This presentation by Stephen Thomsen was made at the session "Investment policy reform and regional integration" during the 2nd ASEAN-OECD Investment Policy Conference held on 10-11 December 2014. To find out more visit: http://www.oecd.org/daf/inv/investment-policy/2014-asean-oecd-investment-policy-conference.htm

1. Investment Policy Reform
in ASEAN
2nd ASEAN-OECD Investment Policy Conference
10-11 December 2014, Jakarta
Dr. Stephen Thomsen
Head, Investment Policy Reviews, OECD

2. • Trends in FDI in ASEAN: a bright spot in a gloomy
global landscape
• The growing importance of the regional market for
international investors
• The impact of FDI restrictions on relative
performance in attracting investment within ASEAN
• The role of services in total ASEAN exports and how
this relates to FDI restrictions
Outline

3. Global FDI is still significantly below
pre-crisis levels
0
500
1000
1500
2000
2500
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
OECD EU World
Source: OECD International Direct Investment database. 2013 is preliminary.
p
Global FDI outflows (USD billion)

4. FDI in ASEAN is at record levels
0
20
40
60
80
100
120
140
0%
5%
10%
15%
20%
25%
ASEAN FDI inflows (right axis) ASEAN share of developing country FDI stock(left axis)
Percentage USD billion
ASEAN FDI inflows
Source: UNCTAD

5. FDI in ASEAN may even be greater than
what AMS report
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
ASEAN statistics OECD home country statistics
USD million
FDI in ASEAN from OECD countries (home vs host statistics)

6. MNE employment figures show even
stronger growth
0
100
200
300
400
500
600
700
800
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(thousand)
*Indonesia, Malaysia, Philippines, Singapore, Thailand
Employment of US MNEs in ASEAN*

7. US investors are turning towards the
regional market
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1989 1994 1999 2004 2008 2011
Local Regional To US
Share of total sales
Pattern of sales of US affiliates in ASEAN
Source: US Department of Commerce

8. • Good growth prospects:
– 5.4% projected over next 5 years on average
• ASEAN Economic Community blueprint
– Both intra- and extra-ASEAN FDI
• Liberalisation of FDI regimes
– WTO, FTAs, ACIA
– Unilateral removal of restrictions
What can explain the recent performance
of ASEAN in terms of FDI?

9. • FDI at record levels for most AMS, but
performance varies strongly across ASEAN,
with Singapore dominating FDI inflows
• Intra-ASEAN investment is still only a small
share of the total
• Increasing the development impact of FDI
• The treatment of foreign investors also varies
considerably across AMS, as with Doing
Business
Strong FDI performance…
but challenges remain

10. OECD FDI Regulatory Restrictiveness Index
• Measures only statutory restrictions on FDI
(i.e. where national treatment is not applied)
• Does not include the degree of implementation,
institutional quality or state ownership, EPZs
• Covers equity restrictions, screening, restrictions
on key personnel and operational restrictions
• Scores currently available for almost 60 countries,
covering 22 sectors.
Benchmarking FDI restrictiveness
across countries and over time

11. FDI liberalisation in Indonesia, 1985-2009*
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0
10
20
30
40
50
60
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Cumulative FDI inflows since 1980 (USD billion; left axis)
OECD FDI Restrictiveness Index score (0=open; 1=closed;
right axis)
*The historical series is based on a simplified index and hence the score for 2009 does not correspond
to the overall Index score.

12. Investment policy reform in Korea and
its impact on FDI inflows
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0
2
4
6
8
10
12
14
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
FDI stock as share of GDP (left axis, per cent)
FDI Index (right axis; 0=open,1=closed)
Source: Nicolas, Thomsen and Bang (2013)

13. 0
20
40
60
80
100
120
140
160
180
0 0.1 0.2 0.3 0.4 0.5
2012InwardFDIStocks(%ofGDP)
2013 FDI RR Index (Closed = 1; Open = 0)
Sources: OECD Statistics and IMF estimates. Excludes Iceland, Belgium, Iceland, Jordan and Luxembourg.
Fewer FDI restrictions mean more FDI
More restrictive
MoreFDI

14. 0
50
100
150
200
250
300
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
The Philippines Myanmar Indonesia Thailand Lao PDR Viet Nam Malaysia Cambodia Singapore
2013 OECD FDI Regulatory Restrictiveness Index 2012 FDI Stocks (current, % of GDP)
OECD FDI Regulatory Restrictiveness Index ,2013(open=0;clsoed=1) 2012 FDI Stocks (% of GDP)
(Preliminary scores)
FDI Index scores vs FDI Stocks
(% of GDP) ASEAN9 countries

15. ASEAN economies are generally more
restrictive across sectors than OECD
0
0.1
0.2
0.3
0.4
0.5
0.6
OECD ASEAN9
OECD FDI Regulatory Restrictiveness Index (open=0; closed=1)

16. Embodied services are an important
share of exports
0
5
10
15
20
25
30
35
40
%
Construction Wholesale and retail trade, hotels and restaurants
Transport and storage, post and telecommunications Financial intermediation
Business services Other services
Source: OECD-WTO Trade in Value Added database

17. FDI restrictions affect the share of
services value added in exports
OECD FDI Regulatory Restrictiveness Index (0=open; 1=closed)
Services value added as a share of exports

18. AMS are becoming more open to FDI over time,
often significantly so…
…but policies still vary significantly within ASEAN
Governments have the sovereign right to choose
their own level of openness…
…but FDI restrictions can have a significant impact
not only on FDI inflows but also on overall national
competitiveness
Conclusion

19. Policy Framework for Investment (and User’s Toolkit)
www.oecd.org/investment/pfi.htm
www.oecd.org/investment/toolkit/
www.oecd.org/daf/inv/investment-policy/pfi-update.htm
FDI Index
www.oecd.org/investment/fdiindex.htm
Investment Policy Reviews
www.oecd.org/investment/countryreviews.htm
ASEAN-OECD Investment Programme
www.oecd.org/daf/inv/mne/seasia.htm
ASEAN Investment website
www.investasean.asean.org
For further information