Alternative Approach for Improving Investor – State Relations

1. Alternative Approach for Improving Investor – State Relations

2. 1. Two Approaches (1)

3. 1. Two Approaches (2) Under what conditions, will it work?

4. 2. Basic Assumption - How Soft Approach Works? Investor and host Country’s perspective for ideal situation - To contribute to or benefit from each other - Long term business activities (relationship) (No one wants to be got involved in dispute from the beginning) Regular and Continues Dialog between Investors and Host Country • Creating Win-Win situation by building up trustful relationship (confidence building) • between the Investors and host Country Home Country’s support Voluntary and Agreed Actions - Improvement of business environment - Solving problems Preventing disputes!

5. （Reference） Efforts in the APEC The APEC Investment Facilitation Action Plan (IFAP) provides a working framework for a series of eight guiding principles that, if met, would constitute better practice in investment facilitation and improve the attractiveness of APEC member economies to FDI. • IFAP outlines eight guiding principles : • Promote accessibility and transparency in the formulation and administration of • investment related policies; • Enhance stability of investment environments, security of property and protection • of investments; • Enhance predictability and consistency in investment related policies; • Improve the efficiency and effectiveness of investment procedures; • Build constructive stakeholder relationships; • Utilize new technology to improve investment environments; • Establish monitoring and review mechanisms for investment policies; and • Enhance international cooperation. source: Centre for International Economics 2009 Measuring progress in implementing APEC’s IFAP

6. 3. Japanese Experience (1)Japanese IIAs: Focused on the Aspect of Home Country • Japanese Investment stock (2008) : • - FDI from Japan : 680 Billions of dollars • - FDI to Japan : 203 Billions of dollars • Source: UNCTAD, World Investment Report 2009 • IIAs concluded by Japan - 24 BITs EPAs (Investment Chapters)

7. 3. Japanese Experience (2) Rare Utilization of the ISDS As a respondent: none As a claimant : none under Japanese IIAs (but only one case by third -Country IIA) →Why? ・・・・ Unknown Hypothesis - Relatively new history of negotiations of IIAs? - Japanese business culture? - Type of Japanese Investments? Long term presence for manufacturing, retail business etc, Large number of investors, Size of each investment (consist of many SMEs) - Corporate philosophy?

8. 3. Japanese Experience (3)Basic Concept of Consultation Mechanism • The “Improvement of the Business Environment” Chapter (or Article) sets up a committee to allow industry and Governments to work together to improve the business environment under the EPA/BIT framework. • Invited industries can discuss directly with the high rank • officials of host Country with the help of home Country • Basically no limitation regarding the discussion agenda • (Improvement of the infrastructure, Simplification and facilitation of • administrative procedures, Improvement of public safety and protection • of IPRs, etc.)

9. 3. Japanese Experience (4)Structure of the Improvement of Business Environment mechanism ※Provisions and schemes may vary with EAPs. The Government of Malaysia （MITI） Joint Committee ●function: reviewing and managing operation of the Agreement, supervising sub-committees, and considering amendments, etc. ●organization: representatives of both governments The Government of Japan （MOFA） contact contact reporting the findings recommendation, review Supervising, coordination reporting the findings recommendation, review report, consult related ministries Sub-Committee on Improvement Business Environment ●mission: addressing issues in relation to the improvement of the business environment, reporting the findings and making recommendations to both countries, and reviewing the implementation of the recommendations, etc. ●organization: representatives of both governments, and representatives of the business sector as necessary related ministries complain, check request of consultation answer complain, check request of consultation answer reporting the findings reporting the findings Liaison Office (MOFA) Liaison Office (MITI） designated Japanese authorities (Embassy of Japan in Malaysia, cooperating with JETRO KL) designated Malaysian authorities (Embassy of Malaysia in Japan) answer, providing information and advice answer, providing information and advice complain, check request of consultation complain, check request of consultation Japanese companies in Malaysia Malaysian companies in Japan

10. 3. Japanese Experience (5) Case Examples and Achievements Japan has held the Committee with many EPA partners continually. Japan-Mexico EPA The Committee held in April 2005, May 2006 and May 2007 Japan-Malaysia EPA The Sub-Committee held in March and October 2007 Main Participants Main Participants GOJ (MOFA, METI, Embassy of Japan in Mexico), JETRO Mexico Center, Nippon Keidanren (Japan-Mexico Economic Committee), The Japan Chamber of Commerce and Industry in Mexico, Japan Maquiladora Association, Government of Mexico (Ministry of Economy), etc. GOJ (MOFA, METI, Embassy of Japan in Malaysia), JETRO KL Center, The Japanese Chamber of Commerce and Industry in Malaysia, JAMECA, Government of Malaysia (MITI), etc. 　　　* Requests and results below are as of 2007. Requests from Japan side * Requests from Japan side * • Improvement of public safety • →　Damage decreased by opening a hotline connecting with the related ministry. • Anti-counterfeit. Standards and Conformity • →Opening a hotline connecting with IMPI • Improvement of tourism • →Introducing custom declaration cards for travelers in Japanese • Improvement of customs and taxation procedure • →Opening a hotline connecting with the central customs, considering Japanese enterprises when amending customs procedure • Infrastructure improvement • Improvement of quality of electricity • → Budgeting for infrastructure improvement • Improvement of shortage of gas supply • → Starting consideration in the government • Improvement of public safety （truck hijack prevention） • → Strengthening patrol and setting monitoring cameras, etc. • Anti-counterfeit Requests from Malaysia side * • Information provision relating industrial standards • Implementation of EPA (confirmation of ROO etc.) Requests from Mexico side * • Improvement of import procedure of agricultural products • Support for SME • Entering service of nonstop flights* * Aero México started services between Narita and Mexico City in November 2006.

11. 3. Japanese Experience (6) Evaluation by Stakeholders • Host country …Generally welcome • Knowing investor/ investors’ priority • Gaining the understanding of investors on host Country’s efforts • Keeping good communications with investors • Attracting further (future) investments • Investors… Generally satisfied • Industries can raise issues collectively, when individual • companies may not be inclined to raise the issue on its own • Creating a good relationship with high rank officials • Keeping good communications with host Country • Planning further (future) investments

12. 4. Toward the Future (1) Factors for Success of such Mechanism • Structure/Operation • Involvement of high rank officials • Power of the coordinating agency • Choice of issues (Prioritizing common interests) • Other Factors • Influence of investments • (Existence of expectation of host Country) • Attitude of investors • (Wish to contribute to the economic development of host • Country) • Development assistance • Good bilateral relationship

13. 4. Toward the Future (2) Proposal of “Stage by Stage Approach” • “Stage by Stage Approach” and importance of effective coordination among each tool • There are three stages of the investor-state relation and investment environment: • - Peace time period: Voluntary improvement of the investment environment is needed • - Early period: Efforts to prevent the disputes are needed • - Disputed period: Preparedness to the dispute is needed • Keep in mind, what should be done, stage by stage, by Investors and host Country • Both of Investors and host Country should make efforts to improve investment environment to • solve and prevent the investment disputes. Peace time period : voluntary improvement Early period: prevention of the disputes Disputed period: preparedness for the disputes Capacity Building (Bilateral, Multilateral, APEC) Communication by Embassy, bilaterally Arbitration (ISDS), Mediation Government Internal Checking by Authorities Committee on Improvement of Business Environment Observance of the CSR, or Codes of Conduct on Multinational Corporation Investor Lobbying activities, cooperation between private sector groups