The ASEAN Regional Economic Integration: Is the ASEAN Institutional Model Suitable for Achieving Investment Liberalisation?

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The ASEAN Regional Economic Integration: Is the

ASEAN Institutional Model Suitable for Achieving

Investment Liberalisation?

MA Thesis

Veronika Bondarenko

Faculty of Law

University of Amsterdam

Thesis supervisor: Stephan Schill

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Abstract

The ASEAN institutional model for regional economic integration aims to create an internal market with a free flow of investments. The investment liberalisation through the reduction of entry barriers for foreign investments plays a crucial role in the implementation of this regional goal. This thesis evaluates to what extent the ASEAN institutional model as reflected in the ACIA and ASEAN+ investment agreements is suitable for achieving investment liberalisation in the ASEAN region. The research is conducted through a comparative legal analysis of internal and external ASEAN agreements supported by the relevant literature. It is concluded that the ASEAN institutional model is to some extent suitable for the achievement of investment liberalisation. The regional investment agreements establish a valid cooperative framework among the ASEAN Member States and their dialogue partners. However, there are still significant obstacles at the level of implementation of their commitments for investment liberalisation. They are weakened by the diverse nature of the ASEAN Member States, as well as the attempts of Member States to retain their autonomy in both internal investment frameworks and in external obligations concluded through ASEAN+ agreements.

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1. List of Abbreviations

AANZFTA - ASEAN-Australia-New Zealand Free Trade Agreement ACIA - ASEAN Comprehensive Investment Agreement

AEC - ASEAN Economic Community

AFAS - ASEAN Framework Agreement on Services AIA - Agreement on the ASEAN Investment Area

AIPPA/IGA - The Agreement for the Promotion and Protection of the Investments 1987 AMS - The ASEAN Member States

ASEAN - The Association of Southeast Asian Nations BIT - Bilateral Investment Treaty

EU - The European Union FDI - Foreign direct investment FTA - Free Trade Agreement

GATS - General Agreement on Trade in Services

ICSID - International Center for Settlement of Investment Disputes NAFTA - North American Free Trade Agreement

NT - National Treatment

LIP 2016 - Laos Law on Investment Promotion 2016 MFN - Most Favoured Nation

PTA - Plurilateral Trade Agreement PR - Performance Requirements PRC - The People’s Republic of China

RCEP - Regional Comprehensive Economic Partnership SMBD - Senior Management and Board of Directors

TRIMs - The Agreement on Trade-Related Investment Measures UNCITRAL - United Nations Commission on International Trade Law WTO - World Trade Organisation

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2. Introduction

The field of international investment law is rapidly changing. One of the current trends in investment law is a rising regionalism in the conclusion of investment agreements. 1 Regionalisation of investment law includes two important aspects. Firstly, there is a trend of rising regional investment agreements when investment protection is not only given through BITs but also regional investment instruments between multiple States. Secondly, regional2 organisations themselves are becoming new players in the field of international investment law. South-East Asia is an interesting region for observing these new changes of3 international investment law as it proves to be Asia's “growth engine” region which reached its record level of $156 billion inflow of FDI in 2019. The region of South-East Asia, in 4 particular, shows the growing trend for regionalism both from the perspective of the conclusion of regional investment agreements as well as the role of regional organisations in investment law. ASEAN is a regional inter-governmental organisation that sets as its goal the economic cooperation and development in the region. ASEAN economic blueprints clearly 5 state that ASEAN aims to enhance its attractiveness as a foreign investment region through the creation of a transparent, predictable and liberalised investment regime. The successful 6 conclusion of the ASEAN Comprehensive Investment Agreement (ACIA) in 2009 and numerous ASEAN+ investment agreements with its external dialogue partners such as China, New Zealand and South Korea, among others, support the trend of regionalisation of international investment law.

The proliferation of the ASEAN regional agreements shows the ambition of ASEAN to follow the alternative paths for trade and investment liberalisation. It is encouraged by the shock of the Asian Crisis of 1998 and by the partial imitation of North American and European regional economic integration models as well as the desire for the wider presence of ASEAN on the international arena. Even though the regional developments in ASEAN set 7

1_{Stephan W. Schill, and M. Jacob. “Trends in International Investment Agreements, 2010-2011”, 163.} 2_{Ibid., 163.}

3_{Ibid., 163.}

4_{UNCTAD, World Investment Report 2020 (United Nations 2015), 42.} 5_{Yoshi Kodama, “Asia-Pacific Region: APEC and ASEAN”, 383.} 6_{ASEAN Economic Community Blueprint 2025, 7.}

7_{Chia Yue Siow, "AEC and ASEAN 1 FTAs”, 185.}

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as the goal the regional economic integration of the ASEAN Member States (AMS), it is yet debated to what extent this regional evolution and the institutional model that ASEAN adopts in the creation of its regional investment agreements is suitable for the wider goals ASEAN strives to achieve. One of these goals includes the investment liberalisation of the region to boost its attractiveness for business and investments. Certain studies observe that the existence of international investment agreements, in general, does not play a prominent role in the decision-making of investors, unless these agreements provide for liberal admission rules and improved market access.8 Therefore, it is important to analyse these regional agreements in terms of investment liberalisation which stands for commitments to reduce the investment entry barriers and to grant the wider market access for foreign investors. 9

Most studies focus on the general analysis of the nature of ASEAN agreements. For instance, Julien Chaisse and Sufian Jusoh are prominent researchers on ACIA and ASEAN FTAs and how they fit into the ASEAN regional framework. Meanwhile, Anna Tevini 10 focuses on improvements of ACIA in comparison to its predecessor agreements. There are 11 numerous studies on the implementation issues of ACIA in the separate AMS. For example, Rafaelita Aldaba predominantly focuses on the effects of ACIA on investment liberalisation in the Philippines. While Nadia Aziz dedicates her research to investment liberalisation in Malaysia, and Nguen Phuong focuses on Vietnam. Several studies explicitly focus on the institutional framework of ASEAN and the model of ASEAN external agreements. 12 This thesis provides a nexus between the wider institutional model of ASEAN which is reflected in regional investment agreements and its regional goal of investment liberalisation. Accordingly, it specifically provides a link between the institutional aspirations of ASEAN and how they connect to the achievement of investment liberalisation in the region. The main focus of the analysis is regional internal and external investments agreements. Thus, the central research question is to what extent the institutional model that ASEAN adopts in its internal and external regional investment agreements is suitable for achieving investment liberalisation in the South-East Asia region. ACIA, being a central regional investment 13

8_{Axel Berger, “Do Trade and Investment Agreements Lead to More FDI?”.} 9_{Vivienne Bath, “ASEAN: The Liberalization of Investment”, 203.}

10_{Julien Chaisse, and Sufian Jusoh, The ASEAN Comprehensive Investment Agreement.} 11_{Anna Tevini, “Regional Investment Protection and Liberalisation”.}

12_{Pieter Jan Kuijper, From Treaty-making to Treaty-breaking; Marise Cremona, ASEAN's External} Agreements_.

