chapter  13
13 Pages

Review of Asian views on foreign investment law

ByM . SORNARAJAH

Assuming that there is a col lect ive Asian view on foreign investments, its founda tions must be found in a common his tor ical attitude towards eco­ nomic ex ploita tion during the co lo nial period and the later adoption of a more pragmatic vision that foreign investment, select ively admitted, may be harnessed to the goals of eco nomic de velopment that Asian states have adopted. A combination of a his tor ical sense of hostility, nationalism that con tinues to dictate events, pragmatism and com peti tion among themselves to attract foreign investment underlies the different pol icies of the Asian states. India, Malaya, Indonesia, the Philippines, Vietnam and Myanmar had suffered direct co lo nial rule. China, Japan and Thailand were subjected to the practice of extraterritoriality through treaties.1 Even in Australia and New Zealand, though the same degree of resentment may not have set in, there is a lingering sense of ex ploita tion or cultural distance. These attitudes may have passed as later phases set in, erasing to some extent the distaste felt for foreign investment as a harbinger of domination, but the sense of unease still lurks in a corner. There is again no common degree of distaste towards co lo nialism. Indo­ nesia had to fight a long and cruel war against the Dutch to secure inde­ pend ence. Malaysia and Singapore were given it by a power that had grown too weak to hold onto colonies. Japan, though Asian, was an aggressor in Asia. Jap an ese atrocities on Asian people are still remembered, although their memory is fading. Attitudes therefore vary in degree as to the linking of co lo nialism with foreign investment. The extent of resentment did shape pol icies in the imme diate post­ colonial phase. Indonesia imme diately after inde pend ence was hostile to foreign investment, nationalizing co lo nial com­ panies and excluding new entry, but Thailand and Singapore never displayed open hostility. Quite early in the post­ colonial phase, vari ations among Asian states had begun to emerge. In the imme diate post­ colonial phase, Asian states were intent on sup­ porting meas ures to recover control over their eco nomies from the eco nomic

dominance of the multi national corporations from the metropolitan powers. Many sectors of the eco nomy, par ticu larly the plantation and the nat ural resources sectors, were in the control of foreign corporations. The first phase of recovering eco nomic control was accomplished through a series of nation­ alizations in Asia, some of which were cel eb rated instances in inter na tional law.2 It was during this period that Asian states spurred the effort to bring about a New International Economic Order (NIEO). The NIEO sought to change many of the rules of existing inter na tional law. The Charter of Eco­ nomic Rights and Duties of States sought to estab lish the Calvo doctrine as a uni ver sal doctrine.3 That is, the package of res olu tions articulated appro­ priate compensation upon nationalization instead of the old formula of prompt, adequate and effect ive compensation, required settlement of dis­ putes by local tri bu nals according to local law, and recog nized the doctrine of permanent sover eignty over nat ural resources. China, India and Indonesia, as aspirants to Third World leadership, were in the forefront of these move­ ments. Again, there was no abso lute unity. Thailand and Singapore had emerged as states having a different viewpoint, refusing to support Article 2(2)(c) which asserted the right of exclusive local control over foreign investment.4