choosing a certain future for your business · 2015. 11. 10. · details of ptas 06/11/2015 (c)...

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06/11/2015 (c) Julien Chaisse 1

FDI flows and trends in Asia-Pacific

Dr. Julien Chaisse

Chief Counsel, World Trade Advisors Group November 2, 2015

9.15-9.45

Fifth Meeting of the Asia-Pacific Foreign Direct Investment (FDI) Network United Nations Conference Centre, Meeting Room G

Bangkok, Thailand 2 November 2015

FDI world as an ‘expanding universe’

Quantitative expansion

Trends in FDI Flows: on the upswing

Trends in policy and rule-making

From North-South to South-South agreements

Structuring and re-struturing of FDI

Qualitative expansion

IIAs as a cause and consequence of capitals flows

Diversity of foreign investments

(from tangible to intangible)

Improved drafting / clarification (Canada-China 2012, Singapore-EU 2014, TPP 2015…)

ISDS success but also inconsistent interpretations triggered more law– not less law


Outline

Trends in policy and

rule-making

FDI Flows in Asia Pacific

Foreign Direct Investment

Source of capital, FX, technology, skills, market

access, employment,

linkages

Increases connectivity,

opportunities to participate in global value

chains

Related to stages of growth and

structural transformation,

stability

May be private/public

(SOE), greenfield/M&A

For natural resources, efficiency,

markets, strategy

Amenable to policy influence

FDI inward & outward stock, by region

44%

29%

3%

14%

5% 4% 1%

1990

FDI Inward Stock

33%

41%

2%

14%

7% 2% 1%

2000

FDI Inward Stock

42%

23%

3%

20%

7% 3%

2%

2014 Europe

North America

Africa

Asia

Latin America and theCaribbeanOceania

Middle East

FDI Inward Stock

47%

36%

1%

12%

2% 2%

0%

1990

FDI Outward Stock

44%

40%

1%

12%

2% 1%

0%

2000

FDI Outward Stock

45%

27%

1%

21%

3% 2%

1%

2014

FDI Outward Stock

Source: UNCTADStat, 2015

FDI inflows and outflows, 1990-2014

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

1800.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

$ U

S b

ln.

FDI inflows, 1990-2014

World Developed economies Developing economies

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

1800.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

$ U

S b

ln.

FDI outflows, 1990-2014

World Developed economies Developing economies


Top Ten Destinations for FDI in Developing Asia, 1990-2014

Average annual total FDI inflows (mln. $ US) Average FDI inflow per capita (US $)

Economy 1990-1995 2010-2014 Economy 1990-1995 2010-2014

China 19 611 China 122 442 Singapore 1 915 Hong Kong, China 11 667

Singapore 6 308 Hong Kong, China 82 970 Hong Kong, China 810 Singapore 11 007

Hong Kong, China 4 860 Singapore 58 411 Brunei 349 Brunei 1 666

Malaysia 4 655 India 30 084 Malaysia 238 Mongolia 968

Indonesia 2 164 Indonesia 18 709 Taiwan, China 59 Kazakhstan 699

Thailand 2 004 Kazakhstan 11 729 Kazakhstan 46 Turkmenistan 635

Korea, Republic of 1 326 Malaysia 10 682 Thailand 35 Malaysia 368

Taiwan, China 1 222 Korea, Republic of 10 286 Korea, Republic of 30 Korea, Republic of 207

Philippines 1 028 Thailand 9 218 Maldives 29 Thailand 137

Viet Nam 947 Viet Nam 8 397 Turkmenistan 25 Cambodia 110

FDI as % of gross fixed capital formation

Economy 1990-1995 2010-2014

Viet Nam 33.5 Hong Kong, China 135.5

Singapore 31.3 Singapore 79.6

Kazakhstan 23.9 Mongolia 60.5

Malaysia 19.4 Cambodia 56.9

Hong Kong, China 14.9 Kyrgyzstan 30.0

Cambodia 14.5 Brunei 29.9

Kyrgyzstan 11.7 Kazakhstan 26.3

China 9.7 Myanmar 22.9

Maldives 7.7 Viet Nam 21.7

Philippines 6.4 Malaysia 14.8

Source: UNCTADStat, 2015; Author’ calculations

Estimated inward FDI flows by economy/sector

Estimated inward FDI flows, by sector, 1990-1992 and 2010-2012

(Millions of dollars)

