Introduction
The Fifth ASEAN Summit, held in December 1995 in Bangkok, called for the establishment of a regional investment arrangement to enhance the attractiveness and competitiveness of the region for direct investment flows. This mandate has been translated into a substantial and binding Framework Agreement on establishing the ASEAN Investment Area, which was signed yesterday by the ASEAN Economic Ministers. The AIA Council, a ministerial body, has been established to oversee the implementation of the Framework Agreement.
1. The inaugural meeting of the AIA Council was held on 8 October 1998 in manila and chaired by H.E. Mr. Jose Trinidad Pardo, Secretary of Trade and Industry of the Philippines. The list of participants is attached.
Implementation of the Framework Agreement
3. The Council discussed preliminary future work activities and the arrangements needed to commence implementation of the programmes and work plans to realise the AIA by 2010. The Council agreed that the first formal meeting of the Council be held in conjunction with the first AEM Meeting in 1999, to consider various urgent AIA implementation matters. The Council tasked the Coordinating Committee on Investment (CCI) to begin work on AIA, especially on the submission of the Temporary Exclusion List and Sensitive List for opening up of sectors for investment and the granting of national treatment. The Council also requested the CCI to table, for the consideration of the Council, the specific schedules, programmes and action plans to execute the three main programmes of the AIA.
Key Elements of AIA Arrangement
4. The key objective of AIA is to substantially increase flow or direct investment from ASEAN and non-ASEAN sources by making ASEAN a competitive, open and liberal investment area. This will entail, among others, the following activities:
- implementing coordinated ASEAN investment cooperation and facilitation programmes;
- implementing coordinated promotion programme and investment awareness activities;
- opening immediately all industries, with some exceptions as specified in the Temporary Exclusion List (TEL) and Sensitive List (SL), for investment to ASEAN investors by 2010 and to all investors by 2020;
- granting immediately national treatment, with some exceptions as specified in the Temporary Exclusion List (TEL) and Sensitive List (SL), to ASEAN investors by 2010 and to all investors by 2020;
- involving the private sector actively in the AIA development process;
- promoting freer flow of capital, skilled labour and professional, and technology amongst the Member Countries;
- providing transparency of investment policies, rules, procedures and administrative processes;
- provides a more streamlined and simplified investment process.
5. The Framework Agreement on AIA, together with the 1987 ASEAN Agreement for the Promotion and Protection of Investments and the 1996 Protocol, covers direct investment flows into and within the region. Among other things, the AIA arrangement will bind the Member Countries to gradually eliminate investment barriers, liberalise investment rules and policies, grant national treatment and open up industries, initially in the manufacturing sector and later to cover other sectors under the Agreement.
6. The initial package of Temporary exclusion List (TEL) and Sensitive List (SL), for opening up of industries and granting of national treatment will be submitted to the AIA Council within six months after the signing of this Agreement. The implementation of the Framework Agreement will be reviewed every two years to ensure that the objectives of the AIA are met.
7. Recognising the different stages of development and the late entry of new members to the ASEAN family, the newer Member Countries are accorded flexibility in the implementation timeframe. Thus while Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand will phase out the TEL by 2010, Vietnam will phase out the TEL by 2013, Lao PDR and Myanmar by 2015. The TEL, will be reviewed every two years by the Council.
Programmes, Action Plans and Schedules
8. Three broad-based programmes will govern the realisation of the AIA. The programmes are Cooperation and Facilitation; Promotion and Awareness, and Liberalisation. These programmes are to be implemented through specific schedules and action plans to be submitted to the AIA Council within six months after the signing of this Agreement. A list of preliminary activities has been agreed for the three programmes.
Benefits of AIA to Investors
9. The Council agreed that the AIA will provide ASEAN, in a collective manner and to the individual member countries greater benefits and synergy in attracting investments. Existing and potential investors will benefit from the AIA agreement in, among others, the following ways:
- greater investment access to industries and economic sectors as the result of opening up of industries under the AIA arrangement, if they qualify as ASEAN investors;
- national treatment, if they qualify as ASEAN investors;
- greater information and awareness of investment climate as well as investment opportunities in the region;
- a more liberal and competitive investment regime;
10. In defining, ASEAN investors, a liberal definition has been adopted. An ASEAN investor is being defined as equal to national investor in accordance with the equity condition requirement of the respective host Member Countries.
Facilitation Activities and Indicators of AIA Development
Three initial facilitation activities are to be launched at the Sixth ASEAN Summit in December 1998. These are:
- ASEAN Supporting Industry Database which contains over 8000 entries of companies information that with help facilitate sourcing of parts and components in the region and investment in the supporting industry;
- Directory of ASEAN Technology Suppliers which will help identify ASEAN firms which possess certain technological capability, help investors to source technological services within ASEAN and facilitate joint-venture investment in technologically oriented operations; and
- Compendium of Investment Rules and Policies in ASEAN which will give up-to-date information of the investment regime and the liberalisation activities in undertaken in the region.
