This chapter analyses the legal framework governing foreign direct investment (FDI) in ASEAN economies, with a focus on its relevance for the green and digital transformation. It reviews trends in statutory openness to FDI and highlights remaining restrictions, particularly in services and infrastructure sectors. The chapter examines the main features of national investment laws across ASEAN Member States (AMS), including their functions, investment protection standards, and dispute settlement mechanisms. It assesses domestic legal frameworks with regional and international investment agreements, notably the ASEAN Comprehensive Investment Agreement and the ASEAN Trade in Services Agreement. The analysis also explores how sustainability considerations are reflected in national investment laws and international investment treaties.
OECD Review of Investment Policies in ASEAN
Abstract
The existence of a conducive institutional, legal and policy environment is a necessary precondition for harnessing FDI to achieve sustainability objectives, including the green and digital transition. Recent policy developments in ASEAN confirm Member States’ commitment to supporting sustainable practices and to creating an enabling environment for the green transition and the digital transformation, particularly in areas such as e-commerce and digital investment. This commitment is reflected both in overarching policy frameworks, such as the ASEAN Economic Community (AEC) Blueprint 2025, and in regional sectoral and thematic instruments pursuing specific objectives, including the promotion of the digital economy and the energy transition.
The policy commitment to the green and digital transitions has yet to be fully translated into the legal frameworks of ASEAN Member States (AMS). Despite recent improvements, barriers to foreign entry persist across the region, particularly in services and infrastructure-related activities that are critical enablers of the green and digital transitions. These constraints risk limiting the contribution of FDI to investment in energy and transport infrastructure, digital connectivity and access to finance, which are essential for scaling sustainable and inclusive growth. Notably, sectors subject to higher levels of restrictiveness include real estate investment, construction, distribution, transport, telecommunications, media and financial and professional services.
At the domestic level, and with few exceptions, AMS have adopted dedicated investment laws, governing issues such as standards of protection, dispute resolution mechanisms and, in some cases, specific investor obligations. Overall, AMS investment laws show a high degree of convergence in their treatment of investment protection standards and are broadly aligned with key ASEAN-level investment-related instruments, namely the ASEAN Comprehensive Investment Agreement (ACIA). They similarly show alignment with additional ASEAN-level instruments addressing areas related to investment, such as the ASEAN Trade in Services Agreement (ATISA).
At the same time, significant country-level variations exist in the drafting of specific protections, particularly relating to expropriation. While all national investment laws in ASEAN provide protection against direct expropriation, some do so in a manner that does not fully reflect the higher standards set out under the ACIA, which are aligned with international best practices. Approaches to indirect expropriation are even more diverse, with only one AMS investment law closely following the ACIA approach. Unlike the case of direct expropriation, however, this diversity is less problematic, given the absence of consistent international practice in this area.
Some AMS national laws also incorporate certain standards of protection that are typically found in investment treaties, including national treatment (NT), most-favoured-nation (MFN) treatment and fair and equitable treatment (FET). Incorporating treaty-based standards into domestic legislation might give rise to unintended risks, including constraints on regulatory autonomy, exposure to expansive interpretations through domestic litigation and increased legal uncertainty. Where states nevertheless choose to include such standards, careful and narrowly tailored drafting – relying on clear definition of key terms and operational features of the standard – is essential to minimise potential risks.
AMS investment laws display a high degree of consistency in their approach to dispute settlement, offering investors – both from AMS and beyond – access to a range of mechanisms, from amicable settlement procedures such as conciliation and negotiation to adjudication and arbitration. In some jurisdictions (e.g. Lao PDR, Myanmar), investment laws establish specific grievance mechanisms, which can facilitate the resolution of issues between investors and public authorities before they escalate into formal disputes.
Sustainability considerations are reflected in AMS investment laws primarily as overarching policy objectives rather than as binding requirements linked to the green and digital transitions. Only a subset of AMS investment laws goes further by establishing specific investor obligations. These may include compliance with domestic laws, including social and environmental legislation, environmental impact assessments requirements, sustainability or environmental reporting obligations, respect for local customs and traditions, and measures promoting technology transfer and local skills development.
At the international level, sustainability considerations also remain limited in ASEAN and AMS’s international investment frameworks. More recent ASEAN-level investment agreements provide only modest attention to sustainable development, which is mostly considered in its environmental dimension. At the same time, investment treaties are not the primary instrument through which AMS pursue sustainability objectives. Moreover, the impact of certain sustainability provisions (e.g. addressing investment facilitation) in IIAs is not yet clear, including due to lack of information concerning their practical implementation. Instead, recent efforts increasingly rely on alternative international policy tools addressing issues at the intersection of economic policy and sustainable development, including arrangements supporting the digital transition and new forms of international co-operation, through instruments such as non-binding International Green Economy Collaborations and digital economy partnerships entered into among AMS or between AMS and third countries.