13_{For the purposes of this research, the South-East Asia region refers to the region that includes all AMS.}

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agreement of ASEAN, as well as the ASEAN external investment agreements such as ASEAN-China Investment Agreement 2009, ASEAN-India Investment Agreement 2014, and ASEAN - Australia - New Zealand Free Trade Agreement (AANZFTA) thus provide a good basis for such analysis.

It is argued that the ASEAN institutional model that is reflected in the ASEAN Charter and the model that ASEAN adopts in its internal and external investment agreements is to some extent suitable for regional investment liberalisation. It establishes a valid cooperative framework among the AMS, which encourages them to conclude regional investment agreements with substantive commitments towards progressive investment liberalisation. Yet, there are significant obstacles on the level of implementation of these commitments which are weakened by the diverse nature of AMS as well as the attempts of Member States to retain their autonomy in both internal investment frameworks and in external obligations concluded through ASEAN+ agreements.

This thesis will address the question in three main sections. The first section explains the institutional model of ASEAN with regards to economic integration and the evolution of this model through the ASEAN history. It explains the core features of the model which ASEAN also adopts while concluding internal and external investment agreements. The second section addresses the internal regional developments of ASEAN, namely ACIA and the extent to which the agreement conforms to the institutional model and suits the achievement of the goal of investment liberalisation. The third section focuses on ASEAN+ agreements and how the institutional model is reflected in the relations of ASEAN with its dialogue partners and the extent to which the external side of the model is suitable for achieving investment liberalisation of the ASEAN region.

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3. Methodology

To address the research question, a legal comparative analysis will be used to analyse different texts of investment agreements. For the internal framework, ACIA is compared to its predecessor agreements, IGA and AIA. The comparison focuses on the scope of the definition of investment and investor, the NT and MFN provisions, prohibition on performance requirements, and dispute settlement clauses. These provisions are compared in terms of their liberalising effect on investment, which is one of the goals of the ACIA. This comparison helps to understand whether the model that ASEAN employs in ACIA is suitable for the achievement of investment liberalisation. It also focuses on the broader implementation of the agreement and on obstacles it might have in the context of the wider institutional model of ASEAN. The method for this part of the thesis will be conducted through analysis of secondary literature on the topic of investment liberalisation and ASEAN economic integration. The secondary literature comprises scholarly articles and reports.

While the first part of the thesis focuses on the internal investment framework of ASEAN, the second part conducts a legal analysis of three ASEAN+ agreements, namely AANZFTA, ASEAN-China investment agreement, ASEAN-India investment agreement. These three agreements were chosen because the dialogue partners in these agreements have substantial political and developmental differences which can impact their negotiating positions which in return have an impact on provisions relevant to investment liberalisation. For instance, Australia and New Zealand might have different approaches to investment liberalisation as compared to China. The ASEAN-India agreement was added as it was concluded in 2014 which is later than the ASEAN-China agreement(2009) and AANZFTA(2009). AANZFTA has a different structure as it is an investment chapter while the ASEAN-China and ASEAN-India agreements are self-standing agreements. This diversity helps to get a better overview of ASEAN+ agreements and their relation to investment liberalisation. These agreements are analysed in the same manner as ACIA and its predecessor agreements. The relevant provisions are compared to provisions of other agreements. Secondary literature is employed to identify any limitations or obstacles in the wider understanding of how the institutional model of ASEAN operates.

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4. ASEAN and the Evolution of its Institutional Model

The ASEAN institutional model for economic integration is a long project that the AMS chose to undertake back in the 1970s. Partly inspired by the regional integration of European states as well as the creation of NAFTA later in 1994, ASEAN States saw the benefits of regionalisation and economic cooperation among its Member States. Although ASEAN might well have looked at the achievements of the European Union and its model, ASEAN and its Member States have long maintained that ASEAN must find its own way of regionalisation, which is not a pure imitation of other regional blocks but the model which suits its structure, geography and the nature of relations among its Member States. This 14 approach has later crystallised into the expression of “ASEAN Way” which means that ASEAN should address the diverse needs of its Member States through seeking consensus and non-interference into internal affairs of separate Member States from outside and within the region. This way AMS want to remain a regional block without the threat of internecine15 conflict.16 These developments of institutional thinking are deeply ingrained into the history of ASEAN, which is worth mentioning before digging into the analysis of investment agreements, as it provides an explanation for the structure of ASEAN’s institutional model and the obstacles that it is facing in achieving its goals. The following subsections will firstly address the history of ASEAN. Then, it will focus on ASEAN Charter and the principles that ASEAN builds its institutional model on. Then, it will delve into the ASEAN Economic Community.

14_{Pieter Jan Kuijper, From Treaty-making to Treaty-breaking, 1.} 15_{Lucille Keen, “The ASEAN Way”.}

16_{Pieter Jan Kuijper, From Treaty-making to Treaty-breaking, 1.}

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4.1 The History of ASEAN

The ASEAN was founded in 1967 in Bangkok, Thailand. Initially, ASEAN comprised only 17 five Member States which were Singapore, Indonesia, Malaysia, the Philippines and Thailand. In 1967, these countries signed the ASEAN Declaration and founded the Association.18 Later, the Association was joined by Brunei in 1984, Vietnam in 1995, Myanmar and Laos in 1997, and finally Cambodia in 1999. From the list of countries that 19 are members of ASEAN, it is clear that there is a great variety of States which have different ideological, cultural, religious beliefs, and different political and market structure. From highly developed free-market economies in Singapore and Malaysia to predominantly low-income countries such as Myanmar and Laos, to the one-party socialist republic of Vietnam. As a result, this diversity leaves an imprint on the institutional model of ASEAN which strives to find a balance between aspirations of highly diverse Member States. Also, the “CLMV” countries that joined the block later have a significant developmental gap20 which ASEAN strives to eliminate. As a result, these countries enjoy a special approach in 21 regional agreements which takes into account their economic situations . For instance, ACIA in its preamble specifically states that it recognises “the different levels of development within ASEAN especially the least developed Member States which require some flexibility including special and differential treatment as ASEAN moves towards a more integrated and interdependent future”. 22

ASEAN was initially created due to geopolitical tensions in the region. The primary motivations for the establishment of ASEAN were rather political and security-related than economic. Later, in the 1970s, the ambitions for economic integration intensified. In 1997,23 24 during the summit in Kuala Lumpur, the leaders of ASEAN agreed to the creation of a highly integrated and competitive region by 2020 which was crystallised into ASEAN Vision 2020. In 2003 the Member states signed the Bali Concord II and agreed to the establishment of

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17_{ASEAN, “History - ASEAN: One Vision One Identity One Community”.} 18_{Ibid; Anna Tevini, “Regional Investment Protection and Liberalisation”, 336.} 19_Ibid.

