Is the policy in compliance with international commitments?
