Have International Investment Agreements had an impact on Science, Technology, and Innovation in the Asia-Pacific region? Preliminary Analysis ACED 2016 ADB Conference on Economic Development in 2016 The Role of Foreign Direct Investment in Economic Development The University of Hong Kong Hong Kong, China 2 3 June 2016 Susan F. Stone Director, Trade, Investment Innovation Division, UNESCAP
Overview of the Paper Set the Scene o o o Role of IIAs in the region Types of IIAs examined Why STI? STI Provisions o o o Defining STI Provisions Approaches to including STI in BITs. Some descriptive Statistics Discerning Patterns o o Is the inclusion of STI related to income level? Is the Provision of STI related to economic output? Preliminary Conclusions and Next Steps
Role of IIAs in the Region Most common form of IIA is bilateral investment treaty (BITs). Of the more than 2,400 BITs currently in force, more than half (1,480) involve a country from the Asia-Pacific region. The majority of BITs focus on investor protection: Fair and equitable treatment of foreign investors Compensation in the case of expropriation Right to move investment-related capital freely More and more investment provisions included in RTAs
Types of IIAs examined Selection based on: One or more parties from Asia Pacific Currently in-force Full text available in English Taken from UNCTAD IIA Navigator Focused on BITs
Summary of Agreements Examined Category compared to total sample Category compared to total population Year grouping Number in sample Number in total population -75 17 3% 20 2% 76-85 25 4% 40 4% 86-95 157 24% 234 23% 96-00 206 31% 313 31% 01-05 128 19% 199 20% 06-10 94 14% 159 16% 11-15 30 5% 54 5% Classification North-North 33 5% 46 5% North-South 338 51% 497 49% South-South 286 44% 476 47% Income classification Has HIC 371 56% 543 53% Has LIC 287 44% 449 44% Has LMIC 332 51% 533 52% Has UMIC 206 31% 315 31% Grand Total 657 1019
1962 1963 1965 1966 1967 1968 1971 1972 1973 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Evolution of Agreements 90 100% 80 90% 70 80% 60 70% 60% 50 50% 40 40% 30 30% 20 20% 10 10% 0 0% Bilateral Investment Treaties Other Investment Agreements BITs share of total
Why Science, Technology and Innovation? While technology, and technology transfer, have always been a large part of FDI, STI in general is gaining in importance in agreements. STI s role in the SDGs STI s role in economic transformation and structural adjustment Importance of technology and innovation in value added trade
High-tech products traded 100% 90% 80% 804,592 747,190 70% 60% 50% 40% 30% 894,905 1,202,910 20% 10% 0% 237,265 164,033 2008 2013 USA ESCAP-Asia Rest of the world Source: Comtrade
Patents in the Region Patent50000 40000 30000 20000 10000 Patent1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Japan China, People's Republic of Australia India 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Singapore Thailand Malaysia Indonesia Viet Nam
Approaches to including STI in BITs Examined agreements to see if reference is made to science, technology or innovation: Preamble Scope and definition of the agreement Admission and establishment Treatment Transfer Other
Share of agreements Share of STI Provisions 25% Transfer 20% Preamble 15% Scope and definition Treatment 10% Admission and establishment Other 5% 0%
Number of agreements, per year Share of agreements BITS with or without STI provisions (by year entered into force) 60 100% 90% 50 80% 40 70% 60% 30 50% 20 40% 30% 10 20% 10% 0 0% With STI-related provisions Without STI-related provisions Share of BITs with STI-related provisions
Share of agreements, cumulative STI Provisions over time 35% 30% 25% 20% 15% 10% 5% 0% -75 76-85 86-95 96-00 01-05 06-10 11-15 Preamble Scope and Definition Admission and Establishment Treatment Transfers Other
Discerning Patterns We examined the agreements to see if there are any specific pattern relating to income level or economic structure. Across each part of the agreement Across time Across income Across export sophistication
Share of agreements Share of BITs with STI by income level 70% 60% 50% 40% 30% 20% 10% 0% Has LIC Has LMIC Has UMIC Has HIC Preamble Scope and definition Admission and establishment Standards of treatment Transfers Other Sum STI-related provisions
BITs with STI over time
STI Provisions by Partner Income
Export Sophistication Gap 140 120 100 80 60 40 20 0 0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60%+ With any STI-related provisions Without any STI-related provisions Share with provisions 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
STI Provisions and Export Sophistication 60 50 40 30 20 10 0 0-10% 10-20% With preamble 20-30% 30-40% With Scope and Definition 40-50% With Standards of Treatment With Transfers Share preamble (avg 18%) Share scope and definition (avg 11%) Share standards of treatment (avg 22%) Share transfers (avg 22%) 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Select Economies 0.4 70 0.35 0.3 0.25 0.2 0.15 0.1 0.05 60 50 40 30 20 10 0 0 CHINA Export sophistication INDIA Export sophistication KOREA Number of BITs with STI-related provisions KOREA Export sophistication CHINA Number of BITs with STI-related provisions INDIA Number of BITs with STI-related provisions
Preliminary Conclusions and Next Steps Preliminary Conclusions: A greater variety of STI provisions are increasingly included in BITs. Upper Middle Income economies seem especially active. Level of export sophistication appears to be negatively associated with the inclusion of STI provisions. Next Steps: Examine correlation (not causation!) across various measures, including domestic policy space will be undertaken. Examine in the context of investment provisions in RTAs
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