20_{CLMV countries include Cambodia, Laos, Myanmar and Vietnam.}

21_{ASEAN Secretariat, “Bridging the Development Gap among Members of ASEAN”.} 22_{Preamble, ASEAN Comprehensive Investment Agreement.}

23_{Anna Tevini, “Regional Investment Protection and Liberalisation”, 336.} 24_Ibid.

25_{ASEAN, “History - ASEAN: One Vision One Identity One Community”.}

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the ASEAN Community which would consist of three pillars: political and security cooperation, economic cooperation, and socio-cultural cooperation.26 Thus, despite the countries’ differences, AMS share common goals which they strive to collectively achieve and which they effectively use to progress in their regional integration. It started from having shared political security threats and it steadily evolved into having shared commercial interests. Although ASEAN has much greater diversity challenges than the EU, from the very beginning of the creation of ASEAN, its Member States had a common approach to international commercial policy, which the EU did not have at the early years of its creation.

The ASEAN States are committed to an outward-looking approach to trade and investment 27

relations as well as macroeconomic strength and stability. 28

Nowadays, ASEAN addresses political, economic, security, cultural, technological, health, and environmental issues of its Member States. 29

4.2 ASEAN Charter, its Goals and Legal Personality

It is important to point out that throughout previously described historical developments ASEAN still was not considered an inter-governmental organisation with a legal personality. It is only in January 2008, that the Member States signed the ASEAN Charter which in Article 3 conferred ASEAN the legal personality of an inter-governmental organisation. 30 Since then, the ASEAN Charter is a central treaty of the organization, which outlines its principles, goals, and institutional framework for conducting external relations.

Article 1(5) outlines that the purpose of ASEAN is the creation of a single market and production base which is economically integrated and which facilitates trade and investment with the free flow of goods, services, investment, labour, and capital.31 Article 1(14) acknowledges the diverse nature of ASEAN and states that it needs “to promote an ASEAN identity through fostering greater awareness of the diverse culture and heritage of the region”. Importantly, Article 1(15) introduces a key principle that is relevant for external relations 32

with its partners. It states that ASEAN’s goal is “to maintain the centrality and proactive role

26_{Declaration of ASEAN Concord II (Bali Concord II). ASEAN Secretariat. 2003.} 27_{Michael G. Plummer, ASEAN Economic Integration, 162.}

28_Ibid.

29_{Anna Tevini, “Regional Investment Protection and Liberalisation”, 337.} 30_{The ASEAN Charter. Jakarta: ASEAN Secretariat, January 2008.} 31_{Article 1(5), the ASEAN Charter.}

32_{Ibid., Article 1(14).}

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of ASEAN as the primary driving force in its relations and cooperation with its external partners in a regional architecture that is open, transparent and inclusive”. The same 33 principle is reiterated in Article 2(2)(m) of the ASEAN Charter, which states that “the centrality of ASEAN” should be maintained in its external political, economic, social and cultural relations.

Later, these objectives are supported by Article 3 which confers ASEAN a legal personality. The attainment of a legal personality implies that ASEAN has the legal capacity to enter into international and internal legal obligations. Although these legal capacities are not mentioned explicitly, they are further specified in Articles 41(1) and (7). Article 41(1) underlines that “ASEAN shall develop friendly relations and mutually beneficial dialogue, cooperation and partnerships with countries and sub-regional, regional and international organisations and institutions”.34 Then, Article 41(7) confers ASEAN a treaty-making power by stating that “ASEAN may conclude agreements with countries or subregional, regional and international organisations”. 35

The possession of a legal personality implies a certain degree of independence of the organisation from its Member States. For instance, the European Court of Justice confirmed that the legal personality of the EU implied the creation of the supranational order when Member States transfer their powers to the EU.36 Yet, ASEAN was created as an inter-governmental organisation which implies that ASEAN does not have the elements of supranational order. This limits its power in the external relations of the organisation and retains Member States autonomy. Interestingly, ASEAN possessed certain limited external37 power even before the ASEAN Charter entered into force. Yet, the agreements, despite the ASEAN title, were largely concluded by the AMS. What is significant, is that the situation 38 with regards to ASEAN external power to conclude the agreements has not changed much since.39 The AMS still retain a large part of their autonomy while concluding external agreements. For instance, AANZFTA was signed primarily by the separate ASEAN governments in spite of the clear ASEAN title of the agreement. Thus, AMS do not see 40

33_{Article 1(5), the ASEAN Charter.} 34_{Ibid., Article 41(1).}

35_{Ibid., Article 41(7).}

36_{Case / Costa v. ENEL ECR English special edition in Marise Cremona, ASEAN's External Agreements, 26.} 37_{Marise Cremona, ASEAN's External Agreements, 26.}

38_{Ibid., 27.} 39_{Ibid., 28.}

40_{Marise Cremona, ASEAN's External Agreements, 28.}

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ASEAN as replacing their individual foreign policies and bilateral relations. Especially, the 41 external treaty-making capacity in the field of external trade and investment is largely concentrated in the hands of individual AMS. Thus, although it is possible to speak of an 42 ASEAN active treaty-making practice and international presence, the ASEAN external power is yet rather limited. It is dominated by AMS which are just acting within the framework of ASEAN such as the ASEAN Summit.

4.3 ASEAN Economic Community

The ambition to create the ASEAN Economic Community plays a significant role in the construction of the institutional model of ASEAN, especially with regards to FDI. In spite of all formal commitments to establish a regional community and the AEC formally being established in 2015, AMS are still working on the implementation of economic integration. As it was previously stated, at the beginning of the creation of ASEAN, the economic integration did not play a prominent role within the association. Although multiple formal agreements were being signed, Member States still remained sceptical of implementing any important and far-reaching commitments. In 1997, the adoption of the ASEAN Vision 202043 made the creation of the ASEAN integrated economic community more central. This economic community would envisage a “stable, prosperous, and highly competitive region” with “free flow of goods, services, and investments” and “freer flow of capital”. 44

In 2007, the ASEAN states signed the AEC Blueprint, which called for the implementation of AEC by 2015. The goal of the AEC is to transform the ASEAN region into “a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy”. 45 As it is stated in the AEC Blueprint 2015, the single market and the production base will be made of five elements, namely the free flow of goods, services, investments, capital and labour. 46

41_{Marise Cremona,}_{ASEAN's External Agreements, 32.} 42_{Ibid., 46.}

43_{Anna Tevini, “Regional Investment Protection and Liberalisation”}_{, 339.} 44_“_{ASEAN Vision 2020”, para 5.}

