WORLD TRADE
ORGANIZATIONWT/WGTI/W/87
5 July 2000
(00-2771)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM JAPAN
The following communication, dated 4 July 2000, has been received from the Permanent
Mission of Japan.
_______________
IMPROVING TRANSPARENCY
1. Transparency is one of the most important elements concerning international investment
rules. Japan presented a contribution paper to this Working Group last April under the title of
“Ensuring Transparency and Stability.”1 In this paper we will review below the recent changes in
situation on international investment and further discuss the several aspects of transparency issues,
thereby supplementing our previous paper.
1. Change of social environment surrounding investment
2. Ensuring transparency is, without doubt, an essential factor in the promotion of foreign
investment.  When an enterprise considers making an investment, the collection and analysis of basic
information is absolutely necessary as is the factor of ensuring transparency of the laws and
regulations of a host country.  Although the computerization of modern society has contributed toenhancing transparency in general and has enabled easy access to obtain information, such as
economic statistics concerning businesses, improving the transparency of investment rules in host
countries is still an important issue.
3. In particular, the need for information on rules and their modification, in host countries is
gaining importance due to the demand for an appropriate risk management.  On the one hand, thepossibility of expropriation, which used to be one of the important factors of risk management for
foreign investment, has relatively decreased.  On the other hand, however, governments need to
reform their rules frequently, in order to respond to the globalization and the computerization of the
economy.  The fact, therefore, that regulations can be modified at any time is becoming an important
concern of companies.
4. Adjustment at international level, as well as competition between the various systems, are
becoming more and more intense, thereby requirin g governments to reform their regulations/rules,
and, we should note, many countries are currently carrying out rapid reforms by changing their rules
dramatically.
                                                     
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5. Thus, the interests of companies seem to be moving towards that surrounding the rules in host
countries, while at the same time, the rules themselves are becoming ever more complex.  The desire
of investors to obtain accurate and systematic information is understandably increasing rapidly.
6. In accordance with the reform of rules, the n eeds concerning transparency have changed and
the demand, not only for transparency in the rules,  but rather for the transparency in the reform
process itself, is increasing.  Improving transparency will enhance the predictability of rules, and will
also contribute to preventing arbitrary or unnecessary changes in the rules by the host government.
While changing the rules is necessary to respond to the evolving society, improving transparency
itself would help to stimulate the interests of the persons concerned and would, therefore, enable an
impartial structural reform by reflecting a wide scope of opinion.
7. Regarding the recent changes of rules in Japan, regulatory reforms have been in progress for
sometime over a wide area.  The Three-Year Project for the Promotion of Deregulation starting from1995 has been completed, while another three-year project starting from 1998 is still in progress.  For
example, in the communication industry, deregulation has been concluded in many areas, including
that concerning modification of regulations on the balance of supply and demand.  A regulatory
reform is also underway in the finance sector, beginning with the reform of the Foreign Currency
Control Law.  There have been other wide-ranging reforms in areas, such as market access, productline-up and price regulation.  The project will continue to be implemented, to include a review of the
reform that covers wide-ranging areas.
2. Recent changes in the Japanese system concerning transparency
8. Recently, many changes have been made to the laws in Japan, in the context of a structural
reform.  Improving transparency is particularly  important, and there has been for example, the
following changes:
(a) The enactment of the Administrative Procedure Law
9. In order to improve the fairness and transparency of the administration, the Administrative
Procedure Law prescribes the commonly applicable rules in relation to the administrative procedures
for administrative action, guidance and registration.  The law was enacted in October 1994. The mainobjective of this law is to secure a prompt, fair and transparent administration concerning the
applications for approval or license, or concerning adverse treatments.  For example, this law includes
a provision requiring the Government to publicly a nnounce the standards of review for the approval of
an application, and to explain the reasons if it is rejected.
(b) Public Comment Procedure
10. In order to secure fairness and improve transparency concerning the formulation of a
regulation, a public comment procedure was established in March 1999.  Policies emanating from anadministrative organ of the national government shall be formulated through the notice and comment
procedure.  First, the proposed regulation is publicly notified through the Internet distribution, the
distribution of pamphlets at the counter of gove rnment offices or by publication in the Official
Gazette, etc.  Subsequent to such public notification, comments, information and expert knowledge
are called for.
