Results of the Questionnaire Survey on Investment, which was conducted by Keidanren (now Nippon Keidanren, or JBF; same below) in April 2002, were as follows.

1. Survey objectives

With the new round of World Trade Organization (WTO) negotiations launched this year, work is currently underway toward initiating negotiations on the creation of international investment rules following the Ministerial Conference to be held in Mexico in 2003. Recent years have also seen the worldwide conclusion of a growing number of bilateral investment treaties (BITs) and investment-inclusive bilateral and regional free trade agreements (FTAs) and economic partnership agreements (EPAs).

This survey was conducted as a means of bringing together the views of Japanese business on the formation of investment rules through WTO negotiations and at other levels, and to provide a reference in lobbying the Japanese Government, government and industry in other nations, and the WTO.

2. Respondents

Keidanren member companies (members of the Committee on Trade and Investment and the Regional and Bilateral Committees): 159 responses from 140 companies
(Survey sent out to 980 companies; 14.3 % response rate)

3. Key views

(1) In the WTO context, a high-level plurilateral agreement should be sought which includes the ASEAN members, China and the NIEs.

Many companies wanted to see a high level of content in order to ensure agreement effectiveness. Many therefore were prepared to consider a plurilateral agreement which included the ASEAN members, China and the NIEs. In the case of a plurilateral agreement, most-favored-nation (MFN) treatment would have to be conditional, extending benefits only to signatory parties.

(2) Rules should include a high level of transparency and investment protection.

Expectations regarding investment rules were particularly high for transparency and investment protection. The transparency of laws and regulations in the investment host nation was clearly the most critical factor in promoting and stabilizing investment by Japanese companies. Many respondents called for public announcement of laws and regulations and transparency in administrative approval procedures. In terms of the traditional area of investment protection (freedom of remittance, expropriation and compensation), many companies wanted a high level of protection to be applied even in developing countries.

(3) In addition to foreign direct investment (FDI), intellectual property rights (IPR) also need to be covered.

Many respondents felt that the agreement should cover not only FDI, but also IPR, contractual rights, long-term and short-term portfolio investment, and real estate investment. Many noted that the diversification of international business had boosted the importance of protection for contractual rights and IPR in regard to technology provision, etc.

(4) Special measures such as transitional periods could be allowed for developing countries. Due account could also be given to developing countries in terms of pre-establishment MFN treatment and national treatment.

Many companies felt that to encourage the East Asian nations and other developing countries to participate in the agreement, some account needed to be taken of their needs. Transitional periods could therefore be granted for some measures, or conditional temporary exemptions from obligations allowed.

Developing countries could also be exempted to some extent from MFN treatment and national treatment obligations for pre-establishment investment (establishment of commercial presence), or a positive-list modality could be adopted.

(5) Movement of key personnel will be extremely critical.

Many respondents regarded the liberalization of entry, sojourn and work for key personnel accompanying foreign investment as a critical issue given the status of these personnel as a key management resource.

(6) Performance requirements relating to joint ventures, domestic sales, technology transfer, and exports should be stipulated.

The various performance requirements accompanying investment have greatly impeded the foreign operations of Japanese companies. Japanese business strongly urges systemic regulation in regard to requirements for joint ventures with local companies, restriction of domestic sales, technology transfer requirements, and requirements for a certain ratio of exports.

(7) Investment incentives should not be prohibited.

Many Japanese companies operating abroad benefit from investment incentives, and virtually all respondents felt that these should not be regulated as they were part of legitimate efforts by developing countries to improve their business environments in order to attract more investment.

(8) While priority should be given to the WTO negotiation, BITs should also be formed with ASEAN members, etc.

Given the range of WTO membership and the need for administrative efficiency, many companies believed that while priority should be given to WTO negotiation efforts, Japan should also actively conclude BITs with the ASEAN members and China as critical trading partners. There was also some expectation of an investment agreement with the NAFTA countries and ROK.

4. Outline of results by question

(1) Agreement structure

• Structure of the agreement
  The most frequent response in this regard was that a high-level plurilateral agreement should be sought with the ASEAN members, China and the NIEs (39%). However, many companies also felt that a high-level plurilateral agreement without the participation of ASEAN, etc. (33%), or an agreement among all WTO members (28%), should be sought.
  Countries which should be included in the plurilateral agreement were ASEAN (32 responses), China (28), the ROK (10), Brazil (8), India (7), the EU (6), and Taiwan.
  Many companies felt that in the case of a plurilateral agreement, benefits should be extended only to signatory parties (70%).
  
