_that party_ ”. As for the issue of control, JSEPA stipulates that a company is “controlled” by persons of a Party if such persons have the power to name the majority of its directors or otherwise legally direct its actions. Presumably, this refers to the nationality of the person who can legally represent the company or who is the designated official whose signature must accompany the company’s seal on all legal documents.

Finally, most agreements extend benefits to incorporated and non-incorporated legal entities, as long as the substantial business criterion is met. In other words, branches and representative offices of enterprises incorporated in non-parties are typically eligible for FTA preferences.<sup>13</sup>

# **_Simulations of different rules of origin_**

The five country case studies undertook a simulation, seeking to investigate the following question: Which of the currently established non-ASEAN service providers would (or would not) benefit from FTA preferences if progressively more restrictive rules of origin were adopted? This is a hypothetical exercise, though it has practical relevance. The ASEAN group is currently negotiating the liberalization of trade in services under the ASEAN-China Comprehensive Economic Cooperation Agreement and the question of which rule of origin to adopt has not been resolved. Additional ‘ASEAN-plus’ FTAs have been initiated or are envisaged with Australia, India, Japan, Korea and New Zealand. Moreover, even though the AFAS currently maintains a liberal rule of origin, this rule could be changed in the course of future negotiating rounds.

The five country case studies focused on selected service sub-sectors. The choice of sectors was determined by data availability and the need to have at least some non-ASEAN service providers already present in the market.

Table 2 presents the sectors that were analyzed in the five countries as well as the level of openness as measures by the extent of foreign equity ownership allowed. In the end, all five case studies chose banking services for the simulation. Insurance services were analyzed in four countries. Several other sectors—distribution services, maritime shipping services, port and freight forwarding services, health services, and telecommunications services—were covered by at least two studies.

The level of openness varies across countries and sectors. While certain sectors in some countries are open to full foreign ownership, others are restricted to minority equity participation. However, certain caveats to the level of openness described in Table 2 apply. First, foreign investment in services may be restricted by other barriers, notably limits to the number of service suppliers allowed or economic needs tests. Second, Malaysia and Thailand appear to be most restrictive in the participation of foreign equity—especially, in banking and insurance services. At the same time, foreign investors in Thailand are able to secure corporate control despite a 49 percent foreign ownership ceiling through either indirect equity holding involving layers of holding companies up the ownership chain, or through Thai nominees (see also the discussion

> 13 In particular, most agreements define an enterprise or a juridical person of another party as any legal entity which is constituted or otherwise organized under the law of that other party.  One exception is the investment chapter of the Malaysia-Japan Economic Partnership Agreement, which expressly excludes “ _branches of an enterprise of a third State_ ”.

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