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 Role of IIAs in the region

o Types of IIAs examined

o Why STI?

STI Provisions

o Defining STI Provisions

o Approaches to including STI in BITs.

o Some descriptive Statistics

Discerning Patterns

o Is the inclusion of STI related to income level?

o 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

Year grouping

Number in

sample

Category

compared to

total sample

Number in total

population

Category

compared to 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

Evolution of Agreements

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10

20

30

40

50

60

70

80

90

19

62

19

63

19

65

19

66

19

67

19

68

19

71

19

72

19

73

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

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

237,265164,033

894,905 1,202,910

804,592747,190

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2013

USA ESCAP-Asia Rest of the world

Source: Comtrade

Patents in the Region

0

10000

20000

30000

40000

50000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Patent

Japan China, People's Republic of Australia India

0

200

400

600

800

1000

1200

1400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Patent

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 STI Provisions

0%

5%

10%

15%

20%

25%

Shar

e o

f ag

ree

me

nts

Preamble

Scope and definition

Admission and establishment

Treatment

Transfer

Other

BITS with or without STI provisions

(by year entered into force)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10

20

30

40

50

60

Shar

e o

f ag

ree

me

nts

Nu

mb

er

of

agre

em

en

ts, p

er

year

With STI-related provisions Without STI-related provisions Share of BITs with STI-related provisions

STI Provisions over time

0%

5%

10%

15%

20%

25%

30%

35%

-75 76-85 86-95 96-00 01-05 06-10 11-15

Shar

e o

f ag

ree

me

nts

, cu

mu

lati

ve

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 BITs with STI by income level

0%

10%

20%

30%

40%

50%

60%

70%

Has LIC Has LMIC Has UMIC Has HIC

Shar

e o

f ag

ree

me

nts

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

20

40

60

80

100

120

140

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

STI Provisions and Export

Sophistication

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

10

20

30

40

50

60

0-10% 10-20% 20-30% 30-40% 40-50%With preamble With Scope and Definition

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%)

Select Economies

0

10

20

30

40

50

60

70

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

CHINA Export sophistication KOREA Export sophistication

INDIA Export sophistication CHINA Number of BITs with STI-related provisions

KOREA 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

Thank youKeep up to date at

http://www.unescap.org/our-work/trade-

investment