45_{ASEAN Economic Community Blueprint 2015, 2.}

46_Ibid._{, 6.}

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The free flow of investments encompasses the creation of a free and open investment regime that will enhance the attractiveness of the region for foreign direct investment (FDI). 47 Intra-ASEAN investment liberalization is crucial for the region as it facilitates the deployment of capital within the region. Also, regional investment liberalisation reduces the 48 cost of foreign investors between partner countries. The ASEAN countries can benefit from 49 FDI in the sense that foreign companies might bring the increase of capital, new technology, organizational and management skills, more employment opportunities, access to new products and economic development. Thus, in order to stimulate the implementation of this50 goal, there is a need for better investment protection, creation of more consistent, transparent and predictable investment rules, promotion of the ASEAN as an integrated investment area, and importantly, the progressive liberalisation of ASEAN countries' investment regime. The 51 “ASEAN Way” model incorporates a successful top-down approach to investment liberalisation when all AMS harmonise their investment regimes into a regional entity. 52

The AEC blueprint incorporates the concept of progressive liberalisation. Progressive liberalisation is the removal of restrictions or barriers to the market access for foreign investors through a more dynamic process which is achieved gradually over a certain period of time. The concept of progressive liberalisation allows ASEAN countries to liberalise their investment regimes through the elimination of barriers to market access for foreign investors which simultaneously takes into account their national policies objectives and their economic development. This concept follows the principles of WTO which are explicitly enshrined in53 GATS, Article XIX Part IV.54 Progressive liberalisation encourages the elimination of barriers to market access, the inclusion of fewer sectors in Member States' Schedules of Commitments, and the gradual opening of more sectors. The whole concept of progressive55 liberalisation implies a dynamic process of improvement. 56 Importantly, the process of progressive liberalisation should take into account national policy objectives and different

47_{ASEAN Economic Community Blueprint 2015}_{, 13.}

48_{Sufian Juson, “Investment Liberalisation in ASEAN”, 213.}

49_{Kiyoyasu Tanaka, Shawn Arita. “The Impact of Regional Investment Liberalization”, 17.} 50_{Leon Trakman, Ranieri Nicola, “Foreign Direct Investment”, 2.}

51_{ASEAN Economic Community Blueprint 2015, 13-14.} 52_{OECD, “The ASEAN Way”, 31.}

53_{Sufian Juson, “Investment Liberalisation in ASEAN”}_{, 214.} 54_{Panagiotis Delimatsis, “Article XIX GATS”.}

55_{Panagiotis Delimatsis, “Article XIX GATS”., 2.} 56_{Ibid., 3.}

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levels of development across Member States.57 ASEAN incorporates the concept of progressive liberalization with regard to investments in the AEC blueprint 2015 and the ASEAN regional investment agreements such as AIA, ACIA, and ASEAN+. For instance, the AEC Blueprint strives to achieve investment liberalisation through extending non-discriminatory treatment, such as national treatment and most-favoured-nation (MFN) treatment to ASEAN investors, with very few exceptions. This is done through reducing and eliminating the entry for investments, and through reducing performance requirements. The58 ACIA in Article 1 explicitly sets as its objective to create a free and open investment regime through progressive liberalisation of the investment regimes of ASEAN Members. 59

4.4 Conclusion

Thus, ASEAN is an inter-governmental organisation with a legal personality conferred to it by the ASEAN Charter. Its institutional model of regional integration is ingrained into the history of the creation of ASEAN. It is an organisation which is composed of highly diverse Member States with different political ideologies, market structures, cultural and religious beliefs. Thus, one of the important goals of ASEAN is to reconcile these differences within the organisation. There is also a significant developmental gap between its Member States, and especially with the ones who joined the organisation later. Therefore, ASEAN is focused on achieving a regional integration in the “ASEAN way”. This implies finding a consensus between individual Member States, without interference into their national orders, while also taking their developmental differences into account. Therefore, these goals are inseparable from how the organisation is built and organised. Accordingly, the institutional model of ASEAN is such that grants its Member States a significant space for manoeuvre, while trying to integrate these highly diverse states into one single regional block.

The ASEAN Charter underlines that the organization wants to achieve “ASEAN centrality” in external relations with its partners. It implies that ASEAN strives to be a focal point of reference while dealing with its external partners on political, economic, and cultural matters. Although ASEAN was explicitly granted a treaty-making power in ASEAN Charter, its Member States did not transfer their powers to the organisation. Thus, they want to retain

57_{Art XIX, GATS, para 2.}

58_{ASEAN Economic Community Blueprint 2015, 14.} 59_{Article 1,}_{ASEAN Comprehensive Investment Agreement.}

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their autonomy, especially with matters related to trade and investment. Therefore, this institutional model is reflected in the treaty-making capacity of ASEAN where external agreements are concluded collectively by separate Member States rather than ASEAN itself as an inter-governmental organisation.

One of the goals of ASEAN, as also stated in the ASEAN Charter, is the creation of an internal market and production base with the free flow of goods, services, investments, labour and capital. This goal is encouraged by the creation of the ASEAN Economic Community. One of its pillars is the free flow of investment in the region which is achieved through the creation of a free and transparent investment regime in the ASEAN region. ASEAN wants to achieve the creation of this investment regime through the top-down approach of harmonisation of investment regimes. This will incorporate the progressive liberalisation of investments, which implies the reduction of entry barriers and obstacles to market access for foreign investors. Therefore, it is interesting to analyse to what extent the institutional model of ASEAN is suitable for achieving the progressive liberalisation of the investment regime in ASEAN. The institutional model of ASEAN is also reflected in its second layer obligation, enshrined in ASEAN’s internal and external investment agreements. Thus, the following two sections will draw upon ACIA and ASEAN+ agreements. It will analyse them from the perspective of their substantive provisions, the structure of the agreements and how they are concluded, and it will examine implementation issues.

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5. ASEAN Comprehensive Investment Agreement

The central regional internal investment treaty of ASEAN is ACIA. It is a regional comprehensive investment agreement which was signed by the ASEAN Economic Ministers on 26 February 2009 and entered into force on 29 March 2012. The agreement aims to60 create a transparent, liberal and competitive investment environment in ASEAN which is aligned to the goals of AEC and the wider institutional model of ASEAN.61 ACIA incorporates four pillars in achieving its aim, namely investment protection, investment liberalisation, investment facilitation and promotion. In Article 3, ACIA underlines that for62 the purposes of liberalisation this agreement applies to the following sectors: (a) manufacturing, (b) agriculture, (c) fishery, (d) forestry, (e) mining and quarrying, (f) services incidental to these sectors, and (g) any other sectors, as may be agreed upon by all Member States. As described in its preamble, ACIA strives to incorporate “international best practices” in its provision to ensure an open and transparent investment regime in ASEAN. ACIA replaced two previous investment agreements, namely the 1987 ASEAN Agreement for the Promotion and Protection of Investment (IGA) and the 1998 framework agreement on the ASEAN Investment Area (AIA). This section will delve into ACIA and analyse to what63 extent the model of ASEAN as reflected in the investment agreement is suitable for achieving investment liberalisation. It firstly analyses the substantive provisions of the agreement and how they relate to the investment liberalisation. Then, it will analyse certain limitations of the agreement and obstacles to the implementation of substantive provisions.