(c) Law Concerning Access to Information held by Administrative Organs
11. This law establishes the general obligation of administrative organs, that they should disclose
administrative files when requested, in the light of the Constitution which indicates that sovereignty
should remain with the people, that the accountability of the government be assured and thatWT/WGTI/W/87
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administration be open to the public.  This law was promulgated in May 1999.  The scope of the
obligation of disclosure is very wide with only limited exceptions, such as the information concerning
privacy, national security and other information; the disclosure of which could deteriorate the faith
achieved with foreign countries, or even affect bilateral negotiations.
(d) Providing information through the Internet
12. In line with the rapid diffusion of the Internet, ministries, agencies and government
organizations in Japan are now promoting the use of the Internet as a means for disseminating
information to the public; the contents of which are being improved rapidly.
3. Ensuring transparency at international level
13. With a view of increasing international investment, a number of measures can be considered.
(a) Provisions of information through voluntary government policy
14. The government itself can provide information voluntarily, or establish enquiry points
concerning domestic rules. In such a case, there are many ways in which to improve the convenience
of matters for the investing companies, including by increasing the frequency of the distribution of
information, by integrating the information itsel f, and by improving the system of answering
enquiries.  Recently, due to the significant development of the Internet, net-access from abroad is
becoming more important.  An example of provid ing information to foreign investors wishing to
invest in Japan is through the JETRO (Japan External Trade Organization).  JETRO provides a “guide
book for investment to Japan” on its website, which covers a wide range of information on the
investment environment, such as on market access, tax systems, etc.
15. The followings are examples of efforts made by several countries towards improving
transparency.
(i) The use of the Internet
16. The Internet, together with enquiry points, is being used by an increasing number of
countries, as channels for providing information on regulations and rules.  The development of IT has
reduced the cost of information distribution.  There are even countries that have made it possible to
search for most of its domestic rules on the Internet.
(ii) The use of a central registry
17. Using a central registry as the sole source of all the regulations of local governments is also a
useful measure to ensure transparency, thus facilitating the collection of information by foreign
investors.
(b) Providing information based on laws
18. Besides the voluntary presentation of information by a government with regard to investment
policies or rules, the approach of establishing a domestic law on disclosure could also be considered.The “Law Concerning Access to Information held by Administrative Organs” in Japan is an example
of such approach.
19. Recently, due to the rapid changes in the econom ic environment, each country needs to adapt
rapidly its system to the new environment.  It is important to notify to the public, not only of the
present situation of the rules, but also of the direction that the reform process is taking, as promptly asWT/WGTI/W/87
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possible. In this regard, already notifying the public from the rule making stage would be useful.  The
public comment procedures taken in Japan, the US and some other countries, seem to be contributing
greatly to the improvement of transparency, and can be considered as one possible approach.  At this
point, although there are few countries that have a clear rule for public comment procedures, a
growing number are holding various consultation processes in the regulatory decision-makingsessions.
20. Improving transparency contributes to making information clear, not only that concerning
policies/rules, but also that on approval and licensing procedures, which helps towards a rapid
decision-making by the companies.
(c) Providing information according to an international framework
21. As described below in paragraph 5, other than providing information on a national basis,
whether voluntarily or rule-based, the host country has provided information according to theinternational agreements. There are two types of international agreements: the first being the indirect
approach where the host country provides investors with information via exchanges between
participating countries; while the other is the direct approach where information is given directly to
investors via an International Organization.  Similarly to the national approach, a voluntary or rule-
based approach also exists.
22. A voluntary approach can be seen in the case of the OECD or the APEC, where a wide scope
of information is voluntarily provided through the work and service of the Secretariats, or through
holding seminars.  In the case of ASEAN, as part of a FDI-attracting strategy and to improve
transparency, a list of each member country’s laws, procedures, competent authorities, etc., is
published.  ASEAN has also published a handbook on the major investment-related agreements in theregion.
23. A typical rule-based approach can be seen in the WTO.  For example, a framework where
every Member country regularly reports any investment-related information could be considered.
4. Merits and demerits for developing countries
24. Generally speaking, improving transparency would increase foreign investment, thereby
contributing widely to the economic development of developing countries, including the formation of
capital, technological development and job-creation.
25. In particular, improving transparency will contribute to reducing the risks involved in
investment, and will enable foreign enterprises to make high-risk investments: i.e. those using high-
tech and large capital investments.
26. Furthermore, speeding up domestic procedures due to an enhanced transparency will also lead
to a smoother operation of investment for those industries faced with rapid technological changes.Thus, an attraction of investment in such industries as the Tele-communication industry is expected.
