ASEAN opposes investment deal

Date: 18/04/1996

By Shada Islam

TRADE Commissioner Sir Leon Brittan's plans to start discussions in the World Trade Organisation on a first-ever international treaty to liberalise cross-border investments have run into fierce opposition from Asia's newly industrialised states.

The seven members of the Association of Southeast Asian Nations (ASEAN), backed by India and Pakistan, are resisting Brittan's calls for the international investment accord.

Asian trade and economic experts have made it clear that they would rather continue to deal with investments on a bilateral level, fearing a global treaty would hamper their government's sovereign rights and make Asian economies more vulnerable to pressure from western multinational firms.

Brittan, however, is pressing ahead with his proposals, insisting that while bilateral investment treaties are useful, “a truly multilateral regime” to boost cross-border investments must be negotiated within the WTO.

“The overall test is clear: the rules must be strong enough to produce results that protect capital investment and boost further world-wide investment flows,” he said at a seminar on EU-Asian investments held in Geneva earlier this month.

The demand for a multilateral investment treaty has come at least partially in response to a recent study highlighting the failure of EU investors to seize business and investment opportunities in East Asia.

A report published by the Commission and the United Nations Conference on Trade and Development (UNCTAD) warned that while Japanese and American firms were “aggressively” seeking to expand their presence in Asia in the 1980s, European companies underestimated the growth potential of the region.

“Opportunities closer to home, arising from EU integration, successive enlargements and the upheavals in Central and Eastern Europe further helped to divert business attention from Asia,” stated the report.

That is now changing, with European companies managing to maintain, or increase, their share of investments in South Korea, Hong Kong and Singapore.

But Commission officials are convinced that a WTO-based network of investment-liberalising rules would help EU firms to increase their economic stake in Asia.

The US is also in favour of a treaty, but is focusing its efforts on securing the approval of all the industrial countries which are members of the Paris-based Organisation for Economic Cooperation and Development (OECD).

The Commission believes that the WTO is a more appropriate forum because of its larger membership.

Overcoming Asian opposition will be difficult, however.

Asian countries are determined to attract foreign investors to their shores, but insist that governments must retain their discretionary powers in authorising foreign investments.

“The whole concept of foreign companies having the right to invest in our economies is a difficult one for Asian governments to accept,” said an East Asian envoy in Geneva. “We cannot allow foreign investors complete freedom in this field.”

Asians say that because of ethnic and regional difference in their countries, Asian governments often run special investment programmes for less-developed regions and communities, and argue that foreign investors may not want to respect these economic priorities.

An international treaty banning governments from giving special incentives to attract foreign investors is also unacceptable, say Asian economic experts. “We see no need for a level playing-field in this area,” argues a South Asian official. “There's no harm in having countries compete with each other for foreign investments.”

Others argue that a multilateral investment treaty will only be acceptable if it is backed by a similar agreement on banning restrictive business practices by western multinationals.

“Often corporate behaviour does not reflect what our countries need,” stressed one East Asian diplomat.