60_{Julien Chaisse, and Sufian Jusoh. The ASEAN Comprehensive Investment Agreement, Chapter 4.} 61_{Peter Muchlinski, “Trends in International Investment Agreements 2008/2009”, 49-55.}

62_{Aldaba M., Rafaelita, “Investment and Capital Flows”, 85.}

63_{Peter Muchlinski, “Trends in International Investment Agreements 2008/2009”, 49-55.}

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5.1 ACIA Achievements with regard to Investment Liberalisation

The preamble of ACIA reflects its goals, which are an inseparable part of the institutional model of ASEAN. For instance, it clearly states that it aims to shape the investment environment through the amendment of IGA and AIA agreements. This will help “to further enhance regional integration to realise the vision of the ASEAN Economic Community”. 64 Meanwhile, the preamble also clearly underlines that there are quite different levels of development within ASEAN and that certain countries, especially the ones with the least developed economies, need special treatment to fully realise their regional economic integration. Article 2 of ACIA, underlines that one of the guiding principles of ACIA is the “progressive liberalisation of investment with a view towards achieving a free and open investment environment in the region”. Therefore, AMS strive to improve their investment 65 environment by improving the previous investment agreements, while adapting to their diverse levels of developments. One of the central goals of the agreements is to introduce commitments for progressive liberalisation of investments.

As Anna Tevini underlines, ACIA provides a more modern and transparent approach to investment liberalisation compared to previous agreements such as IGA and AIA. The IGA and AIA are different in scope and were meant to be complementary to form a comprehensive set of rules protecting investors.66 These agreements were regarded as inadequate to meet the goals of the AEC Blueprint in creating a single market within ASEAN. Therefore, the AEC Blueprint called for the review of these agreements and a new67 approach to boost the attractiveness of the region for FDI. ACIA was created to compensate 68 for the shortcoming of the previous agreements and to create a comprehensive framework for investment protection and liberalisation. Thus, it is argued that ACIA provides a much more comprehensive approach to investment liberalisation as compared to IGA and AIA agreements. It expands the scope of the definitions of investment and investor, extends NT and MFN provisions to the pre-establishment phase, prohibits the performance requirements and extends the dispute settlement options. Yet, Member States still try to ensure its

64_{Preamble, ASEAN Comprehensive Investment Agreement.} 65_{Article 2, ASEAN Comprehensive Investment Agreement.}

66_{Zhong Zewei, “The ASEAN Comprehensive Investment Agreement”, 11;} 67_Ibid.

68_{Julien Chaisse, and Sufian Jusoh,}_{The ASEAN Comprehensive Investment Agreement, Chapter 5, 48.}

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autonomy by providing extensive reservation lists, by being reluctant to pass the authority to international fora for dispute settlement.

5.1.1 The Scope of the Definition of Investment

Article 4 of ACIA defines the scope of the definition of investment. As it is specified in the definition, the investment should be established in the territory of the Member State, and it should exist when ACIA enters into force, or established after. Importantly, the definition protects the regulatory power of the states by stating that the investment should be admitted in accordance with its laws, regulations and national policies. The first difference with the previous IGA agreement is that it loosens the requirement of approval of investments by the Member State. Article II of IGA states that “This agreement shall apply only to investments [...] which are _specifically _{approved in writing and registered [...]”(emphasis added).70 Contrary, ACIA requires the state's approval only “where applicable”. As Anna Tevini states, it is a significant development since the only award that71 was rendered in _{Yaung Chi OO v. Government of Myanmar} absence of the approval of Myanmar to admit the investment. Moreover, ACIA further 72 imposes a political constraint on the use of approval in Annex 1. Member States that intend to use this feature are required to “inform all the other Member States through the ASEAN Secretariat of the contact details of its competent authority responsible for granting such approval”. As a result, the host state has a constraint in influencing the institution that issues73 the approval as it is monitored by the ASEAN Secretariat. Therefore, although ACIA still preserves the Member States' right to issue approvals of whether investments can be received on their territory, it also loosens this requirement to a narrower set of cases, only where it is applicable, and it imposes further political constraints to the use of a specific requirement. Moreover, it combines the definitions of IGA and AIA where this requirement is either too strict or absent at all.

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by the host country} _{denied jurisdiction based on the}

69_{Please, see Appendix A the figure 1 for the exact text.}

70_{Article 2, The 1987 ASEAN Agreement for the Promotion and Protection of Investments.} 71_{Article 4 (a), ASEAN Comprehensive Investment Agreement.}

72_{Anna Tevini, “Regional Investment Protection and Liberalisation”, 345.}

73_{Annex 1(a), ASEAN Comprehensive Investment Agreement; Zhong, Zewei. “The ASEAN Comprehensive}

Investment Agreement”, 10.

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Article 4(c) includes a non-exhaustive list of investments that may satisfy the term “investment”. As in IGA, the definition is quite broad, nevertheless, ACIA provides the74 specification of the term investment using footnotes. For instance, footnote 2 specifies that characteristics of investment include “the commitment of capital, the expectation of gain or profit, or the assumption of risk”. Yet, it does not require the contribution to the host 75 country’s economy, the last requirement as spelt out in the Salini criteria. Therefore, in comparison to IGA, ACIA narrows down the definition of investment and makes it more specific. On the other side, in comparison with AIA, ACIA broadens the definition. For instance, AIA has quite a vague definition which in Article 2 explicitly excludes portfolio investment and investments covered by AFAS. Contrary, ACIA expands the scope of the agreement not only to FDI but also to portfolio investment. 76

Therefore, ACIA expands the scope of covered investments as compared to AIA and makes the definition of investment more specific in comparison with IGA. It can have a positive effect on investment liberalisation as more investments can enter the Member States and by means of a more precise definition, it is easier to specify whether this particular type of investment can be made. Importantly, although ACIA incorporates the right of Member States to screen investments by means of specific approval, it loosens the requirement of approval to the cases where it is applicable. Also, it imposes political constraints onto institutions that issue these approvals. Accordingly, it lowers the entry requirement and takes a closer step towards investment liberalisation.

5.1.2 The Scope of the Definition of Investor

Article 4(d) of ACIA defines “investor” as “a natural person of a Member State or a juridical person of a Member State that is making, or has made an investment in the territory of any other Member State”. Further, ACIA defines the meaning of a juridical person in paragraph77 (e) and a natural person in paragraph (g). What is remarkable is that ACIA extends the scope of the investor. IGA in Article 1(1) provides that a natural person can be considered only a national of a Member State as defined by law or Constitution of the respective country.

