Free Flow of Investment
A key element to establishing ASEAN as a single market and production base is having a free and open investment regime where (a) non-discriminatory treatment is extended to ASEAN and ASEAN-based investors, save for limited exceptions that are also due for progressive elimination; (b) rules and regulations are made transparent; and (c) investors and their investments (i.e. covered investments) enjoy protection.
ASEAN is achieving these via the implementation of the ACIA, which took effect on 29 March 2012. The ACIA, as one of the economic instruments for realising regional economic integration, aims to create a liberal, facilitative, transparent and competitive investment environment in ASEAN.
Comprehensive in scope it covers investment liberalisation, protection, promotion and facilitation. At par with international best practices it adopts a single negative list approach, extends automatic most-favoured nation treatment to all Member States, and carries a comprehensive and detailed investor-state dispute settlement mechanism, among others. Forward looking, it prohibits performance requirements, and contains provision on senior manager and board of directors (SMBD) to encourage inflow of key foreign managerial and senior management personnel. Comprehensive and integrated in approach, it revised, merged and improved upon the ASEAN Investment Guarantee Agreement (ASEAN IGA) and the Framework Agreement on ASEAN Investment Area (AIA Framework Agreement) and provides a clearer interaction of provisions pertaining to investment liberalisation and protection under a single investment agreement. ACIA supersedes these two precursor investment agreements (issued in 1987 and 1998, respectively) including their subsequent amendments.
ASEAN’s task now is to effectively implement the ACIA to ensure that the benefits from the Agreement are realised with ASEAN and ASEAN-based foreign investors taking advantage of the opportunities that the ACIA provides. ASEAN through the AIA Council and its subsidiary body (the CCI) has intensified its efforts to support the implementation of the Agreement cognisant of the importance of the ACIA in keeping ASEAN’s competitive strength vis-à-vis the changing economic landscape, and in achieving ASEAN’s economic integration goal. It has given focus to: (a) completing the work pertaining to the build-in agenda items; (b) promoting the ACIA and reaching out to businessmen and investors to create awareness about the benefits of ACIA; (c) enhancing the capacity of ASEAN and its Member States in implementing the Agreement; and (d) developing a regional cooperation work programme aimed at supporting the work of ASEAN on investment liberalization, protection, promotion and facilitation.
Key Developments in the Implementation of ACIA
- At the entry into force of the ACIA on 29 March 2012, ASEAN also issued the ACIA Schedule or the Member States Reservation Lists. The Lists contains measures that are maintained by Member States that do not conform to the National Treatment and SMBD provisions of the Lists are required to be reduced or eliminated as prescribed in the Agreement.
- The AIA Council endorsed the Modality to improve and Eliminate the Impediments to Investment, which sets out the process in carrying out the task to progressively reduce and/or eliminate non-conforming measures in the Lists.
- A vital component of the Modality is the adoption of the ASEAN Investment Peer Review Process that enhances the operation of the transparency provisions of the ACIA. The Peer Review Process requires the regular reporting of any changes in the law, rules and regulations, policies and administrative guidelines that may significantly affect investments or commitments of Member States under the Agreement. It also demands the reporting of any international agreement that a Member States has entered into and grants preferential treatment.
- Underway is the development of a mechanism by which changes or modification in the Schedule or reservations of Member States could be effected.
- ASEAN has implemented various activities to promote and create awareness on the new investment agreement. It published an introductory booklet on ACIA in April 2012 and an ACIA Guidebook for Businessmen and Investors in March 2013. It also recently organized an ACIA Socialization Forum in cooperation with the Malaysia Investment Development Authority in Kuala Lumpur.
- To have a greater reach in the promotion of ASEAN as a single investment destination, ASEAN is also developing an ASEAN investment website that will serve as ASEAN’s gateway for sharing information on investing in the region, and as a window for investors to learn and know more about ASEAN, its opportunities and potentials.
- ASEAN has stated a platform for strategic discussion among the Heads of the ASEAN Investment Promotion Agencies on enhancing investment facilitation and promotion in ASEAN via the annual event “The ASEAN Investment Forum”.