VI. An analysis on Vietnam’s commitments in FTAs
6.2. Liberalization provisions in investment chapters
The ASEAN Comprehensive Investment Agreement, the Agreement on Investment under AKFTA and the Investment chapter of AANZFTA are comprehensive and considered as WTO- plus with a broad range of principles on investment matters. They include not only provisions on investment liberalization, investment protection, but also principles on supporting the investment framework and investor-state dispute settlement (ISDS). The commitments of the country members under these agreements reduce the barriers or difficulties in the business environment that investors experience a lot before the agreements, such as foreign equity restrictions, performance requirements or a lack of regulatory transparence. The provisions of these
5 In some cases, the interaction is not be stated in agreements. The last version of ASEAN agreements on investment and trade in services is an example (Houde et al., 2007).
26 agreements provides investors a more liberal platform with more transparent, predictable conditions and legal safeguard to ensure investment liberalization and investment promotion in regions. While market access principles, including MFN, foreign equity restrictions, performance requirements, regulatory transparence affect the confidence and opportunities to invest of investors; regulations related to post-establishment factors, such as the potential for expropriation, restrictions on profit repatriation and transfers, and the adequate legal protection, play important role in decision to expand their investment. Besides, foreign investors also are concerned about provisions with regard to their interest and responsibilities in the dispute or how they are protected. All principles in investment agreement, therefore, affect decisions on investment of foreign investors. Taking into account of the matter of other principles, as mentioned earlier, this study only analyses and compares the investment liberalization provisions, which includes National Treatment, MFN, performance requirements, senior management nationality requirements and reservation schedule, between the three FTAs.
It is important to define the scope of the investment framework of each FTA before discuss their liberalization principles as they regulate assets and transactions which are liberalized and protected under FTAs, and investors who receive benefit from these agreements. All the three FTAs use a broad, ‘asset-based’ definition of investment which cover all kind of asset owned or controlled by an investor and a wide range of tangible and intangible assets, including shares, property, business concessions and intellectual property rights. These agreements apply for investors of any other Party and their covered investment, but exclude government procurement, subsidies or grants, services supplied in the exercise of governmental authority. The only and the most important difference between these three Agreements is that the ACIA apply for both existing investments as at the date of entry into force and investment of country members made after the agreement came into effect, while Investment Agreement of AKFTA and Investment Chapter of AANZ cover only investment at the date of entry into force. All the liberalization provisions under the three investment agreements are now discussed below.
With regard to the principle of non-discrimination, while the national treatment provisions are included in all three FTAs, the MFN obligation has different application in each FTA. All three FTAs provide the same content of national treatment obligation which requires host country to remove all the discriminatory measures to investors and investments and the treatment
27 covers all the stage of investment, even the pre-establishment stage. In term of MFN, whereas this treatment is still in Work programme in AANZFTA, the ACIA provide investors of another Member State a much higher commitment than AKFTA. In particular, any preferential treatment under any existing or future agreements in which a Member State of ASEAN is a party shall be extended to all other Member States in ASEAN under MFN obligation. By contrast, AKFTA excludes any treatment under any existing agreements and do not cover any preferential treatment between or among ASEAN member countries. In other words, any treatment committed by an ASEAN party to a member or non-party member will be applied instantly to other members of the bloc; while these treatments can only be applied to AKFTA members if they make a request which can be accepted only through negotiation.
The performance requirements are measures of host countries that require investors to behave in a particular way or to meet prescribed goals. The commitments on this issue are the same in the three FTAs, which not allow the parties to impose any measures which is inconsistent with the WTO Agreement on Trade-related Investments Measures (TRIMs).
However, the ACIA requires higher standard in this issue by requiring Member States undertake assessment on existing performance requirement and then considering the need for additional commitments under this Article.
In term of senior management nationality requirements, while country members are prohibited in both ACIA and AKFTA from damaging the ability of investor to control its investment by requiring the investor appoint to senior management positions, natural persons of any particular nationality, there is no commitment on that issue under AANZFTA. Vietnam, therefore, is not bound under the AANZFTA with regard to this issue.
With regard to the market access, the ACIA uses the negative list approach which means that Vietnam commit to open fully industries unless otherwise listed in the reservation list. In which Vietnam mainly reserves industries related to Agriculture, Forestry, Fishery, Mining, Quarrying and manufacturing related industries with special or sensitive products, such as tobacco production and alcoholic, soft drink, production using oil and gas, etc. All measures retained in these industries are in type of National Treatment and Senior Management and Board of Directors. By contrast, even both AKFTA and AANZ FTA have commitments on this obligation, the reservations lists are still the subjects to their Work Programme.
28 In conclusion, the difference in the scope of the investment agreement, the wider application of non-discrimination provisions and the performance requirements of the ACIA show its higher commitment on liberalization than two other FTAs. Both AKFTA and AANZFTA have the same scope of application which cover only the investment at and after the date of being in force of the agreement. However, AANZFTA is limited than AKFTA in term of MFN and senior management nationality requirements provisions.