CHINAASEAN INVESTMENT NEGOTIATIONS PROBLEMS AND PROSPECTS：中国东盟投资谈判的问题和前景

1、china-asean investment agreement negotiations: problems and prospects chen huiping *i. introduction china and the ten asean countries are neighboring asian countries.* dr. chen huiping, associate professor of xiamen university school of law (china). e-mail: daichen. this article was first drafted wh

2、en the author was working as visiting research fellow at east asian institute (eai) of national university of singapore during june to september 2005. the author would like to extend her thanks to prof. john wong and prof. zou keyuan at eai for their insightful suggestions and encouragement. gratitu

3、de is also extended to ms. amy cheng-wong for her kind help in correcting the english language. the association of south-east asian nations (asean) was formed in 1967 by indonesia, malaysia, philippines, thailand and singapore, joined by brunei in 1984 (known as asean-6), and by cambodia, laos, myan

4、mar and vietnam in the 1990s (known as clmv or new asean members). due to political and economic considerations, as well as chinas own initiative, the two parties decided to develop closer economic relations and establish a free trade area. asean is negotiating the free trade agreements with china a

5、s one party. in november 2002, china and asean signed the framework agreement on comprehensive economic co-operation between the association of south east asian nations and the peoples republic of china (“china-asean framework agreement” or “framework agreement”) in phnom penh, cambodia, which came

6、into force on july 1, 2003. the specific goal of the framework agreement is to establish china-asean free trade area (cafta) by 2010 with the asean-6 and by 2015 with the four new asean members. this framework agreement serves as a roadmap for the future free trade area. china-asean fta factsheet, a

7、vailable at .sg/public/fta/frm_fta_default.asp?sid=179&cid=1902, last visited july 23, 2004. formal negotiations on the establishment of the cafta began immediately after the signing of the framework agreement. the cafta negotiations cover negotiations on trade in goods, services an

8、d investment. negotiations on trade in goods resulted in the agreement on trading in goods on november 29, 2004. service negotiations and investment negotiations are currently being conducted.the investment negotiations began in 2003. general agreements have been reached as to the basic contents and

9、 the underlying principles of the future china-asean investment agreement. however, procedural obstacles surfaced when the two parties touched upon the issue of the liberalization of investment. the investment liberalization issue is also the main substantive controversy between the two parties duri

10、ng the negotiations on specific agreement rules. therefore, this article will first give a general introduction to the investment negotiations in part ii. in part iii, the procedural obstacles on the part of both china, asean and between china and asean will be analyzed; as well, some suggestions of

11、 strategies to overcome the obstacles will be offered. in part iv, the substantive controversies over investment liberalization during the negotiations will be discussed. in part v, a detailed study on some specific issues directly related to investment liberalization will be conducted and some appr

12、oaches to tackle the issues will be suggested. this article will end with a conclusion by the writer.ii. getting down to the investment agreement negotiationsa. the initiative of investment negotiationsthe china-asean framework agreement specifically mentions that its objectives include goals to “st

13、rengthen and enhance economic, trade and investment co-operation between the parties” and “progressively liberalize and promote trade in goods and services as well as create a transparent, liberal and facilitative investment regime”, and etc. art. 1 (a) and (b) of the framework agreement on comprehe

14、nsive economic co-operation between the association of south east asian nations and the peoples republic of china (asean-china framework agreement). therefore, it is clear that the framework agreement is to incorporate investment as an important and integrated part of the cafta.it is an internationa

15、l tendency to integrate investment issue into a free trade area, which, as the term suggests, seems to be a specified area only for free trade. with globalization and increased multilateral and regional cooperation as a backdrop, competition for fdi is no longer confined to “between countries”, but

16、increasingly growing to “between regions”. therefore, more countries are likely to submit to a regional approach in attracting fdi. kee hwee wee & hafiz mirza, asean investment cooperation: retrospect, developments and prospects, in: the future of foreign investment in southeast asia, nick j. freema

17、n & frank l. bartels (ed.s), routledgecurzon, 2004, p. 202. the first practice of incorporating investment rules into free trade agreements is the northern american free trade agreement (nafta).being a free trade area, cafta follows the above international tendency. however, the china-asean framewor

18、k agreement has only one article (article 5) dealing specifically but generally with investment. this article also requires the two parties to enter into investment negotiations so as to create a transparent, liberal and facilitative investment regime. the impending and detailed china-asean investme

19、nt agreement will be an inherent part of the cafta agreements. article 5 specifies that “to promote investment and to create a liberal, facilitative, transparent and competitive investment regime, the parties agree to: (a) enter into negotiations in order to progressively liberalize the investment r