1990-1992 2010-2012

Sector

Developed

countries

Developing

economies

Transition

economies World Developed countries Developing economies Transition economies World

Total 131573.5 42999.6 1423.6 175996.7 855815.5 553723.3 74664.5 1484203.3

Primary 9018.2 4557.4 915.8 14491.4 64372.2 67852.1 11917.0 144141.2

Manufacturing 36565.6 15467.8 216.6 52250.0 145090.5 151442.2 12169.3 308702.1

Services 77382.5 19490.2 167.8 97040.6 602020.8 324508.9 49024.0 975553.6

Estimated inward FDI flows, by sector, 1990-1992 and 2010-2012

(% of total)

1990-1992 2010-2012

Sector

Developed

countries

Developing

economies

Transition

economies World Developed countries Developing economies Transition economies World

Total 74.8% 24.4% 0.8% 100.0% 57.7% 37.3% 5.0% 100.0%

Primary 5.1% 2.6% 0.5% 8.2% 4.3% 4.6% 0.8% 9.7%

Manufacturing 20.8% 8.8% 0.1% 29.7% 9.8% 10.2% 0.8% 20.8%

Services 44.0% 11.1% 0.1% 55.1% 40.6% 21.9% 3.3% 65.7%

Source: UNCTAD,2014

Inward FDI increasing faster for higher skill manufacturing sectors

Estimated world inward FDI flows, by skill, 1990-1992 and 2010-2012

(Millions of dollars)

1990-1992 2010-2012

Sector/industry

Developed countries

Developing economies

Transition economies World

Developed countries

Developing economies

Transition economies World

Low Skill Sectors 2800 723 1 3524 620 2164 558 3342

Semi-Skill Sectors 5257 2396 43 7696 37417 18786 2746 58949

High Skill Sectors 17220 4482 74 21777 70387 31604 7833 109824

Ratio of Semi Skill to Low Skill 1.9 3.3 41.7 2.2 60.3 8.7 4.9 17.6

Ratio of High Skill to Low Skill 6.1 6.2 71.3 6.2 113.4 14.6 14.1 32.9

Source: UNCTAD, 2014

Percentage share in world FDI flows by trading bloc

2005-07

average 2008 2009 2010 2011 2012 2013 2014

APEC 33.5 46.1 59.7 52.6 58.1 66 69.8 70.9

ASEAN 2.5 1.9 3.8 4.1 3.5 3.9 5.1 5.9

EU 55.4 43.9 32 33.6 32.7 24.7 21.8 20.7

G20 59.1 68.5 70 61.7 66.7 65.5 63.7 63.8

NAFTA 18.5 22.9 30.6 24 29.1 30.2 30 29.2

RCEP 9.7 17 20.1 18 17.9 23.8 25.4 25.8

TPP 24.8 34.3 42.5 33.9 39.5 44.1 44.2 42.8

TTIP 70.2 62.1 58.1 54 57.7 48.9 47 45.6


Asian FDI 5 Key Points

Now mostly services, higher skill sectors

East Asia as leading source

Relative importance differs when measured gross, per capita, or as

share of total investment

FDI closely linked to trade, GVC

development, structural

transformation

Regional FDI regional treaties and

policies?

Outline

Trends in policy and

rule-making

FDI Flows in Asia Pacific

Why international investment agreements (IIAs)?

FDI promises several positive spillovers.

• But the benefits of FDI are not automatic.

• They depend above all on host country policies.

FDI is also associated with potential downsides

• Corruption, environment,

• Deterioration in balance of payments as profits are repatriated

06/11/2015 (c) Julien Chaisse (CUHK) 14

The challenge of investment treaties (the law) is to

maximise the benefits and minimise the costs

Role of BITs and PTAs (IIAs)

IIAs Contribute to the creation of a stable,

predictable and transparent regulatory framework for international investment

Strengthen the enabling framework for FDI

Facilitate the coordination of investment relations through internationally

agreed common denominators

Relations between host States, home States,

international investors and other development

stakeholders

Complement national laws on investment

Interface between national and international

investment policies

06/11/2015 (c) Julien Chaisse (CUHK) 15

Trends in IIAs signed, 1980−2014

UNCTAD, IIA database and World Investment Report 2015 p. 106.

What are the Asian investment rule-making patterns?

