Current International Investment Issues

OECD – INVESTMENT COMMITTEE

The main projects on the work program of the Investment Committee include:

• Business integrity in weak governance zones. This project has been on the Committee’s agenda since April 2004 and is now nearing completion. The aim of the project is to assist companies in responsibly managing their investments in weak governance zones through the development of a risk management tool. The tool is non-prescriptive and consistent with the objectives and principles of the OECD Guidelines. During the course of the project the Committee considered the generic challenges that emerge from investments in weak governance zones, based on a case study of investments by OECD companies in the Democratic Republic of the Congo. In preparing terms of reference on conducting business with integrity in weak governance zones, the Committee largely focused on issues raised by the OECD Guidelines and six other OECD integrity instruments. This work has been subject to extensive consultation with stakeholders, and in October 2005, the draft text was made available for public comment. There was a strong response and these comments will be used to improve the risk management tool which is scheduled for finalisation by Spring 2006.
• Investment for development — Policy Framework for Investment (PFI). The PFI is being developed by a Task Force established by the Investment Committee, which involves OECD and non-OECD governments, civil society actors and other international organisations. The objective of the PFI is to promote a shared view among OECD and non-OECD governments and business of what constitutes ‘good policies’ in a range of areas bearing on investment. The PFI is a comprehensive, evolving and non-prescriptive operational guide on a broad range of policies relevant to the investment climate, such as trade policy, competition policy, taxation policy and corporate and public governance. It has been designed for governments engaged in domestic reform, regional cooperation or international policy dialogue aimed at creating an investment environment that is not only attractive to investors but enhances the benefits of investment. The PFI is scheduled to be completed by the May 2006 OECD Ministerial Meeting.
• Analysis of key obligations and emerging issues in international investment treaties. Against the background of a proliferation of international investment agreements, the emergence of a ‘new generation’ of bilateral and regional agreements and a growing body of jurisprudence, the Committee has committed to undertaking in-depth analysis of the core provisions and arbitration procedures included in international investment agreements. To date, the work has largely focused the legal literature, evolving arbitral jurisprudence and state practice in relation to the implications of ‘Most-Favoured-Nation’ provisions, interpretations of ‘fair and equitable treatment’ and ‘indirect expropriation’. The Committee has progressed this work during the reporting period by analysing the coverage of FDI by OECD investment agreements and undertaking a stock take of the novel features that have recently been included in such agreements. In early 2005, the Committee commenced a new strand of work on the improvements to investor-state dispute settlement mechanisms.
• Investment for development — outreach. The Committee’s aims in this area are to increase the capacity of non-members (China, Russia, India, Africa, Middle East and North Africa (MENA), Asia, Latin America, South East Europe and Eurasia) to attract more and higher quality investment by engaging in dialogue and sharing best practice advice for promoting a favourable environment for both foreign and domestic investment. The Committee undertakes its outreach work in a number of forums including, ad hoc working groups, regional roundtables, peer reviews and background reports. The OECD Global Forum on International Investment (GFII) has been established as vehicle for the continuing policy dialogue with non-members. Investment policy programmes with Russia, China and other major players have continued over the period and initiatives in Africa, Asia and the Middle East have also been launched recently.

OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES

The promotional activities of the ANCP during 2004/2005 have been focused on finalising the upgrade of the ANCP website, promoting the Guidelines to business groups and developing a more targeted approach to the consultation process with government agencies, non-government organisations (NGOs), business, and other social partners. This has involved:

• Consultation sessions with social partners in Canberra in November 2004 and Melbourne in May 2005. These sessions provide a forum for interested parties to raise issues relevant to the Guidelines with the ANCP, facilitate discussion on OECD working papers and provide ideas and assistance with the promotion of the Guidelines.
• Finalising the review and upgrade of the website dedicated to the ANCP and the Guidelines (www.ausncp.gov.au) . The upgrade has improved registered users’ access to the secure section of the site and has thereby enhanced the ability of the ANCP to consult with social partners electronically.
• Outreach to the business community in relation to promoting the Guidelines and efforts to establish a network of business contacts to consult on the Guidelines and related issues. This included:
  • a presentation on the OECD Guidelines and OECD Corporate Governance Principles to the Australian Stock Exchange Corporate Governance Council at its September 2004 meeting; and
  • increased business attendance and participation at the November 2004 ANCP community consultation.
• Providing for the inclusion of an attachment providing information on the OECD Guidelines and the ANCP in all foreign investment approvals for business proposals granted by the Foreign Investment Review Board.
• Chairing an interdepartmental meeting on the Guidelines and the specific instance that was raised with the ANCP in June 2005.
• Attending regular interdepartmental committee meetings Chaired by the Attorney-General’s Department on bribery and the OECD Bribery Convention. The ANCP has also met separately with the Attorney-General’s Department to explore increased cooperation between the agencies on raising awareness of the OECD Guidelines and the OECD Bribery Convention.
• Continued efforts to promote the Guidelines through embassy and consular networks. This has included briefing senior officials in person prior to them taking up postings and incorporating information on the Guidelines into information packs provided to all Australian Government officials taking overseas postings.
• Attending corporate social responsibility conferences hosted by other organizations (for example, the 2004 Prime Minister’s Community Partnership Conference and Awards and the bi-annual Department of Foreign Affairs and Trade and NGO Human Rights Consultations).

The ANCP participates in the Annual OECD Corporate Responsibility Roundtable and the Annual Meeting of the National Contact Points (NCPs). The 2005 Roundtable held in Brazil was focussed on the theme “The OECD Guidelines and Developing Countries – Building Trust.” The roundtable brought together representatives of the business, trade union, and NGO communities in China, India, South Africa and other non-adhering countries, as well as representatives of BIAC (the Business and Industry Advisory Committee to the OECD), TUAC (the Trade Union Advisory Committee to the OECD) and OECD Watch (a network of NGOs). Participants at the Roundtable were invited to help NCPs to develop a better understanding of: 1) how actors from non-adhering countries view the concepts and principles expressed in the Guidelines; 2) how they can be implemented and promoted in non-adhering countries; and 3) how the Guidelines’ development impact can be enhanced.

• Refer to the Australian National Contact Point for the OECD Guidelines for Multinational Enterprises website for more details on the Guidelines and the activities of the ANCP.

WORLD TRADE ORGANISATION

Updates on the WTO are available on the WTO website.

For further information on Australia’s position on the WTO please see the relevant section of the DFAT website - www.dfat.gov.au/trade/negotiations/index.

ASIA PACIFIC ECONOMIC CO-OPERATION

Australia is hosting APEC in 2007. For more information on the Foreign Investment and Trade Policy Division’s involvement in the lead up to APEC 2007 refer to the APEC page of this website . Further information on Australia’s involvement is also available on the relevant section of the DFAT website - www.dfat.gov.au/apec/index.

Australia’s current Individual Action Plan is available at - www.apec-iap.org.

Updates on APEC are available on the APEC website.

BILATERAL AGREEMENTS

Australia recently signed IPPAs with Sri Lanka, Mexico and Turkey (though these are not yet in force) and is currently negotiating IPPAs with Lebanon and Iran.

Australia-China Free Trade Agreement Negotiations

On 18 April 2005, Prime Minister John Howard and his Chinese counterpart agreed to launch negotiations on a bilateral FTA. The decision to proceed to FTA negotiations follows the completion of a joint feasibility study, which found that an FTA would provide substantial economic benefits to both countries, and Australia’s formal recognition of China as a market economy.

The first three rounds of FTA negotiations were held in Sydney on 23 May, Beijing from 22-24 August, and Beijing from 2-4 November 2005. To date, the negotiations have focused on procedural issues and a wide ranging and comprehensive exchange of information on our respective trade and investment regimes.

As at 31 December 2004, Australia’s total stock of investment in China was $A1.25 billion (of which only $466 million was FDI), making China the 23^rd largest destination for Australian outward investment. The stock of Chinese investment in Australia totalled $A1.98 billion making China Australia’s 17^th largest source of foreign investment.

For further information on the China FTA negotiations please see the relevant section of the DFAT website – http://www.dfat.gov.au/geo/china/fta/

Australia-Malaysia Free Trade Agreement Negotiations

On 7 April 2005, the Prime Minister and his Malaysian counterpart announced that Australia and Malaysia would enter into negotiations for an FTA. The announcement followed the completion of parallel scoping studies by the two Governments into the likely impacts of a bilateral agreement.

The first two rounds of negotiations were held in Kuala Lumpur in May and August of 2005 and have covered a wide range of issues, including trade in goods; trade in services; foreign investment and trade facilitation. To date, negotiators have undertaken a substantial information exchange on the regulatory regimes of the two countries.

As at 31 December 2004, Malaysia was Australia’s 28^th largest destination for outward investment with the Australia stock of total investment in Malaysia valued at $A736 million (the FDI component was $406 million). The Malaysian stock of investment in Australia for the same period was $A5.3 billion (of which $2.8 billion was FDI) making Malaysia the 13^th largest source of foreign investment in Australia.

For further information on the Malaysian FTA negotiations please see the relevant section of the DFAT website – http://www.dfat.gov.au/geo/malaysia/fta/index.html

Australia-New Zealand-ASEAN Free Trade Agreement Negotiations

At the ASEAN — Australia — New Zealand Commemorative Summit on 30 November 2004, Prime Minister John Howard, together with his New Zealand and ASEAN counterparts, announced that negotiations would commence on an FTA between Australia, New Zealand and ASEAN in early 2005.

The first two rounds of the FTA negotiations, held in February and March in 2005, focused on procedural issues, including modalities for the negotiations and the possible architecture of an agreement. During the last three rounds of negotiations (June, August and October 2005), the discussions were progressed on the substantive issues under each of the four Working Groups — rules of origin, services, investment and legal issues.

Two-way investment between Australia and the ASEAN is substantial. The cumulative stock of total investment from ASEAN countries in Australia, as at year end 2004, was $A27 billion. However, FDI accounted for only $A7 billion of this figure. Australia’s investment stocks in the ASEAN countries totalled $A19 billion for the same period, of which only $A3 billion was FDI.

For further information on the ASEAN FTA negotiations please see the relevant section of the DFAT website – http://www.dfat.gov.au/trade/fta/asean/index.html

Australia-United Arab Emirates Free Trade Agreement Negotiations

At the fourth meeting of the Australia-UAE Joint Ministerial Commission (JMC) in Canberra on 15 March 2005, Australia's Trade Minister Mr Mark Vaile and the United Arab Emirates’ Economy and Planning Minister, Sheikha Lubna Al Qassimi, announced that the two countries would commence negotiations on a bilateral FTA.

The first two rounds of negotiations, which were held in Canberra in March 2005 and Abu Dhabi in June 2005, included Working Group discussions on goods, services and Investment, and legal issues. On investment, negotiations have progressed from the substantive information exchange process to discussions on draft text for inclusion in a chapter. The third round on negotiations was held on the Goldcoast early in December 2005.

Two-way investment between Australia and the UAE is very modest. At 31 December 2004, the UAE was only the 37^th largest destination for Australian outward investment with the Australian total stock of investment in the UAE valued at $93 million. Of this, only $A21 million was FDI. While the statistics for UAE investment in Australia are not available, it can be assumed that they are likewise very modest.

For further information please see the relevant section of the DFAT website – http://www.dfat.gov.au/geo/uae/fta/index.html

Australia-Japan Trade and Economic Framework

On 20 April 2005, the Prime Ministers of Australia and Japan agreed to commence a joint feasibility study into a possible FTA. The study will analyse the possible implications of a comprehensive FTA to enable both countries to consider whether they should proceed to formal FTA negotiations. The feasibility study is scheduled to be completed by 20 April 2007.

A joint study into the costs and benefits of trade and investment liberalisation between Australia and Japan was finalised and released on 20 April 2005. The study was undertaken under the Australia-Japan Trade and Economic Framework (AJTEF) signed in July 2003. As part of that study, the Foreign Investment and Trade Policy Division prepared a case study on the bilateral FDI relationship, including a discussion of the possible beneficial impacts of liberalising FDI restrictions in both countries.

The AJTEF commits both countries to work to achieve comprehensive trade and investment liberalisation. It builds on two other formal agreements between Australia and Japan — the Agreement on Commerce between the Commonwealth of Australia and Japan, 1957 and the Basic Treaty of Friendship and Co-operation between Australia and Japan, 1976 — to further strengthen the bilateral economic relationship between the two countries.

For further information on the UAE FTA negotiations please see the relevant section of the DFAT website – http://www.dfat.gov.au/geo/japan/fta/index.html