27. An increase in foreign investment is not the only merit of improving transparency.  The
policies and rules that affect foreign companies can also have an effect on domestic companies.  Thus,
in addition to the indirect effect of stimulat ing domestic companies through foreign investment,
improving the transparency of rules would have a positive effect on domestic industries.
28. On the other hand, to improve transparency a certain amount of administrative work is
required, which could be a burden on developing c ountries.  Although it is apparent that improving
transparency is beneficial, it is important to assess the actual cost and benefit.  It is important toWT/WGTI/W/87
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consider what kind of information can be provided at a low cost in the context of promoting
investment and whether such information is useful to  investors.  An exchange of both information and
technical support concerning this issue, through the framework of International Organizations, would
be useful.
5. The present situation of international ru les concerning transparency, as well as
contribution by the WTO
29. The following are examples of the treatment of transparency in international rules, such as
those in the WTO Agreement.
(a) Main provisions in current international rules
(i) Publication of rules
30. There are two ways to specify the scope of what should be published: 1) the exemplifying
approach stated in Article 10 of the GATT, which lists the actual aspects of transparency (e.g. laws,regulations, judicial decisions, etc.); and 2) the comprehensive approach stated in Article 3 of the
GATS, which specifies the coverage in a general manner (e.g.…all relevant measures..).
31. The exemplifying approach can be considered as being as wide as the comprehensive
approach, so long as it actually covers the area concerned.  On the other hand, the comprehensive
approach may be a little vague for ensuring the actual effect, so making the obligation clearer atcommittee-level would be an idea.
(ii) The time-limit for publication
32. To ensure predictability for investors, measures  that affect investment should be published at
least by the time of the entry into force of the re gulations.  Furthermore, in order to give investors
time to consider the new regulations, it is desirable that they be published as early as possible.
33. The wording of the articles on the issue of time-limits differs among each agreement. In
GATT Article 10, for example, it is only stated, “...shall be published promptly...”; in GATS
Article 3, an additional phrase is mentioned, “...at the latest by the time of their entry into force...”;
while in Article 1802 of the NAFTA, the phrase, “To the extent possible…publish in advance…and
provide…a reasonable opportunity to comment...”, is stated in addition to the word, “promptly”.
(iii) Enquiry
34. Answering questions raised by other countries is a basic obligation.  Such obligation can be
found in, for example, Article 6-3 of TRIMs Agr eement and GATS Article 3.  To cover the above
requirement, establishing an enquiry point, as well as unifying various offices, to answer such
questions is a plausible idea.  The GATS prescribes the establishment of an enquiry point.
(iv) Notification to the Secretariat
35. The issue of notifying the WTO Secretariat, an additional obligation to that of publication, is
to what extent regulations should be notified.  The GATS Article 3 indicates the scope of the
obligation in a general manner.  On the other hand, however, Article 6-2 of the TRIMs Agreement
simply limits the obligation to a “..publication in which TRIMs may be found..”.WT/WGTI/W/87
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36. As the notification procedure set down the obligation to present certain information
periodically, the administrative burden for developing countries should particularly be taken into
account when considering a system for notification.
(v) Transparency in administrative procedures
37. In provisions, such as the GATS Article 6 and Article 1804 of the NAFTA, rules exist, not
only on the transparency of the regulations themselves, but also on the transparency concerning the
implementation of rules, including the procedures for licensing.
(vi) Notification prior to the adoption of a regulation
38. Article 2-9 of the TBT Agreement and Article 7 of the TBT Agreement call for a notification
in advance of adopting the regulations.
(b) The implementation of transparency measures in existing international rules (OECD report on
the transparency provisions of GATS)
39. In the GATS, there are provisions, such as Article 3, on transparency, and in order to obtain
an efficiency of implementation, active discussions are being made.  Last year, the OECD released a
Report to analyze the current situation of implementation of the transparency provisions of the GATS.
The main points of the report are as follows:
(i) Enquiry points
40. GATS Article 3-4 obliges members to establish enquiry points in order to answer questions
concerning the domestic rules on trade in services; the phone and fax numbers of which are available
on the WTO website.  It is has been pointed out, however, that there are many established enquiry
points that do not provide adequate responses.  On the other hand, countries such as New Zealand,
Australia and Canada, are taking measures to create their own websites, providing more detailedinformation by introducing the background, as well as the contents of discussions surrounding the
GATS.