06/11/2015 (c) Julien Chaisse (CUHK Law) 17

Less than 11 IIAs

1

2

3

6

6

6

8

11

0 2 4 6 8 10 12

Tonga

Vanuatu

Afghanistan

Myanmar

Nepal

Papua New Guinea

Brunei Darusalam

New Zealand

ONLY STARTING

Total IIAs

PTAs

BITs signed


Between 11 and 40 IIAs

17

21

23

23

26

27

28

28

28

29

29

31

36

36

0 5 10 15 20 25 30 35 40

Hong Kong, China

Cambodia

Lao PDR

Turkmenistan

Taipei, China

Japan

Australia

Kyrgyz Republic

Sri Lanka

Bangladesh

Georgia

Tajikistan

Armenia

Philippines

ASIAN TIER TWO

Total IIAs

PTAs

BITs signed


The Frontrunners


41

42

43

45

48

49

53

59

64

70

86

97

135

Thailand

Kazakhstan

Mongolia

Azerbaijan

Pakistan

Uzbekistan

Singapore

Vietnam

Indonesia

Malaysia

India

Korea, Republic of

China, People republic of

0 20 40 60 80 100 120 140 160

ASIA TOP 13

Total IIAs

PTAs

BITs signed

Intra-Asian PTAs with investment chapter


1 1 2

0 2

3 2

6

0 1

4

1 1 1 2

4 4 6

9 11

17 17 18

22 23

24

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

Nu

mb

er o

f ag

reem

ents

years

Number of PTAs entry into force Cumulative Number of Asian PTAs with investment chapters

Linear (Cumulative Number of Asian PTAs with investment chapters)

Details of PTAs


PTA New Zealand - Singapore 1 Jan 2001

PTA Japan - Singapore 30 Nov 2002

PTA China - Hong Kong, China 29 June 2003

PTA Singapore - Australia 28 Jul 2003

PTA Thailand - Australia 1 Jan 2005

PTA India - Singapore 1 Aug 2005

PTA Korea, Republic of - Singapore 2 Mar 2006

PTA Trans-Pacific Strategic Economic Partnership 28

May 2006

PTA Japan - Malaysia 13 Jul 2006

PTA Pakistan - China 1 Jul 2007

PTA Japan - Thailand 1 Nov 2007

PTA Pakistan - Malaysia 1 Jan 2008

PTA Brunei Darussalam - Japan 31 Jul 2008

PTA China - New Zealand 1 Oct 2008

PTA Japan - Indonesia 1 Jul 2008

PTA Brunei Darussalam - Japan 31 Jul 2008

PTA Japan - Philippines 11 Dec 2008

New Zealand - Malaysia 1 Aug 2010

Hong Kong, China - New Zealand 1 Jan 2011

Australia - New Zealand (ANZCERTA) 1 Jan 1989

(investment Protocol 2011) India – Malaysia 1 Jul 2011

India – Japan 1 Aug 2011 ASEAN Comprehensive on

Investment Agreement (ACIA) 1 March 2012

New Zealand and The Separate Customs Territory of Taiwan, Penghu, Kinmen

and Matsu 10 Jul 2013

Singapore-EU 2014 TPP October 2015

Asian trends in rule-making

Variety of Asian practices reflect global scenario

• TOP 5: PRC, Korea, India, Malaysia, Indonesia

• Increasing role of PTAs to regulate FDI

These countries have developed successive generations of IIAs

• Since 1959 Asian states have concluded 1,194 BITs

• 61 PTAs that contain an investment chapter (24 intra-Asian PTAs).

• Approx. 40% of global regime of investment

MFN to play a key role


Concluding remarks

FDI trends

FDI closely linked to trade, GVC

development, structural transformation

Regional FDI regional treaties and

policies?

Trends in policy and rule-making

Regionalization and liberalization

Keep playing dominos

TPP, RCEP, EU-China, China-US…

Way ahead

Enhancing rules to focus on sustainable

investment

Dealing with reform (and disputes)

Contact Us

Julien Chaisse Chief Legal Counsel

World Trade Advisors

Office: Double Cove Tower, Floor 25 – Office Unit D,

8 Wu Kai Sha Road, Hong Kong

Mobile: +852 69710501

Email: [email protected]

Website: www.worldtradeadvisors.com


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choosing a certain future for your business · 2015. 11. 10. · details of ptas 06/11/2015 (c)...

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