I would like to begin by expressing our sincere appreciation to the international experts who are here to share with us their knowledge on alternative approaches in achieving quality and comparable FDI data. On behalf of ASEAN, I thank the Government of Japan for the financial support and to the Indonesian Investment Coordinating Board for hosting this workshop.
Since the 1995 Bangkok Summit, ASEAN investment cooperation has been progressing from strength to strength. This covers not just joint investment policy matters, such as investment liberalisation and facilitation, but also statistical cooperation.
The ASEAN countries on 7 October 1998 signed a binding agreement to establish the ASEAN Investment Area by 2010, with the manufacturing sector having 2003 as the ending date. The investment area, known as the AIA, is to attract greater levels of FDI and to promote ASEAN as an investment region. These objectives are to be achieved by providing to investors a highly competitive, liberal and transparent investment regime. Investors will be granted, among others, national treatment, greater investment-market access and enjoyment of low transaction cost environment with investment impediments removed and investment process streamlined. The AIA Agreement, which is now in force, covers all the 10 ASEAN countries, including Cambodia which joined the ASEAN family in April this year.
Given the objectives of AIA, it is imperative that an appropriate data system is put in place, which will allow consistent and effective reporting of FDI flows so that regional investment development can be monitored. Without such a system, it will be difficult to determine whether the primary aims of the AIA have been achieved, what level of progress has been made and by when. One such system is none other than having a harmonised, comprehensive and sound FDI data collection and reporting arrangement in the region.
FDI data of the ASEAN countries are, at present, not completely comparable. The problem stems from the complexities of the data issues to be addressed, the divergence of FDI statistical system in ASEAN, including the fact that some countries in the region do not always collect what seem to be important FDI statistics, and the fact that others are at an early stage in establishing their FDI data collection system. These factors make compilation of data for presenting and monitoring FDI flows into the region difficult, but not impossible.
The importance of producing quality FDI data cannot be emphasised enough. A table like the one before you speaks a million words but to generate it takes a million efforts. We have gone through the compilation process ourselves, and we know the amount of effort and dedication needed to generate one such table. We appreciate and commend the work of the statisticians. We hope others that are less familiar with the process will better appreciate that such a table is not just a sheet of paper containing figures, but the efforts of many man-hours and dedicated work. The resulting table generated gives significant value to policy formulation.
In order to support the ASEAN work on FDI data, an ASEAN Task Force on FDI Statistics was established and given the responsibility to spearhead ASEAN cooperation on FDI data matters. The AIA Council in March this year instructed the Task Force to come up with an initial set of comparable FDI statistics, while continuing with the work on achieving harmonised FDI data system to support the AIA process. In this context, we are pleased to say that an initial set of coherent FDI statistics, together with the first Annual Report on FDI Flows and Development in ASEAN, are being finalised and will be presented to the Ministers this month.
Within a period of a little more than two years, the Task Force has made good progress and accomplished much in the FDI data work since we first begin our FDI data journey in July 1997 in Bangkok. In Kuala Lumpur last June, we agreed to a number of technical matters that need to be addressed collectively to enable us to proceed further in the FDI data harmonisation process. We have developed a framework comprising work plans and specific activities that will guide us towards achieving convergence of FDI data system. We have discussed and agreed on a long, coherent initial list of FDI tables to be generated and presented to the AIA Council. As a result of our earlier meetings, we now have a better understanding of each other’s FDI data collection processes and the needs of member countries in improving their system.
We also recognise the different stages of FDI data development in the region and the need to extend technical assistance to the newer member countries. One effective way to do the latter is for ASEAN countries, with more advanced FDI data systems, to extend technical assistance to the newer countries, thereby moving a step closer to convergence. We have passed the stage of debating on the need for a comparable FDI data system. The question confronting us now is how do we realise this and what will be the most effective approach in achieving the task. We hope this workshop will shed some light on this and help us address the outstanding technical issues, which are confronting us in our collective efforts towards achieving comparable FDI statistics.
A number of technical issues have been identified and have to be addressed. These cover the need to establish a common understanding and practices in measuring FDI, designing collection instruments and methodology, establishing best practice in data recording and management, and developing common reporting formats. Of chief concern to us are:
How can we arrive at a common operational definition of what constitutes FDI?;
How to avoid double counting or multiple recording of investment activities involving a few joint partners of different nationalities;
How to reflect the exact foreign capital contribution in investment projects. By that I mean, the need to apportion total project cost or investment value corresponding to the foreign equity ownership;
How can we present total FDI value that would reflect the true extent of foreign interest without missing out the need for a consistent reporting of reinvestment earnings and intra-company loan transactions. Moreover, how can such crucial information on capital components be best obtained and be captured;
Of equal importance is how can we avoid under reporting of investment activities that would undermine the presentation of a true and fair view of the FDI situation in the respective countries and in the region. This issue includes coverage, integration and consolidation of different national sources of FDI data. In this regard, we look forward to learning about the Philippines model; and
What would be the best data management system to use that would allow tables and reports to be easily and effectively generated to enhance analysis.
These are some of the technical problems to which we have to find clear answers, if we are to proceed further in our work.
While the road in front of us, for our data work, may seem to be long and rough, with conviction, perseverance and guided by the principle of ASEAN solidarity, the journey might be reduced to a few winding miles, occasionally a little bumpy, but not too difficult to travel together. We know of our final destination and the road that we have to take. We must stay committed to the path and maintain our momentum. Given the mandate and direction provided by our political masters, it is now up to the Task Force to deliver the results. Just like the data, we too are being watched and monitored. If we succeed in this arrangement, which I am confident that we can, we will set a truly noble example of enhancing transparency and cooperative spirit in ASEAN. We, at the ASEAN Secretariat, stand ready to assist in what ever way we can and to join hands with the Member Countries to meet the challenges that lie ahead of us in this important journey. Let me stress that without your full commitment and involvement in this process, it would be a mission truly impossible to achieve.
We hope that the international organisations too can extend to us technical assistance to help us better meet the challenges of the FDI data harmonisation exercise and the process we have started.
When we set ourselves this important task, we clearly answered the question “are we doing the right thing”. We now need to ask ourselves; “are we doing the things right?” I hope this workshop will give us the answers and help us address some of the technical difficulties we currently faced at this stage of our data development. I look forward to a fruitful discussion, over the next two days, with outcomes and recommendations that will further enrich our work in achieving a convergent FDI data system in this region.