74_{Article 4, ASEAN Comprehensive Investment Agreement.} 75_{Footnote 2, ASEAN Comprehensive Investment Agreement.} 76_{Juliene Chaisse, “The ACIA: Much More Than a BIT?”, 238.} 77_{Article 4(d),}_{ASEAN Comprehensive Investment Agreement.}

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Similarly, AIA creates the definition of “ASEAN investor” which is, as stipulated in Article 1 AIA, is a national of the Member State. On the other side, ACIA extends the scope of the investor including also natural persons that possess the right of permanent residence in the Member State. 78

With regards to juridical persons, ACIA also extends the scope by giving a way for non-ASEAN juridical persons to benefit from ACIA. IGA places a strict requirement of “place of effective management”. Meanwhile, AIA requires the juridical person to satisfy minimum national equity requirements.79 ACIA does not place any of these strict requirements but rather limits certain types of investors through denial of benefits clauses. Article 19 of ACIA on denial of benefits restricts the following categories of investors, namely the juridical person that is owned or controlled by the investor of non-Member State, the juridical person has no substantive business activities in the territory of such Member State, the juridical person which is owned by investors of the host state, and juridical person which comes from the state with the Member state has no diplomatic relations. That is to 80 say, it brings a leeway for non-ASEAN investors to benefit from ACIA in the sense that if investor from non-Member State established business in one of the Member State and then decides to invest into another Member State besides the place of incorporation, it will be able to enjoy the benefits of the ACIA. As Vivienne Bath underlined, this effect was made deliberately to attract non-ASEAN investors into the region. 81

Therefore, ACIA extends the scope of the definition of “investor” through granting protection to natural persons which are not only nationals of the Member State but also permanent residents. Also, in terms of juridical persons, it imposes less strict limits while giving a leeway for non-ASEAN investors to benefit from the agreement.

5.1.3 National Treatment Provision

Article 5 of ACIA on National Treatment explicitly states, “Each Member State shall accord to investors of any other Member State treatment no less favourable than that it accords, in like circumstances, to its investors with respect to the _{admission, establishment, acquisition,}

expansion, management, conduct, operation and sale, or other disposition of investments in

78_{Anna Tevini, “Regional Investment Protection and Liberalisation”, 346.} 79_{Ibid., 347.}

80_{Vivienne Bath, “ASEAN: The Liberalization of Investment Through Regional Agreements”, 199.}

81_{Ibid., 199.}

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its territory_{”(emphasis added). Paragraph 2 of Article 5 similarly extends NT protection to}82 the investments of the investors to “admission, establishment, acquisition, expansion, management, conduct, operation and sale, or other disposition of investments”. It is an 83 important achievement since now the NT applies not only during the post-establishment phase but also at the point when investors and their respective investments just enter the territory of the Member State. That is to say, foreign investors can not be discriminated against national investors already at the pre-establishment phase, which grants them more protections on market access. It means both domestic and foreign investors have equal opportunities to invest in the ASEAN region. Also, as Catharine Titi points out, the 84 provisions on market access and investment liberalisation is a feature of new generation investment agreements and these agreements are much more “intrusive” in comparison with investment agreements that only provide for substantive protections. For instance, IGA does85 not extend any protection to market access. On the other side, although AIA extends national treatment provision to the market access in Article 7 (1)(b), yet its approach to exceptions and screening of industries which do not fall under the provision of NT is much more complex than under ACIA. Important to point out that the NT provision is significantly limited by the reservation list under Article 9 of ACIA on Reservation of sectors which can be exempt from NT and MFN clauses. It will be discussed in further detail in the following sections. Thus, taking everything into account, ACIA takes a significant step with regards to NT provision as it grants the protection not only during post-establishment phase but also during the pre-establishment phase, thus granting the equal opportunities to both domestic and foreign investors to invest in the ASEAN region.

5.1.4. Most-Favoured-Nation Treatment

Most-Favoured-Nation treatment sets as the goal to establish a level-playing field and equal competitive opportunities between all foreign investors and their investments in the territory of the specific State. Article 6 of ACIA provides, “Each Member State shall accord to investors of another Member State treatment no less favourable than that it accords, in like circumstances, to investors of any other Member State or a non-Member State with respect _to

82_{Please, see Appendix A figure 1 for the exact text of the provision.} 83_{Article 5(2),}_{ASEAN Comprehensive Investment Agreement.}

84_{Julien Chaisse, and Sufian Jusoh. The ASEAN Comprehensive Investment Agreement, Chapter 9, 86.} 85_{Catharine Titi, “International Investment Law and the European Union”, 644.}

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the admission, establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments” _{(emphasis added). Therefore, same as in the case of} NT, the protection under MFN clause is extended to pre-establishment phase, meaning that none of the foreign investors can be discriminated against while entering the market of respective ASEAN country, and all of them have equal opportunities on the market access. For instance, if any of the Member states offers the foreign equity ownership of 50 percent in the agricultural sector to any of the ASEAN or foreign investors, it should also extend it to any other foreign investor in like circumstances which is located in its territory. As it was 86 previously stated, IGA does not extend any of the provisions to the pre-establishment phase. Yet, the MFN provision looks quite similar to AIA Article 8 which also applies to “the admission, establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments”.

Thus, ACIA takes a step forward with regards to investment liberalisation in MFN clause because that it extends the MFN provision to pre-establishment phase, thus ensuring that all foreign investors have an equal opportunity on the market access to any of AMS sectors specified in the agreement.

5.1.5 Performance Requirements

Performance requirements (PR) are requirements that are imposed by the host states on foreign investors as a condition to the admission of the investments or their operation on the territory of the host state. This way the host countries try to seek benefits from the foreign 87 investments that could contribute to their national development through requiring to transfer technology, provide training, restricting imports or requiring exports etc. Investors see PR 88 as the violation of NT treatment as the host state applies certain discriminatory requirements that are not applicable to domestic investors. 89

Article 7 of ACIA on Prohibition of Performance Requirements states that provisions of the Agreement on Trade-Related Investment Measures (TRIMs) apply to this agreement. Further, in paragraph 2 it provides that the Member States “shall undertake the joint assessment on performance requirements” to review existing PR. Lastly, Article 7 specifies

86_J_{ulien Chaisse, and Sufian Jusoh.}_{The ASEAN Comprehensive Investment Agreement, Chapter 9, 95.} 87_Ibid.,_104.

88_Ibid. 89_Ibid.

