NEAT Working Groupon East Asian Investment Cooperation

Report(Final)

Beijing, China
3 July 2009

NEAT Report on East Asian Investment Cooperation

Introduction
NEAT Working Group Meeting on East Asian Investment Cooperation was held in
Beijing, China on 3 July 2009. NEAT members and experts from the ASEAN + 3
countries took part in this meeting. There were an opening session, three panel
discussions, and a wrap-up session.
Dr. Zhao Jinping, Deputy Director of the Foreign Economic Relations Department,Development Research Center of the State Council of China, delivered a keynote
speech at the Opening Session, in which he reviewed the impact of the global crisis onChina, China’s responses to the crisis, and their influence upon the region.
The three panels were:
1.Global economic recession and its impact on East Asia;
2.Economic recession and East Asian investment cooperation: challenges
and opportunities; and3.Policy recommendations to further East Asian investment cooperation.
The participants assessed both the challenges and the opportunities that the global
recession brought to East Asia, shared their views on how to strengthen East Asianinvestment cooperation to cope with the challenges, and put forth policy
recommendations to seize the opportunities that have arisen along with the crisis.
I. Challenges: global recession and its impact upon East Asia
The participants recognized the severity of the global recession and its impact on EastAsia. The global financial crisis that erupted in September 2008 has expanded fromthe financial sector to real economy and escalated into an unprecedented severe
economic recession since WWII. World economic growth has been declining sharply.
According to the IMF, the year 2009 is projected to witness a growth rate of -1.3%.
The financial market has been undergoing vehement shock. A large number offinancial institutions have suffered huge losses. World trade has sharply contracted,
projected to hit -11.0% of growth rate in 2009. According to the UNCTAD projections,
global FDI inflows in 2009 will drop by close to half.
East Asia is now facing a most difficult economic challenge. In the financial sector,
equity prices tumbled and many currencies depreciated against the US dollar. The
FDI in the region saw precipitous fall. The shrunk markets and reduced imports, andre-emergence of trade protectionism in some developed economies led to drastic
contraction in the region’s exports and production.
II. Opportunities: stimulus packages and regional economic cooperation
While being keenly aware of the above-mentioned challenges, the participants
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NEAT Report on East Asian Investment Cooperation

expressed hope for economic recovery and further regional cooperation. For instance,
they pointed out that there might be very good opportunities in the crisis for East
Asian economies to expand domestic and intra-regional demand, to promote relevant
research and development, to take advantage of international resources and to play agreater role in the international economic system.
Actions have already been taken. At the national level, East Asian countries havestaged unprecedented economic stimulus packages consisting of financial andmonetary policies as well as fiscal expenditures for infrastructure building andindustrial rejuvenation plans to stimulate investment and ensure growth. At theregional level, intra-regional trade and investment interdependence has been further
enhanced, and transnational economic cooperation has progressed in trade, financeand investment. For instance, there has been remarkable progress in ABMI and theIntergovernmental Agreement on the Trans-Asian Railway Network has come intoeffect.
III. Policy Recommendations
Based on facts and assessments, and the consensus on greater regional cooperation
and better policy coordination, the participants made the following policy
recommendations.
1. Improve the investment environment
East Asian countries should construct an attractive investment environment that
ensures increased FDI flows within and into the region, including soundmacroeconomic fundamentals, transparent and nondiscriminatory legal systems andsensible policy regulation.
It was proposed that a regional investment rule be set up within the EAFTA
framework to make and implement non-biased policies, laws and regulations on not
only inward but also outward investment and to put in place proper mechanisms ofnational treatment and dispute settlement. An investment promotion agency,
investment information and service network and a dispute settlement centre could beset up.
For better policy coordination, it was proposed that the Meeting of ASEAN Plus
Three Finance Ministers be expanded to include Central Bank Governors and theindependent supervision unit be established as soon as possible to utilize the CMIM.
The participants also called for domestic policies and measures for better investment
environment. For instance, measures should be taken to improve transparency and tocounter protectionism.

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NEAT Report on East Asian Investment Cooperation

2. Develop Asian bond markets
The participants agreed joint efforts should be made to facilitate financing for East
Asia investment cooperation. It was proposed making use of the newly founded
Credit Guarantee and Investment Mechanism (CGIM) to expand the scale of ABM,and to attract more idle capitals into regional investment.
It was proposed improving the institution-building capacities of less developed
countries, encouraging transnational investment in bonds and removing the restrictive
investment measures in the region, including barriers in financial supervision, taxation,laws and regulations, and financial infrastructure. Progressive liberalization should bemade to achieve free and open investment in the region.
The participants also proposed strengthening regional capital market development andintegration.
3. Strengthen investment cooperation on infrastructure building
The participants proposed exploring the possibilities of building an East AsianInvestment Cooperation Fund, taking advantage of the Intergovernmental Agreementon the Trans-Asian Railway Network, and exploiting the stimulus packages to further
promote investment cooperation on infrastructure building in the region. The Task
Force for the Possibility of East Asian Infrastructure Fund mainly looked into possible
implementation issues and proposed an investment cooperation mechanism to carryout the projects under the Fund. It was proposed that public financial support beenhanced, large amounts of private capital mobilized, ASEAN experience learned, thepublic-private partnership program established, and joint infrastructure projects
developed.
4. Promote human resources development
To upgrade their FDI portfolio, countries have to be able to supply high quality
human resources. Cooperation should be strengthened to develop human resources in
the region. For instance, a training center for investment cooperation could beestablished to develop high quality human resources and improve the efficiency ofinvestment administration and management. Labor market information networks
could be developed to increase capabilities and experiences of labor force and to help
nations deal with structural unemployment. Efforts should be made to facilitate
mutual recognition agreement for the cross recognition of qualification and educationand experience of market professionals.
5. Encourage green investment
As the world faces two crises at the same time, the economic crisis and the3

NEAT Report on East Asian Investment Cooperation

deterioration of our environment, the participants proposed that policies be made tostrengthen regional investment cooperation on green industry for low carbon growth.
To this end, it was proposed that countries in the region give full support to green
industry, invest more in its R&D, strengthen cooperation in green technology
development and transfer, make favorable taxation and loaning policies, andencourage the participation of the private sector.
6. Establish investment cooperation mechanism for SMEs
It is important to promote investment by small and medium-sized enterprises (SMEs)
and support industries for regional networks. Investment policies should becoordinated in the region to give effective financial support to SMEs. It was proposed
exploring the possibilities of an East Asian SME Investment Cooperation Fund,making favorable policies for SME participation in regional investment, andproviding platforms and opportunities for SME cooperation.
Conclusion
Under the current global recession, the participants agreed that it was all the more
important for East Asia to promote greater intra-regional trade and FDI flows toreduce excessive reliance on exports to outside markets, and to channel more of thelarge savings into productive investment within the region. The participants believedthat with better macro-policy coordination and greater joint efforts, we can turn crisis
into opportunities to build a better East Asia.

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