Choosing a certain future for your business With World Trade Advisors you can be confident that you’ve made the right choice 06/11/2015 (c) Julien Chaisse 1 www.worldtradeadvisors.com This information is confidential and was prepared by World Trade Advisors solely for the use of our client; it is not to be reli ed on by any 3rd party without WTA’s prior written consent.
FDI flo lows and trends in in Asia-Pacific Dr. Ju 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 Qualitative expansion Trends in FDI Flows: on the upswing IIAs as a cause and consequence of capitals flows Diversity of foreign investments Trends in policy and rule-making (from tangible to intangible) Improved drafting / clarification (Canada-China From North-South to South-South agreements 2012, Singapore- EU 2014, TPP 2015…) ISDS success but also inconsistent interpretations Structuring and re-struturing of FDI triggered more law – not less law 06/11/2015 (c) Julien Chaisse 3
Outline Trends in FDI Flows policy and in Asia rule- Pacific making
Foreign Direct In Investment Source of capital, Related to stages FX, technology, For natural of growth and skills, market resources, structural access, efficiency, transformation, employment, markets, strategy stability linkages Increases connectivity, May be opportunities to private/public Amenable to participate in (SOE), policy influence global value greenfield/M&A chains
FDI inward & outward stock, by region 2014 2000 1990 Europe 2% 1% 1% 7% 3% 7% 2% North America 5% 4% Africa 33% 14% 14% 42% 20% FDI Inward FDI Inward Asia 44% FDI Inward 2% Stock Stock 3% Stock Latin America and the Caribbean 3% Oceania 29% 41% 23% Middle East 1990 2000 2014 0% 2% 2% 0% 1% 2% 3% 1% 12% 2% 12% 1% 1% 21% FDI Outward 47% 44% FDI Outward 45% FDI Outward Stock 1% Stock Stock 36% 40% 27% Source: UNCTADStat, 2015
FDI inflows and outflows, , 1990-2014 FDI inflows, 1990-2014 FDI outflows, 1990-2014 1800.0 1800.0 1600.0 1600.0 1400.0 1400.0 1200.0 1200.0 $ US bln. $ US bln. 1000.0 1000.0 800.0 800.0 600.0 600.0 400.0 400.0 200.0 200.0 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 World Developed economies Developing economies World Developed economies Developing economies Source: UNCTADStat, 2015
Top Ten Destinations for FDI in in Developing Asia, 1990-2014 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 Developed Developing Transition Sector countries economies 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 Developed Developing Transition Sector countries economies 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 Developed Developing Transition Developed Developing Transition Sector/industry countries economies economies World countries economies 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 fl flows by trading bloc 2005-07 2008 2009 2010 2011 2012 2013 2014 average 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 Relative importance differs when measured Now mostly services, East Asia as leading gross, per capita, or as higher skill sectors source share of total investment FDI closely linked to Regional FDI trade, GVC development, regional treaties and structural policies? transformation
Outline Trends in FDI Flows policy and in Asia rule- Pacific making
Why international investment agreements (IIAs)? (I FDI promises several FDI is also associated positive spillovers. with potential The challenge of investment treaties (the law) is to downsides • But the benefits of FDI maximise the benefits and are not automatic. minimise the costs • Corruption, • They depend above all environment, on host country policies. • Deterioration in balance of payments as profits are repatriated 06/11/2015 (c) Julien Chaisse (CUHK) 14
Role of BIT ITs and PTAs (I (IIAs) IIAs Contribute to the Facilitate the coordination creation of a stable, of investment relations Complement national laws predictable and transparent through internationally on investment regulatory framework for agreed common international investment denominators Relations between host Interface between States, home States, Strengthen the enabling national and international investors framework for FDI international and other development investment policies stakeholders 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 IIA IIAs ONLY STARTING 11 New Zealand 8 Brunei Darusalam 6 Papua New Guinea 6 Nepal Total IIAs PTAs 6 Myanmar BITs signed 3 Afghanistan 2 Vanuatu 1 Tonga 0 2 4 6 8 10 12 06/11/2015 (c) Julien Chaisse (CUHK Law) 18
Between 11 and 40 IIA IIAs ASIAN TIER TWO 36 Philippines 36 Armenia 31 Tajikistan 29 Georgia 29 Bangladesh 28 Sri Lanka Total IIAs 28 Kyrgyz Republic 28 Australia PTAs 27 Japan BITs signed 26 Taipei, China 23 Turkmenistan 23 Lao PDR 21 Cambodia 17 Hong Kong, China 0 5 10 15 20 25 30 35 40 06/11/2015 (c) Julien Chaisse (CUHK Law) 19
The Frontrunners ASIA TOP 13 135 China, People republic of 97 Korea, Republic of 86 India 70 Malaysia 64 Indonesia 59 Vietnam Total IIAs 53 Singapore PTAs 49 Uzbekistan BITs signed 48 Pakistan 45 Azerbaijan 43 Mongolia 42 Kazakhstan 41 Thailand 0 20 40 60 80 100 120 140 160 06/11/2015 (c) Julien Chaisse (CUHK Law) 20
In Intra-Asian PTAs with investment chapter Number of PTAs entry into force Cumulative Number of Asian PTAs with investment chapters Linear (Cumulative Number of Asian PTAs with investment chapters) 24 Number of agreements 23 22 18 17 17 11 9 6 6 4 4 4 3 2 2 2 2 1 1 1 1 1 1 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 years 06/11/2015 (c) Julien Chaisse (CUHK Law) 21
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