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that even if the Member state of ASEAN is not a member of WTO, it is still obliged to abide by WTO provisions “in accordance with their accession commitments to the WTO”. Under 90 WTO TRIMS, PR that affects trade in goods such as those that violate NT and impose quotas and tariffs are prohibited. Also, in GATS, PRs that require investors to export, or impose restrictions on import are similarly prohibited. Therefore, ACIA prohibits its Member States 91 to impose any of these performance requirements as stipulated in TRIMs agreement to all covered sectors of the agreement and services which are incidental to them. Neither IGA nor AIA, have explicit provisions on PR, which implies that the AMS can impose performance requirements if they apply those agreements. The fact that ACIA incorporated this provision in Article 7 shows that ACIA improved on the reduction of PR through their prohibition and therefore on investment liberalisation as it reduced the limits on the performance of foreign investors.

5.1.6 The Dispute Settlement Provision

Investor-State arbitration was available under IGA only in relation to substantive provisions. Meanwhile, under AIA, investors could bring a claim with regards to investment liberalisation only to State-to-State arbitration when one of the Member States takes on the responsibility of bringing the claim on behalf of the investor. This feature was preserved in 92 ACIA, as it provides in Article 32(a) that the claim can be brought to investor-State arbitration only with regards to the breach of substantive protections which relate to “the management, conduct, operation or sale or other disposition of a covered investment”. 93 Investor-State arbitration is not available with regards to the claims which relate to the establishment of the investment, thus denying a dispute settlement option for the protection of investors’ interests regarding market access. Nevertheless, ACIA had a few improvements94 as for the dispute settlement provision in comparison with previous agreements. For instance, as Anna Tevini pointed out, at least now the claims with regards to NT have an option of being brought to investor-state arbitration, as IGA did not even have this substantive protection included into the agreement. Importantly, there is a significant improvement in95

90_{Article 7(3),}_{ASEAN Comprehensive Investment Agreement.}

91_{Julien Chaisse, and Sufian Jusoh. The ASEAN Comprehensive Investment Agreement, Chapter 9, 106.} 92_{Ibid., 151.}

93_{Article 32(a),}_{ASEAN Comprehensive Investment Agreement.}

94_{Vivienne Bath, “ASEAN: The Liberalization of Investment Through Regional Agreements”, 201.} 95_{Anna Tevini, “Regional Investment Protection and Liberalisation”, 351.}

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terms of rules of arbitration procedure which are more specific and explanatory than in IGA. Besides, ACIA offers more variety of fora to which investors can bring the claim, such as 96

ICSID, UNCITRAL and Kuala Lumpur Regional Center for Arbitration as stipulated in Article 33. What is noticeable though, is that ACIA still is reluctant to grant authority to international institutions to interpret its provisions and thus be more intrusive into the internal order of ASEAN. Article 40 (2) and (3) provide for the creation of joint interpretation of the 97 Member States of the provision of the agreement and declare them as binding upon the tribunal. Thus, although ACIA provides for certain improvements in comparison to previous agreements, it still does not extend the option of investor-state arbitration to the market access commitments and also it tries to limit the authority of tribunals by imposing joint interpretations of the provisions.

5.1.7 Conclusion

This section has shown that the institutional model of ASEAN is also reflected in the second layer obligations concluded through internal regional investment agreements such as ACIA. This agreement is a part of the wider institutional model of ASEAN. It is an inseparable part of the creation of AEC which strives to fulfil the goal of the free flow of investments in the region by fostering progressive investment liberalisation. Yet, ACIA also reflects the aspirations of Member States to endorse their differences and create a balance between regional interests and specialised approach to different members of ASEAN. These goals of the institutional model are also reflected in the provisions of ACIA. Through the analysis of substantive provisions and commitments related to investment liberalisation, it is seen that the agreement itself has a good cooperative framework of AMS with regard to investment liberalisation. ACIA significantly improved in terms of its provision as compared to previous IGA and AIA agreements. It expanded the scope of the definitions of investment and investor, extended the NT and MFN clause to pre-establishment phase, prohibited the performance requirements, and expanded the list of international fora where investors can bring their claims. Thus, ACIA provides for a much better cooperative framework among the Member States for the investment liberalisation than previous agreements. Yet, through the text of ACIA, it is seen that the Member States try to safeguard their autonomy and are

96_{Anna Tevini, “Regional Investment Protection and Liberalisation”, 351.} 97_{Ibid., 352.}

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reluctant to give up their national interests for the sake of regional goals. ACIA allows Member States to limit the application of NT and MFN through reservations as well as limit the board of directors to a certain nationality. It also excludes the claims related to the pre-establishment phase in the dispute settlement clause. Moreover, the Member States are reluctant to give authority to international tribunals to decide on the case through the imposition of binding interpretations which tribunals have to follow. These instances show that the AMS want to retain their authority with regard to their national investment regimes which as a result limit the regional goal of progressive liberalisation.

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5.2 Regionalism versus Nationalism: Negative Reservation Lists

One of the central shortcomings of the ACIA is that the regional goal to create a liberalised investment regime clashes with national policies of the Member states to screen the investments. Although the States have a right to regulate and protect, for instance, security-sensitive sectors, too restrictive regimes can block the process of investment liberalisation and as the result prevent the flow of FDI into the region. Article 9 outlines the possible reservations Member States can have under ACIA and it states that “Article 5 (National Treatment) and 8 (Senior Management and Board of Directors) shall not apply to (a) any existing measure that is maintained by a Member State at: (i) the central level of government, (ii) the regional level of government, (iii) a local level of government as set out by that Member State in its reservation list in the Schedule [...]”. Then, ACIA includes a negative reservation list which excludes certain sectors or sub-sectors from the imposition of NT and SMBD restrictions. The negative list implies that all sectors are considered to be consistent with NT and SMBD restrictions unless it is specifically stated in the list that certain measures do not conform with these provisions. The first impression after opening the reservation lists attached to ACIA is that some reservations lists are comparatively longer than lists of other countries. For instance, while Singapore has a list of 13 pages, Indonesia has a list of 35 pages. It implies that some countries are more protective of their sectors than others and it potentially can be linked to their economic development. That is to say, less economically developed countries tend to protect more sectors as they want to ensure domestic industries stay competitive enough without too much foreign intervention.

Most AMS have foreign equity limits imposed on its sectors and these limitations vary from country to country. The study of the reservations list of ACIA by Ponciano Intal shows that certain countries have quite significant limitations and investment screening.98 Sensitive industries are associated with cultural, political or security sensitivities and may include food manufacturing, production of chemicals, production of media, tobacco and textile industries. Intal’s study shows that Cambodia, Lao PDR, Myanmar and Singapore are the most open countries to foreign investment overall. With regards to sectors with 70 or more percent allowable equity, these three countries have the highest levels of liberalisation

98_{Intal S. Ponciano, “AEC Blueprint Implementation”, 14.}

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in agriculture and natural resources. On the other side, Brunei Darussalam, Indonesia,99 Malaysia, Thailand and the Philippines are more restrictive towards liberalisation in sectors related to land and natural resources. 100 With regards to sensitive industries, it is important to point out that Singapore and Brunei Darussalam have none of the sectors where they allow equity participation only less than 70 percent. Meanwhile, Vietnam has the longest list incorporating manufacture of food products, beverages, tobacco, printing and reproduction of media, manufacture of chemicals, metal etc. 101 Indonesia, Malaysia, and Thailand have, although shorter lists of industries, yet still quite restrictive.102 Therefore, it shows the reluctance of certain countries to give commitment under ACIA to open up and liberalise their respective sectors.

