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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
06/11/2015 (c) Julien Chaisse 3
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
Source: UNCTADStat, 2015
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
Source: UNCTADStat, 2015
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
06/11/2015 (c) Julien Chaisse (CUHK Law) 18
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
06/11/2015 (c) Julien Chaisse (CUHK Law) 19
The Frontrunners
06/11/2015 (c) Julien Chaisse (CUHK Law) 20
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
06/11/2015 (c) Julien Chaisse (CUHK Law) 21
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
06/11/2015 (c) Julien Chaisse (CUHK Law) 22
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
06/11/2015 (c) Julien Chaisse (CUHK Law) 23
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
06/11/2015 (c) Julien Chaisse 25
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