ASEAN Members Prepare for a Better Investment Climate

 
Christina Desy, Kartini L. Makmur
 
With the start of 2015, ASEAN countries now have less than a year to prepare for the commencement of the ASEAN Economic Community in December 2015. One current focus is the investment sector, a topic at the recent Regional Interactive Meeting on Investment Treaty Models.
 
Held by Indonesia from 20 to 22 January 2015, this meeting aimed to explore the best investment treaty model to be applied to regional cooperation, including in ASEAN.
 
Discussions at the meeting also covered the ASEAN Comprehensive Investment Agreement (ACIA) that has been in force since 29 March 2012 and is the fundamental basis for investment between ASEAN countries. The ACIA, which replaced the ASEAN Investment Area (AIA) and ASEAN Investment Guarantee (AIG), aims to enhance ASEAN’s attractiveness as a single investment destination.
 
With ACIA being implemented, ASEAN is theoretically now open to investment made by national bodies, citizens, or permanent residents of any ASEAN country. It is also open to ASEAN-based legal persons that fulfill the requirements set out in ACIA. In addition, parties outside ASEAN can also invest through any recognized legal person within ASEAN.
 
According to James Losari, a researcher at the Centre for International Law at the National University of Singapore, these changes will bring significant impacts on investment within ASEAN. Currently, most ASEAN countries conduct their investment bilaterally and adopt the models applied in the United States and Canada under and by the North American Free Trade Agreement (NAFTA) countries. In addition, Mr. Losari explained that ACIA should also provide greater benefits and protection for investors.
 
“ACIA includes several clauses that are not included in bilateral agreements, such as investment liberalization, fair and equitable treatment, and full protection and security clauses,” Mr. Losari elaborated.
 
Furthermore, Mr. Losari asserts that ACIA enables the investment host country to make reasonable reservations to the agreement. By doing so, the agreement can be implemented in line with the country’s prevailing laws and regulations and protecting their interests.
 
Supporting Mr. Losari’s view, Jonathan Bonnitcha, a researcher at the International Institute for Sustainable Development, stated that the ACIA follows current trends in investment agreements. Mr. Bonnitcha is of the view that contracting parties will have an agreement that is more-detailed in its scope, with better investment protection, the possibility of investment liberalization, and a specific dispute resolution mechanism. Therefore, Mr. Bonnitcha believes that ACIA is a suitable tools to meet current investment trends.
 
Regardless of its potential benefits, the implementation of ACIA is causing concerns about the validity of existing bilateral agreements. In response, Mr. Losari urges each ASEAN countries to immediately clarify whether the ACIA will repeal existing bilateral agreements or not this matter is not clearly specified in ACIA.
 
Mr. Losari argues that it will be better for ASEAN countries to terminate existing bilateral investment agreements to support a clearer and more consistent framework. Should they intend to do so, Mr. Losari suggests the respective ASEAN countries issue a protocol that will provide a transition period for any termination.
 
(hot/kc)