Undertake periodic, evidence-based reviews of foreign equity caps and operational restrictions, particularly in services and land-intensive sectors where statutory restrictiveness remains elevated. Assessing whether such measures remain well targeted and proportionate to stated policy objectives could help reduce unnecessary barriers to entry, support competition and investment, and facilitate the mobilisation of capital, technology and expertise in enabling services and infrastructure, including in energy, transport, and digital connectivity relevant for green and digital transitions. Such reviews should be undertaken by the competent authorities, including at subnational level where applicable, in accordance with domestic legal and constitutional arrangements.
Further clarify, consolidate and regularly update negative lists and other statutory restrictions on foreign investment, including by improving consistency across sectoral legislation and alignment with regional commitments. Strengthening transparency and implementation, particularly under ATISA, could help translate commitments into applied practice, complement unilateral reforms, and support more predictable and coherent investment conditions for long-term and capital-intensive projects, including those supporting decarbonisation, digitalisation and regional connectivity.
Ensure that national investment laws are aligned with respect to the requirements governing protection from expropriation. Sound investment protections, in particular concerning direct expropriation, are essential to ensure the successful implementation of long-term, high-risk investment projects, in particular in fields with direct relevance for sustainable development (e.g. renewable energy). Under international law and established international practice, including as emerging from ASEAN-level instruments such as the ACIA, expropriation should be permitted only for a public purpose, in a non-discriminatory manner, in accordance with due process of law and upon payment of prompt, adequate and effective compensation. AMS national investment laws should be consistent with such criteria, thus ensuring alignment with ASEAN-level principles and instruments.
Exercise caution when incorporating investment treaty standards, in particular FET and MFN treatment, into national investment laws. Given the interpretative risks associated with these standards and the potential constraints they might impose on the domestic right to regulate (including in support of sustainable development objectives), states should refrain from including them in domestic legislation. Where states nevertheless decide to proceed in this direction, narrow and targeted drafting, in particular with respect to key definitions of relevant standards, can help minimise potential risks.
Consider taking stock of the current network of international investment treaties adopted by AMS, to ensure they do not unduly constrain domestic right to regulate. Many IIAs entered into by AMS are “old generation” treaties, that do not take into account the delicate balance between protecting investment and safeguarding domestic policy space to regulate in the public interest. In this context, AMS could consider engaging in investment treaty reform initiatives, including the OECD’s “Future of investment treaties” initiative, which focuses, among others, on the reform and modernisation of substantive treaty protections.
Consider adopting measures to assess the effectiveness of new international arrangements on sustainable investment. As AMS are increasingly relying on new form of international partnerships – including international green economy collaborations – to pursue objectives linked to the green and digital transitions, it will be important to implement appropriate processes and initiatives to assess whether they are achieving the desired objectives.
The existence of a conducive institutional, legal and policy environment is a necessary precondition to harness FDI in support of sustainability objectives, including the green and digital transition. Investment policy frameworks play a key role in this respect. These include not only laws and regulations relating to the admission of investors and the protection of their investment, but also a broader range of laws and regulations that are not strictly related to investment but contribute to creating a conducive investment climate. They also cover policies outlining goals and expectations on the impact of investment on sustainable development, such as those outlined in national development plans. Against this background, instruments such as the OECD Policy Framework for Investment (PFI) can support states in the selection of policy measures and approaches, including laws and regulations, to improve their domestic investment environment. The PFI takes a comprehensive approach to sustainable investment, providing recommendations on a wide range of areas that go beyond investment policy and that are widely recognised as underpinning a healthy investment climate, such as taxation, trade, competition, infrastructure and human resource development.
Investment policy frameworks in ASEAN have evolved considerably over recent decades, with AMS making efforts to improve the investment climate, contributing to making the region one of the world’s top destinations for FDI (ASEAN, 2024[1]). Recent initiatives have contributed to further consolidating the region’s overall investment attractiveness. These include, for example, the AEC Blueprint 2025, ASEAN’s 10-year roadmap (2016-2025) for building the ASEAN Economic Community (AEC), which outlines strategic measures that foster sustainable practices and green technologies while directly shaping legal frameworks to support the digital transition, particularly in areas like e-commerce and digital investment (ASEAN, 2015[2]). Such broader strategies are further reinforced by ASEAN-wide sectoral and thematic instruments that seek to pursue specific sustainability goals, including promoting the digital economy and fostering energy transition (e.g. ASEAN Strategy for Carbon Neutrality; ASEAN Agreement on Electronic Commerce).
AMS have participated in a wide range of initiatives supporting private investment in the region over time. Key among these is the negotiation of the ASEAN Comprehensive Investment Agreement (ACIA), which governs the liberalisation, facilitation, promotion, and protection of investment, as well as the ASEAN Trade in Services Agreement (ATISA), which seeks to deepen services integration, enhance the competitiveness of ASEAN’s services sector, expand its role in global supply chains and economic development, and support a more efficient business and investment environment. Together, these instruments form the backbone of ASEAN’s regional legal co-operation (ASEAN, 2024[1]).