Importantly, the previous study concerned the analysis of the commitments provided under ACIA. On the actual level of implementation, the picture with regards to the reservation list is quite different. Regardless of their commitments given under ACIA and its reservation lists, the screening policy is still in the hands of separate Member States and their commitments under ACIA might differ from the actual implemented policies and laws. For instance, in Indonesia under ACIA the restriction on foreign investment lies primarily in telecommunications, pharmaceuticals, energy and mining.103 The current law that regulates the screening of foreign investments in Indonesia is Presidential Regulation No. 39/2014. 104 This regulation provides the negative list for sectors of Indonesia which are closed or open to foreign investment. The study conducted by Damuri et al. shows that more than half of the commitments provided in this regulation are more liberalised than it is provided in the ACIA reservation list.105 Meanwhile, certain sectors in manufacturing, mining and services incidental to mining are more restrictive under the regulation than in the reservation list under ACIA.106 Lao’s new Law on Investment Promotion of 2016 (LIP 2016), also only partly meets ACIA progressive liberalization commitments.107 LIP 2016 allows investors to invest in a majority of sectors except the ones related to national security, public health, national

99_{Intal S. Ponciano, “AEC Blueprint Implementation”, 8.} 100_{Ibid., 9.}

101_{Ibid., 11-12.} 102_Ibid.

103_J_{ulien Chaisse, and Sufian Jusoh,}_{The ASEAN Comprehensive Investment Agreement, Chapter 6, 59.} 104_P_{residential Regulation of the Republic of Indonesia Number 39 of 2014.}

105_{Damuri, Y.R., ‘ASEAN Economic Community Scorecard Phase IV: Indonesia’.} 106_Ibid.

107_{Sufian Juson, “Investment Liberalisation in ASEAN”, 218.}

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culture and environment. 108 Compared to the reservation list under ACIA, LIP 2016 reservation list is much wider including production and distribution of electricity, radio and television broadcasting, print media etc.109 As Intal pointed out, the fact that certain restrictions on investment liberalisation are wider on the national level than the reservation list in ACIA signifies that commitments in ACIA are not binding enough to oblige States to conform to them. 110

Therefore, as Vivienne Bath pointed out, although ACIA strives to realise ambitious objectives of regional investment liberalisation, yet it strikes a careful balance between investment liberalisation and State’s national policies designed to restrict investments. 111 Moreover, the commitments under ACIA are not binding enough for the Member States, as the restrictions on the national level are much wider than under ACIA.

5.3 The Lack of Regional Enforcement Policy

In the previous section it was explained that despite the regional aspirations to create a liberalised investment regime in ASEAN, separate Member States implement their national policies which are different in every single country. One of the biggest shortcomings in the implementation of ACIA is an absence of common regional enforcement policy that would cover the whole region of ASEAN. 112 Different agencies within separate ASEAN states have different modes of implementation and certain institutions are full of bureaucracy and corruption. ASEAN top-down approach to harmonisation of investment regimes of its Member States is hard to imagine when separate Member States implement their commitments under ACIA in its own way. Therefore, a common policy is essential to the implementation of the commitments under ACIA. As Nadia Aziz points out, just having an agreement which lists sensitive sectors is not enough to implement these commitments, taking into account the contextual differences of ASEAN countries. 113 According to her, ASEAN states should overcome a national interest issue and work towards an agreement on how precisely they want to achieve investment liberalisation. 114As Aldaba underlines, ACIA

108_{Sufian Juson, “Investment Liberalisation in ASEAN”, 218.} 109_{Ibid., 220.}

110_{Intal S. Ponciano, “AEC Blueprint Implementation Performance”, 15.}

111_{Vivienne Bath, “ASEAN: The Liberalization of Investment Through Regional Agreements”, 201.} 112_{Juliene Chaisse, “The ACIA: Much More Than a BIT?”, 247.}

113_{Aziz, S. Nadia., Salawati Mat Basir, “ASEAN Economic Community 2015”, 423.} 114_Ibid.

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should include a precise formula and timeframe of investment liberalisation. 115For instance, it could have adopted a similar approach which is included in AFAS agreement which includes a liberalisation formula and timetable. As Intal stresses, as the result of this precision with regards to implementation, AFAS has more “steering power” and “teeth''. 116Therefore, a common regional policy with a precise time frame and formula is essential for ASEAN. Nonetheless, there might be obstacles in creating a common framework due to AMS political and developmental differences. As Rivera et al. underline the policies in ASEAN should not be generalised for the entire region, taking into account all developmental disparities, it should be more context-specific rather than identical for every single state. 117 Therefore, it creates a dilemma of implementation, since ASEAN countries strive for economic development through investment liberalisation and integration as the region, yet to achieve this, they need a common implementation policy. However, the economic and developmental disparities might prevent the creation of such a policy and might require a country-specific approach until all ASEAN countries are on the same page.

If ASEAN states manage to agree on a common approach, there will be a need for the creation of administrative structures and institutions that will be responsible for implementation and compliance with these commitments.118 It is important to point out that there is already one institution that is responsible for monitoring ACIA implementation, namely the AIA Council. The immediate objectives of this institution are to promote ACIA and its benefits to businessmen, increasing the ability of the ASEAN States to comply with ACIA and creating regional cooperation with regards to investment liberalisation. 119Yet, AIA Council does not take on direct responsibility for implementation of the agreement, and yet lacks the power to do so.

5.4 The Differences of the AMS

To achieve investment liberalisation, all AMS need to commit to the shared regional goal. Yet, there are significant obstacles for these countries to truly cooperate. The most evident

115_{Aldaba M. Rafaelita, “Investment Liberalisation and Facilitation towards AEC 2015”, 70.} 116_{Intal S. Ponciano, “AEC Blueprint Implementation Performance”, 24.}

117_{Rivera, Paolo R. John., “Establishing the ASEAN Economic Community”, 31.}

118_{Diane Desierto, “Regulatory Freedom and Control in the New ASEAN Regional Investment Treaties”, 1042.} 119_{Loretta Malintoppi,}_{Investment Protection in Southeast Asia, 6.}

The ASEAN Regional Economic Integration: Is the ASEAN Institutional Model Suitable for Achieving Investment Liberalisation?