  
• Modality of agreement conclusion
  Many respondents (57%) felt that the agreement should be concluded as a single undertaking.
  

(2) Specific points

• Priority of inclusion
  Interest in transparency (130 responses) and investment protection (113) was extremely strong, followed by definition and scope (79), dispute settlement (76), national treatment (61), investment incentives (47), exceptions and safeguards (46), MFN treatment (45), relation to existing treaties (29), performance requirements (29), development provisions and due account of developing country needs (21), and movement of key personnel (18).
  
  
• Definition
  The most frequent response (48%) was that the definition should extend beyond FDI to include long-term and short-term portfolio investment, real estate investment, IPR and contractual rights.
  
  
• Scope
  Many respondents (63%) noted that all areas should be covered in principle, with the exception of those related to national security.
  
  
• Investment protection
  In the traditional area of investment protection, many companies (56%) thought that a high level of protection should apply in all countries party to the agreement.
  
  
• Transparency
  Business interest was extremely high in relation to public announcement of laws and regulations (127 responses) and securing the transparency of administrative approval and licensing procedures (115), followed by development of domestic judicial and complaint registration procedures (90), notification of laws and regulations to the WTO (68), establishment of enquiry points to deal with requests for information (53), and public announcement of laws and regulations prior to their formulation, as well as provision of the opportunity to debate these (48).
  
  
• MFN treatment
  Many companies thought that MFN treatment should be obligatory for both pre- and post-establishment investment (38%). On the other hand, a number of other respondents thought that a positive-list modality should be allowed for pre-establishment investment (29%), while others thought certain exceptions should be allowed for developing countries (23%).
  
  
• National treatment
  The most frequent response was that national treatment should be obligatory for both pre- and post-establishment investment (33%). However, almost the same number of respondents thought that a positive-list modality should be allowed for pre-establishment investment (29%), or that certain exceptions should be allowed for developing countries (27%).
  
  
• Exceptions and safeguards
  The majority view (49%) was that exceptions should be allowed for developing countries but that safeguard measures should be restricted. A large number of respondents, however, thought that both exceptions and safeguards should be restricted for all member countries (33%).
  
  
• Development provisions and due account of developing country needs
  The majority view was that transitional periods should be granted for some measures for developing countries (48%). Many also thought that conditional temporary exemptions from obligations should be allowed (33%).
  
  
• Relation to existing treaties
  Most companies (67%) felt that existing treaties should, in principle, be incorporated into the WTO investment framework, but that conditional exceptions should be allowed.
  
  
• Movement of key personnel
  The most frequently expressed view (66%) was that the liberalization of entry, sojourn and work for key personnel should be included in the agreement.
  
  
• Performance requirements
  Areas of greatest concern were joint venture requirements (103 responses), regulations on domestic sales (94), technology transfer requirements (88) and export requirements (83), followed by requirements for designation of supply area (59), headquarters establishment requirements (54), product mandate requirements (51), R&D requirements (50) and local nationals employment requirements (48).
  
  
• Investment incentives
  Most companies (83%) believed that investment incentives did not need to be restricted.
  
  
• Dispute settlement
  Opinion was evenly divided between whether dispute settlement procedures should be addressed between WTO members (50%), or whether investor-state procedures should also be allowed (50%).
  
  
• Other
  Many respondents (58 responses) thought that exceptions to rules should be allowed to protect the environment, although a number believed that such exceptions to rules should be left to dispute settlement procedures (51).
  Those respondents supporting stipulation of tax matters (53 responses) greatly outnumbered those who did not believe tax matters should be covered (21).
  Those supporting the inclusion of obligations on investors and investor companies (41 responses) slightly outweighed those who did not believe such obligations should be stipulated (36 responses).
  More companies (40 responses) thought that the agreement should make member countries responsible for protection of domestic labor standards than those dissenting (19).
  More companies (34 responses) thought that the agreement should cover private-sector business practices than those which disagreed (34).
  

(3) Relation to BITs

The great majority of respondents (89%) thought that while efforts in WTO negotiations should be given priority, high-level BITs should also be concluded with the ASEAN countries and other trading partners.

ASEAN was highest on the list (14 responses) of those regions with which a BIT should be concluded, followed by China (8), NAFTA (7), the ROK (5) and the EU (3).