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Supporting The Asean Economic Community (AEC) » Investment


This workstream aims to strengthen capacity of ASEAN Member States to fully implement the ASEAN Comprehensive Investment Agreement, promote foreign investment, and strengthen knowledge and understanding of investment trends and best practices in the region.

ASEAN Member States seek to develop their capacity to implement the ASEAN Comprehensive Investment Agreement (ACIA), and promote Foreign Direct Investment (FDI) through well informed policy-making. This will assist the creation of an open environment for investment and realisation of the initiative to integrate ASEAN Member State economies.

Investment has become a significant driver of economic growth in ASEAN. A recent study noted that "Between 1990 and 1996, FDI inflows to ASEAN grew at an average annual rate of just over US$ 19 billion, while outflows grew at a rate of US$ 6.6 billion during the same period. Even after the economic crisis, FDI inflows continued to rise during 1997 to 2005 at an average annual rate of well over US$ 20 billion, while FDI outflows rose to an average annual rate of US$ 10 billion"1. In 2010, FDI in ASEAN has risen to more than US$74 billion, an increase of 95.6% compared to last year. Despite the region's ability to attract substantive FDI, ASEAN as an integrated region still needs to further enhance its investment climate to face present challenges, including increasing competition from other emerging economies. This need has been recognised by the ASEAN Member States and addressed through the conclusion of ASEAN Comprehensive Investment Agreement (ACIA) in 2009.

ACIA is a key agreement that supports the creation of a more open investment environment in ASEAN. However, not all ASEAN Member States, particularly CLMV economies are positioned to immediately benefit from the ACIA and take maximum advantage of the prospect of increased investment flows. Most ASEAN Member States, including CLMV economies, have made few formal commitments to reduce investment barriers. Significant restrictions still apply to foreign investment and domestic private investment in some industries. ASEAN Member State capacities in addressing these restrictions vary, and in cases, policy and regulations that do address restrictions are not publicly understood.

The AADCP II program is supporting implementation of ACIA through activities to promote and raise awareness of FDI opportunities in the region and activities to support a strong knowledge base on investment trends and best practices to help inform policy making in the region. A special focus will be given to activities that support the needs of the CLMV countries.

Citations and references:
1. Hattari, Rabin et al. Understanding Intra ASEAN FDI Inflows: Trends and Determinants and the Role of China and India. 2008. p.3. [online] Available at http://www.freewebs.com/rrajan1/OFDIASEAN.pdf [Accessed 28 August 2011]

Approximate Value of completed & ongoing project : US$ 1,350,209.00