AEC Blueprint Implementation Performance and Challenges: Investment Liberalization

Investment liberalization is central for ASEAN to attract greater FDI inflows and intra-region direct investment flows. This paper focuses on measuring and examining the progress and challenges in the implementation of the investment liberalization initiatives in the AEC Blueprint 2009–2015. It also draws on country reports produced as part of the AEC Scorecard Project regarding other constraints on creating much better investment regimes in selected ASEAN countries. The result shows the foreign investment liberalization rate, based on the ASEAN Comprehensive Investment Agreement (ACIA), is high in manufacturing with the challenges to further liberalization to be found primarily in Indonesia and Viet Nam. The picture of liberalization in the agriculture–mining sector is much more mixed across ASEAN, with some ASEAN Member States very liberal in their foreign investment stance, while several others are more cautious, measured, and/or restrictive towards foreign equity participation. The main challenges of further investment liberalization in the region include complex cultural, political, and security sensitivities regarding foreign equity majority control in some sectors, especially in agricultural and natural resource–based industries. There may also be strategic industrial, nationalist, and/or developmental gap considerations working against foreign majority ownership in some manufacturing sectors in several ASEAN Member States. The paper ends with some recommendations for ASEAN investment liberalization initiatives post-2015.