20、egime; (b) strengthen cooperation in investment, facilitate investment and improve transparency of investment rules and regulations; and (c) provide for the protection of investments”. this provision has set up basic contents and guidelines for the anticipated investment agreement between china and

21、asean. specifically, the anticipated agreement will be a comprehensive investment agreement covering investment promotion, investment protection and investment liberalization. however, since this provision is very general and functions as a roadmap, a comprehensive, detailed and practical investment

22、 agreement needs to be further negotiated and formulated. the purpose of the investment negotiations is to create an investment agreement between china and asean with a transparent, liberal and facilitative investment regime. art. 1 (a) and (b) of the framework agreement on comprehensive economic co

23、-operation between the association of south east asian nations and the peoples republic of china (asean-china framework agreement).b. an overview of the negotiationsthe investment negotiations started in june 2003. a china-asean trade negotiation committee working group on investment (tnc-wgi) was e

24、stablished to execute the detailed discussions on the framework of the agreement. so far, tnc-wgi has held nine meetings. the framework agreement stipulates that the investment negotiations shall commence in 2003, see art. 8 (2) of the china-asean framework agreement. and is to be concluded as exped

25、itiously as possible. see art. 8(3) of the china-asean framework agreement. however, no specific deadline has been imposed. it was originally set for completion by the end of 2004, china-asean fta factsheet, available at .sg/public/fta/frm_fta_default.asp?sid=179&cid=1902, last visi

26、ted july 23, 2004. but failed. then asean insisted that a deadline should be set for the completion of the entire negotiations and expected to conclude negotiations by june 2005. however, china did not agree.these past nine tnc-wgi meetings touched upon a variety of investment issues. with aseans in

27、sistence, it was agreed that the framework agreement on asean investment area (“aia framework agreement”) would be used as a template for the negotiated investment agreement. china-asean fta factsheet, available at .sg/public/fta/frm_fta_default.asp?sid=179&cid=1902, last visited ju

28、ly 23, 2004. during the preliminary negotiations specific outline of the proposed investment agreement has been agreed upon. the outline lists all the elements and principles a comprehensive international investment agreement should have, including the definitions of terms such as “investment” and “

29、investor”, the scope of coverage and objectives, rules for the liberalization of investments, rules for investment promotion and protection, dispute settlement mechanisms, and general provisions. c. problems arising during the negotiationshowever, further negotiations with regard to the issue of inv

30、estment liberalization, i.e., the opening-up of industries and pre-establishment national treatment, were confronted with difficulties and hurdles. the asean party insisted on full liberalization of investment; while china only agreed to progressive liberalization. asean insisted on negative list ap

31、proach for the opening-up of industries and pre-establishment national treatment; while the chinese delegation said they had no vested authority from the state council to negotiate on the two issues. from july 2004 until now, only two tnc-wgi meetings were held without any further progress. the inve

32、stment negotiations were almost deadlocked.the threat of a deadlock in the investment negotiations is due to both procedural obstacles and substantive controversies between the parties. the procedural obstacles refer to the procedural difficulties betweenand withinchina, asean and its member countri

33、es. the substantive controversies refer to the dissensions over the substantive rules of the agreement related to investment liberalization. iii. possible strategies for overcoming procedural obstacles the key debate between china and asean during the investment negotiations is over the investment l

34、iberalization. this debate should be tackled with efforts from both china and asean. however, both parties have some procedural obstacles, which are unfavorable to the resolution of the debate.a. procedural obstacles facing chinaon the part of china, the complex composition of the chinese delegation

35、, the conflict of interests and the authority vested into the delegates, , as well as the actual but underestimated difficulties of the investment negotiations, contribute to the low efficiency of decision-making on the part of china with regard to the debated issue of investment liberalization, and

36、 thus prolong the investment negotiations. the representatives of the chinese delegation come from various ministries and departments representing different interests and authorities with regard to investment liberalization in china. the chinese delegation comprised representatives from several diff

37、erent state agencies such as the ministry of commerce, ministry of foreign affairs, state development and reform commission, ministry of finance, and the like. representatives from moc come from different departments such as the department of international trade and economic affairs, department of t

38、reaty and law, department of foreign investment administration, and department of foreign economic cooperation. the delegation was not conferred authority to negotiate on investment liberalization. thus, any related issue would be reported to the state council for resolution. further, despite good i

39、ntentions of chinese leaders in the establishment of cafta, actual negotiations are proving to be more complex than expected. moreover, the relatively small and imbalanced mutual investments between china and asean countries prevented china from investing a greater interest in creating a liberalized

