ASEAN Ministers responsible for investments met on 1 September 2003 in Phnom Penh, Cambodia. The Council is upbeat on the outlook of FDI flows to the region in 2003 and 2004 because of a better global economic situation and a stronger regional economic development. FDI flows to the region in 2003 and 2004 are expected to be higher than the year before. Preliminary statistics indicate that the outbreak of the Severe Acute Respiratory Syndrome (SARS) earlier this year have limited impact on investment in the region. Approved foreign investment in the manufacturing sector increased by 54% in the first half of 2003 as compared to the same period last year (ANNEX A).
Against the backdrop of the global economic downturn, geopolitical tensions and reduced corporate spending, FDI flows to the region declined by 18%, from $15.2 billion in 2001 to $12.4 billion in 2002 (ANNEX B). The significant repayment of intra-company loans by affiliates in the region also contributed to the decline. This suggests that the affiliates are making profits in the region which enable them to repay loans and some of which are related to loans provided by the parent companies during the 1997-1998 financial crisis. FDI flows from Japan increased significantly from $1.8 billion in 2001 to $3.1 billion in 2002, Canada from negative $0.2 billion to $1.5 billion, United Kingdom from $1.7 billion to $1.9 billion, and the Asian Newly Industrialised Economies increased from negative $0.6 billion to $0.8 billion between the period 2001 and 2002. Intra-ASEAN investment stabilised at $2.3 billion but its share of total FDI flows to the region increased from 7% in 1999 to 19% in 2002. Some member countries received higher FDI inflows than in 2001.
The Ministers noted that FDI flow to services sector accounted for about 50% of the total FDI flows to the region in 2000-2002. This underscores the growing importance of the services sector to the economies of member countries. Recognising the new wave of business opportunities and development globally in the area of services, the Ministers agreed to work out the scope of expanding the AIA to include services (such as, but not limited to, education services, health care, telecommunication, tourism, banking and finance, insurance, trading, e-commerce, distribution and logistics, transportation and warehousing, professional service such as accounting, engineering and advertising). Consistent with the established ASEAN practice of consensus building, the ASEAN minus X formula can be applied. To this end, the Ministers tasked the senior officials to recommend future steps in expanding the scope of AIA to cover these very important services sectors without any delay for final deliberation at a back-to-back meeting of the ASEAN Investment and Economic Ministers in early 2004.
The Council was pleased with the progress made in advancing the AIA process. On 1 January 2003, Member Countries opened up more industries and granted more investment measures to foreign investment by phasing in the list of sectors and investment measures in the Temporary Exclusion List (TEL). Significant achievements have also been made in transferring sectors and measures in the Sensitive List to the TEL. In addition to their regional commitments under the AIA, member countries have, on individual basis, introduce more favourable measures to improve their investment regimes.
In the past twelve months, several projects on investment promotion and facilitation have been successfully implemented. These projects aimed at strengthening capacity building, regional integration, improving transparency, and harmonisation and improvement of FDI data quality have been implemented with the support of dialogue partners and international organisations such as UNCTAD.
In an effort to enhance transparency and to promote greater awareness of the region’s investment environment, the Council agreed to publish an update Compendium of Investment Policy Measures and the 2003 FDI data set later this year. The Council also agreed to have regular dialogue with some of the ASEAN dialogue partners, under an appropriate mechanism, to spearhead investment cooperation and facilitate exchange of experiences on investment matters. The Council agreed to have more active dialogue with ASEAN and non-ASEAN business representatives in 2004.
The Council welcomed the organisation of the First ASEAN Business and Investment Summit on 4-7 October 2003 in Bali, Indonesia which is an important event to showcase ASEAN to the world as a major regional investment destination.
The Council also welcomed the decision of the leaders to establish an ASEAN-China Free Trade Area within 10 years, in which investment matters are included. Such investment cooperation will augur well for ASEAN given the production and resources complementation between ASEAN and China, and that China is increasingly a source of FDI to the region.
The Sixth AIA Council Meeting was chaired by, H.E. Mr. Kong Vibol, Secretary of State of Economy and Finance, Ministry of Economic and Finance, Vice-Chairman of the Council for the Development of Cambodia and attended by:
H.E. Pehin Dato’ Abdul Rahman Taib
Minister of Industry and Primary Resources
Deputy Chairman for Investment Cooperation
Investment Coordinating Board
H.E. Mr. Soulivong Daravong
Minister of Commerce
H.E. Tan Sri Datuk Zainal Abidin Sulong
Malaysian Industrial Development Authority (MIDA)
H.E. U Khin Maung Win
Deputy Minister of Foreign Affairs
H.E. MAR Roxas
Secretary of Trade and Industry
H.E. BG (NS) George Yong-Boon Yeo
Minister for Trade and Industry
H.E. Mr. Somsak Thepsutin
Minister of Industry
H.E. Mr. Phan Huu Thang
Foreign Investment Bureau
Ministry of Planning and Investment
H.E. Mr. Ong Keng Yong
Secretary-General of ASEAN.