(ii) Notification to the WTO
41. Certain provisions of the GATS contain the obligation to make periodical notifications to the
Council for Trade in Services. Up until 1999 included, there were a total of 106 notifications of whichabout half (55) covered the introduction and changes of domestic rules affecting investment.  We can
note that although the notifications are still not many, they are contributing to the improvement of
transparency.
(iii) The role of the WTO
42. An increasing number of bilateral and regional investment rules have been made.  In light of
the characteristics of the WTO, its overall framework can play an important role in improving
transparency.
43. First of all, the WTO, as an international organization, is able to distribute unified and wide-
ranging information.  Currently, each country is working on providing information on its domestic
regulations and rules with regard to investment in  order to improve transparency, although not all the
information is being collected at international or ganization-level.  Due to the information being
dispersed among the different countries, and the differing of formats, it is difficult for foreigninvestors to obtain unified information.  In order for investors to make accurate and fast investmentWT/WGTI/W/87
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judgements, it is important for them to obtain detailed information on certain areas of certain
countries, as well as unified information on a wide variety of areas from a broad scope of countries.
Making unified rules on the transparency of investment-related regulations in the WTO would
contribute to improving the investment environment, which would consequently lead to the promotion
of investment.
44. Second, the WTO has accumulated over the years expert knowledge and experience regarding
trade/investment obstacles, and it would be useful to discuss the problems concerning transparency in
this forum.  Thus we could consider the kind of information that should be provided and how it should
be presented, in the context of promoting trade and investment.
45. Third, the WTO is an institution that formulates agreements, and coordinates and ensures the
implementation of the rules.  A rule established on an international basis could be an effective
measure to ensure transparency.  A transparency provision within the framework of the WTO wouldcontribute to the actual improvement of the rule.
46. Fourth, the WTO is an international organization, including developed and developing
countries.  The framework of the WTO has promoted the trade liberalization, coordinating the various
interests of Member countries.  The WTO is thus an appropriate forum for rule-making, reflecting the
benefits of developing countries.  Although improving transparency is beneficial to the host country,including any developing country, as it promotes investment, it does, at the same time, lead to an
increase in the administrative burden for some countries, notably developing countries.  Through
utilising the WTO framework, impartial rule-making, as well as technical support and the diffusion of
best practices, will be made all the more possible.
(iv) Further discussions
47. The following points could act as a reference for discussing a possible international
framework in the future, with a view to improving the transparency of investment-related regulations.
• Each Member shall publish …… all relevant measures of general application which pertain to or
affect the operation of this Agreement, including measures affecting the establishment, expansion,
withdrawal and operation of investment.
• Each Member shall publish promptly and, except in emergency situations, at least by the time of
their entry into force, …
• Each Member shall: (a) publish in advance any measures that it proposes to adopt: and (b) provide
a reasonable opportunity for comment by interested persons and Parties on such proposed
measures.
• Each Member shall accord sympathetic consideration to requests for information, and afford
adequate opportunity for consultation, on any matter arising from this Agreement raised by anyanother Member.
• Each Member shall respond promptly to all requests by any other Member for specific
information on any of its measures of general application…. Each member shall also establish one
or more enquiry points to provide specific information to other Members, upon request, on all
such matters as well as those subject to the notification requirement in paragraph …..  TheSecretariat shall develop a list of the enquiry points, and each Member shall update information
on enquiry points at least once a year.  Appropriate flexibility with respect to the time-limit withinWT/WGTI/W/87
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which such enquiry points are to be established may be agreed upon for individual developing
country Members. Enquiry points need not be depositories of laws and regulations.
• Each Member shall notify the Secretariat of the publication in which government measures
affecting foreign direct investment may be found, including those applied by regional and local
governments and authorities within their territories.
• Each Member shall promptly and at least annua lly inform …..(name of a body within the WTO)
of the introduction on any new laws, regulations, on administrative guidelines, or any changesthereto which significantly affect treatment covered by this Agreement regarding foreign direct
investment…..(name of a body within the WTO) shall develop the procedures for such
notification of information.
• Where authorization is required for the establishment, expansion, and operation of foreign direct
investment, the competent authorities of a Member shall, within a reasonable period of time afterthe submission of an application considered complete under domestic laws and regulations,
inform the applicant of the decision concerning the application.  At the request of the applicant,
the competent authorities of the Member shall provide, without undue delay, informationconcerning the status of the application.”
• Wherever possible, persons of another Member that are directly affected by an administrative
proceeding are provided with reasonable notice concerning foreign direct investment, in
accordance with domestic procedures, when a proceeding is initiated, including…. .
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