40、 investment regime. both china and asean are net recipients of foreign investment, and by comparison, asean countries have more investments in china than china has in asean. for example, the investment flows from asean countries to china accounts for less than ten percent of the total fdi inflows to

41、 china during the period of 1998-2003. the ratio between the fdi flows from asean countries and the total fdi inflows to china is 9.29% in 1998, 8.15% in 1999, 6.99% in 2000, 6.36% in 2001, 6.21% in 2002, and 5.47% in 2003. the figures are calculated according to the statistics provided in china sta

42、tistical yearbook (2000-2004) published by china statistics press. the aforementioned procedural obstacles can be overcome. firstly, if the chinese government authorizes greater as well as uniform authority to its delegation and among the representatives from various state agencies, so that they are

43、 able to tackle the issue of investment liberalization, which is the key controversy of the negotiations, the negotiation process will be expedited. the reason is that the investment agreement with asean should be viewed with a long-term perspective. a comprehensive high-standard investment agreemen

44、t with gradual investment liberalization would benefit both china and asean. secondly, if china could be open-minded in seeing that the mutual investments between china and asean are growing fast, she would be more willing and ready to create a liberal investment regime. in effect, the two-way inves

45、tment between china and asean nations has been greatly promoted with the regularly held china-asean expo and china-asean business and investment summit. mofcom, china-asean expo to be an important chance for investment and promotion, available at last visited 8 june, 2005. further, chinese outward i

46、nvestment in asean countries has been on the rise in recent years with chinas new policy of “going out”. by june 2004, asean members have chalked up cumulative investment of us$34 billion, and chinas investment in asean has added up to us$1.037 billion. “trade relations with asean expand rapidly”, c

47、hina daily november 4, 2004, available at last visited oct. 10 2005. it can be expected that once the cafta is established by 2010, asean countries will become a more important and attractive investment destination. thirdly, china should realize that a liberal investment regime will promote more fdi

48、 inflows into the cafta. cafta will create the worlds biggest economic block with a population of around 1.8 billion including chinas 1.3 billion and aseans 500 million. the investment agreement will bring china and asean towards a closer economic relation. both theory and practice show that the geo

49、-economic changes in various parts of the world have helped in bringing about greater and different styles of competition for fdi, kee hwee wee & hafiz mirza, asean investment cooperation: retrospect, developments and prospects, in: the future of foreign investment in southeast asia, nick j. freeman

50、 & frank l. bartels (ed.s), routledgecurzon, 2004, p. 202. and regional integration and economic cooperation would help improve the competitiveness of regions and their constituent countries in attracting fdi. kee hwee wee & hafiz mirza, asean investment cooperation: retrospect, developments and pro

51、spects, in: the future of foreign investment in southeast asia, nick j. freeman & frank l. bartels (ed.s), routledgecurzon, 2004, p. 202. a good example in this regard is the asean investment area (aia). after the aia was established in 1999, foreign investments to the aia during the 2001-2002 perio

52、d increased by 13.4 percent. asean secretariat, joint press statement of the fifth asean investment area ministerial council, 11 september 2002 bandar seri begawan, brunei darussalam, available at /12614.htm, last visited 19 february 2005. b. procedural obstacles facing aseanon

53、 the part of asean and its member countries, the complexity of composition of asean delegation also adds to the complicated decision-making process within asean with regard to the debated investment liberalization during the negotiations. although asean acts as an entity in the negotiations with chi

54、na, it actually consists of investment officials and representatives from 10 asean member countries, as well as representatives from the investment and enterprise unit of the asean secretariat. moreover, the diverse economic and political situations and development among the ten asean countries make

55、 it hard for them to coordinate their different interests and formulate a uniform position towards china when china is proposing new solutions to the liberalization issue. the asean-6 countries are comparatively developed countries but the 4 new members are less developed countries both economically

56、 and politically. seven out of the ten asean member states are wto members (brunei, indonesia, malaysia, myanmar, philippines, singapore and thailand) when the cafta framework agreement was signed. further, some asean countries are not active in the negotiations because they are doubtful whether the

57、y will actually benefit from the future investment agreement and cafta. in their opinion, the investment relations between china and asean are mutually competitive rather than complementary. china and asean are both major recipients for foreign direct investment, rather than significant mutual inves

58、tors. at the present stage asean is a net investor in china. forging closer asean-china economic relations in the twenty-first century: a report submitted by the asean-china expert group on economic cooperation, october 2001, p. 12, available at the asean secretariat website, last visited 15 october 2004. furthermore, there is also the fear that china is diverting fdi from asean countries.the aforementioned procedural obstacles on the part of asean should be overcome. firstly, the ten asean cou