ASEAN enabling intra-bloc investment

March 01, 2022 | 10:00
With all ASEAN member states vowing to stay united to further facilitate trade and investment, Vietnam is taking advantage to expand ties with regional nations on the back of shared deals.
ASEAN enabling intra-bloc investment
The country’s leaders are looking to smooth regional cooperation to recover the economy faster

This year, the Ministry of Planning and Investment and the Ministry of Industry and Trade will work with stakeholders to implement both the ASEAN Trade in Services Agreement (ATISA) and the ASEAN Investment Facilitation Framework (AIFF).

Last October, the government ratified the ATISA, which replaces the ASEAN Framework Agreement on Services that took effect in 1995, and deepens the integration and liberalisation of service sectors across the region.

According to the Centre for WTO and International Trade under the Vietnam Chamber of Commerce and Industry, the ATISA applies a “negative list” approach. Under this, all service sectors are considered liberalised by default. A state would then list only those sectors/sub-sectors in which it has taken measures that it considers to run counter to the obligations of the agreement, also known as non-conforming measures.

This contrasts with the positive list approach, in which a state has to explicitly list the sectors/sub-sectors in which it intends to liberalise.

Last October, ASEAN leaders adopted the AIFF, which sets out the principles and actions to facilitate the inflow of investment into the region as ASEAN steps up its efforts towards a comprehensive recovery. The AIFF is aimed to facilitate the inflow of investment into the region as ASEAN steps up its efforts towards a comprehensive recovery.

Among others, the AIFF is intended to improve accessibility and transparency of investment measures, streamline and speed up administrative procedures and requirements, and create favourable conditions for investment in the region.

Fostering cooperation

Adopting and implementing these frameworks, among other commitments, are among many solutions for ASEAN to turn itself into a more attractive destination for trade and investment, especially in the context that the region’s network of partners is increasing, with a number of nations seeking to forge a new partnership with it.

In addition, the bloc is boosting its economic recovery, with trade and investment considered a major driver of economic growth.

According to a statement by the chairman of the ASEAN Foreign Ministers’ Retreat held on February 16-17 in Cambodia, which is acting as the bloc’s chair this year, in order for the region’s economy to grow 5.1 per cent this year, regional nations looked forward to the expeditious implementation of the ASEAN Comprehensive Recovery Framework and the ASEAN Travel Corridor Arrangement Framework to facilitate essential business and official travels between and among the member states.

“We also emphasised the importance of deepening economic integration and enhancing intra-ASEAN trade, investment, and supply chain connections in line with the Economic Community Blueprint 2025. We welcomed the advancement of the building process, which is transforming ASEAN into an economically-integrated, competitive, resilient, sustainable, and inclusive region, with a special emphasis on narrowing the development gap among its member states,” the statement read.

“We also reiterated commitment to foster economic growth while responding to climate change, through realising commitment on greenhouse emissions reduction, to ensure an ever-better life for ASEAN people.”

At the 38th-39th ASEAN Summit and related summits held online last October, Vietnamese Prime Minister Pham Minh Chinh stated, “We need to boost regional cooperation so as to soon recover trade and investment inflows, facilitating enterprises to enter regional markets. We must actively remove difficulties for enterprises and people so that they can soon recover business and production, and stabilise their lives.”

To facilitate quality intra-bloc investment flows, Vietnam has also adopted the fourth protocol amending the ASEAN Comprehensive Investment Agreement. The protocol mentions a prohibition of both performance requirements and fundamentals in the Agreement on Trade-Related Investment Measures that was agreed by all members of the World Trade Organization.

This means that no member state is allowed to enforce regulations that discriminate against foreign goods from other member states or implement any measure that might provoke obstructions to other member states to invest or conduct trade in the region.

More specifically, member states are prohibited to apply quantitative restrictions on the number of goods exported or imported for investors of other member states; to impose regulations to discriminate against imported goods in favour of domestic goods; to purchase, use, or grant unfair privileges for domestic goods; to enforce local content requirements on other member states’ investors, requiring them to achieve a certain amount or percentage of domestic goods or services; and to require investors of other member states to distribute products exclusively to certain markets.

According to the ASEAN Secretariat’s latest statistics, in 2020, the total combined GDP of the 10 member states was $3 trillion, resulting in ASEAN becoming the fifth-largest economy in the world after the US ($20.9 trillion), China ($14.7 trillion), Japan ($5 trillion), and Germany ($3.8 trillion). During the last two decades, ASEAN’s economy grew at an average annual growth of 5 per cent, and Myanmar, Cambodia, Laos, and Vietnam have recorded the highest GDP growth.

Foreign direct investment (FDI) inward flows to ASEAN experienced an upward trend in 2000-2019, but declined in 2020. That year, inward flows to ASEAN reached $137.3 billion, a decrease of nearly 25 per cent compared to 2019.

As of January 20, Vietnam attracted $92.37 billion in registered investment capital from ASEAN member states, including Singapore ($65.23 billion), Thailand ($13 billion), Malaysia ($12.85 billion), the Philippines ($615 million), Indonesia ($611.7 million), and Laos ($71.1 million). Total registered FDI into Vietnam reached $415.6 billion as of January 20. Vietnam lured a total registered capital of $2.1 billion in the first 20 days of 2022.

At last week’s Vietnam Business Forum in Hanoi, PM Chinh stated that Vietnam is committed to creating “the best conditions and improving its business environment for all investors so that they can perform well in the country.”

Taking advantage of the RCEP

Under the statement by the chairman of the Foreign Ministers’ Retreat, all the member states welcomed the entry into force of the Regional Comprehensive Economic Partnership (RCEP) this year and encouraged all the remaining signatories to complete their ratification of the agreement as soon as possible.

“We reiterated our commitment to ensure full and effective implementation of the agreement in order to establish an open trade and investment environment in the region to facilitate the expansion of regional trade and investment and contribute to global economic growth and development as well as boost economic growth and equitable economic development, advance economic cooperation, and broaden, and deepen integration in the region through the RCEP, which will build upon our existing economic links,” the chairman's statement read.

The Vietnamese government last month enacted Decision No.01/QD-TTg on implementing the RCEP. The plan assigned specific tasks to ministries and agencies, as well as municipal and provincial people’s committees. The tasks are about disseminating information on how the deal will create opportunities but also warn of hurdles to overcome for businesses and individuals.

The government has ordered ministries and agencies to review all relevant legal documents for the implementation of the RCEP and suggest necessary amendments and supplementation of documents in line with Vietnam’s commitments under the agreement. The government will formulate programmes on supporting enterprises to improve their competitiveness so that they can effectively compete with rivals from the deal's member nations.

“Mechanisms to encourage foreign investment into Vietnam will be revised, so that we can attract more investment from nations into key sectors,” read Decision 01.

The RCEP was inked between the 10 ASEAN members and the five partners of China, Japan, Australia, New Zealand, and South Korea in November 2020. With a market of about 2.3 billion people accounting for as much as 30 per cent of the global population, the RCEP is considered the current largest free trade agreement in the world.

Statistics from the MPI demonstrated that total registered FDI from RCEP member states into Vietnam as of January was $92.37 billion from ASEAN, and that from South Korea, Japan, and China totalled $77.3 billion, $63.96 billion, and $21.8 billion, respectively. The figures from Australia and New Zealand were $1.94 billion and $209.73 million.

By Khoi Nguyen

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional