. /.WORLD TRADE
ORGANIZATIONWT/WGTI/W/126
1 July 2002
(02-3646)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM THE SEPARATE CUSTOMS TERRITORY OF
TAIWAN, PENGHU, KINMEN AND MATSU
The following communication, dated 28 June 2002, has been received from the Permanent
Mission of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.
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DEVELOPMENT PROVISIONS
1. The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu appreciates the
Secretariat’s Note on the development provisions and would like to offer this brief note to indicate our
support of having effective development provisions in the future investment rules to enable
developing Members to benefit therefrom.  Some additional practical considerations are submitted at
the same time for participants to take into account.
2. One of the purposes of having a multilateral investment agreement is undoubtedly to provide
a stable as well as predictable environment for investment.  Apart from supporting the pursuit of this
objective, we strongly support developing Members in obtaining a reasonable condition for
development within the future investment framework.  We consider that although dual favors in both
requiring developed Members to open up wider of the business opportunities for investors from
developing Members and allowing developing Memb ers an extended period and higher flexibility to
phase-in the future investment framework would be of assistance, the future investment rules should
still be focusing more on providing a transition period and flexibility for developing Members.
3. Regarding the support for developing Members in achieving a reasonable condition for
development within the future investment framework, since transitional arrangements are among the
most flexible ways to deal with developing Members and have been used in quite a number of WTO
agreements, there is no reason why the same mechanism cannot be used in the future rules on
investment.  A transitional arrangement for developing Members should definitely be available underthe future investment rules.  It will certainly facilitate developing Members in adjusting to the
requirements imposed by these future rules. Howe ver, any transitional arrangement should probably
apply to specific issue only, for example, the establishment of an enquiry point.  It might not be
appropriate for such arrangement to be made applicable to matters relating to, say, publication of
regulations.  Neither would it be advisable to allow the application of transition arrangements in most-favored-nation treatment.  Further discussion is needed on the scope of matters that can be suitably
covered under transition arrangements for developing Members.
4. The Doha Ministerial Declaration has already explicitly declared that the commitments model
under the GATS would be used as a basis for future model on the negotiation of investment rules.
Under the GATS, developing Members do enjoy a substantial degree of flexibility in decidingwhether to include specific sectors within their economy into the Schedule of Commitments.
Furthermore, under the GATS, developing Members may impose specific restrictions on the provision
of national treatment.  We see no reason why developing Members may not be given the sameWT/WGTI/W/126
Page 2
flexible treatment in the future rules on investment.  Members will probably agree that such special
treatment could go far in meeting the needs of the developing Members.
5. Perhaps it would also be useful for the future investment rules to include provisions urging
developed Members not to expect developing Members to accord balanced commitments on the
opening up of investment markets as well as provisions indicating the progressiveness of theliberalization of investment markets.
6. Since the need of flexibility is to enable de veloping Members to identify their development
priority and to enhance their economic developmen t, it might not be appropriate to allow fuller
flexibility regarding some aspects of international investment rules.  Our views are as following in
this regard:
• Pre-establishment treatment could be given more flexibility than post-establishment treatment,
because pre-establishment is more directly related to the development needs of developing
Members.
• Most-favored-nation status should be given less fl exibility than national treatment, due to the fact
that most-favored-nation treatment discriminates investors based only on their origins and has lessto do with development needs of the developing Members.
• Disclosure of investment laws and regulations as well as procedural fairness should be given less
flexibility than the establishment of enquiry points, because the latter involves higher capacitydemand and the former is less related to development needs.
7. We do not favor granting developing Members with right on imposing performance
requirements on foreign investors.  If such performance requirements are allowed, it should not be
made permanent under future investment framew orks.  Requiring foreign investors to transfer
technology to domestic firms or to the government might not be an effective way to actually attract
high quality technology.  It could have the counterproductive effect of deterring genuine investorsfrom investing in such host countries.  From the in vestors’ point of view, performance requirements
could become a non-transparent and unpredictable factor preventing them from participating in the
business opportunities in developing Members.
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