Openness to FDI is a core component of a conducive investment policy framework and can support investment, productivity growth and technology diffusion (OECD, 2022[3]; 2015[4]). While discriminatory measures affecting foreign investors are observed worldwide and may pursue legitimate policy objectives, they also entail economic costs. Empirical evidence shows that even partial statutory restrictions, such as foreign equity caps or screening requirements, are associated with lower FDI levels, particularly in services and infrastructure-related sectors (Mistura and Roulet, 2019[5]; Fournier, 2015[6]; Nicoletti et al., 2003[7]).
In ASEAN, statutory restrictions measured by the OECD FDI Regulatory Restrictiveness Index (FDIRRI) (Box 4.1) have declined gradually since 2018, extending a longer-term trend of FDI liberalisation observed over the past decades (OECD, 2023[8]; 2019[9]). This trajectory reflects sustained, albeit uneven, reform efforts across AMS (Figure 4.1, Panel A). Despite this improvement, the ASEAN average remains above both the non-OECD and OECD averages, indicating that barriers to foreign entry persist. These constraints may limit the contribution of foreign investment to the green and digital transformation, which relies on investment in enabling services, infrastructure and new technologies.
The OECD FDI Regulatory Restrictiveness Index (hereafter, FDIRRI) measures statutory restrictions targeting FDI across 100+ countries and 22 economic sectors, including all primary sectors, manufacturing, electricity and main services sectors. The restrictions recorded in the FDIRRI are based on information retrieved from official legal sources.
The FDIRRI captures FDI restrictions across four policy categories: i) foreign equity limits; ii) screening and approval of foreign investment; iii) restrictions on key foreign personnel; and iv) other operational restrictions, such as restrictions on the acquisition of land and real estate for business purposes by foreigners and preferential treatment offered to locally owned firms in public procurement.
The discriminatory nature of a policy (i.e., it applies only to foreign investors) is the central criterion for scoring it as restrictive under the FDIRRI. Certain non-discriminatory measures are also covered when they are considered more burdensome for foreign investors, such as rules regarding the nationality of board of directors. Any non-statutory discrimination that may occur during implementation and enforcement of FDI policies is not taken into account. Preferential treatment accorded to some investors over others as a result of more favourable treatment under international agreements or location and activity-based policies, as well as the presence of state-owned enterprises and monopolies, are equally disregarded. The FDIRRI should therefore be interpreted as a measure of statutory barriers to FDI rather than as a comprehensive measure of actual market conditions or the broader investment climate.
Individual measures are evaluated on a 0 (fully open to FDI) to 1 (fully closed) scale based on the degree of restrictiveness. The sectoral scores reflect the sum of scores across all four policy categories, capped at 1. The economy wide FDIRRI of a given country is simply a weighted average of all 22 sectoral scores.
Note: For further information about the current FDIRRI methodology, the full list of measures covered and the scores, please refer to: (OECD, 2024[10]), the FDIRRI – Regulatory Database (https://data-explorer.oecd.org/s/3cs) and the FDIRRI – Scores database (https://data-explorer.oecd.org/s/3cr).
Across ASEAN, FDI restrictiveness is driven primarily by foreign equity restrictions and other operational constraints rather than by investment screening or nationality requirements for key personnel (Figure 4.1, Panel A). On average, equity caps account for the largest share of statutory barriers to foreign entry in the region and reflect most of the gap between ASEAN and OECD economies. By contrast, investment screening measures play a more limited role in ASEAN and are close to OECD averages based on the statutory screening measures captured in the FDIRRI, although they remain relevant in selected Member States. National security-based investment screening falls outside the scope of this analysis and is examined in Chapter 5. Restrictions on other operational requirements, including those related to land access, also contribute to overall restrictiveness in several economies. The predominance of equity-based and operational restrictions is particularly relevant for services and infrastructure-related activities, where restrictions on the establishment and operations of foreign investors can diminish the potential contribution of foreign investment to mobilising capital, deploying technology and scaling projects linked to decarbonisation and other sustainability objectives, including in services that support digital technologies (OECD, 2023[8]).
Sectoral patterns indicate that statutory restrictions on FDI in ASEAN tend to be more pronounced in services and land-intensive activities than in many manufacturing sectors (Figure 4.1, Panel B). Across most manufacturing segments, including machinery, transport equipment and chemical products, ASEAN average levels of restrictiveness are relatively close to non-OECD averages and remain well below those observed in several services sectors. This pattern is particularly relevant given the central enabling role of services and infrastructure-related activities for the green and digital transformation, including through their importance for energy and transport infrastructure, digital connectivity and access to finance (OECD, 2022[3]; 2023[8]). By contrast, higher levels of restrictiveness relative to both OECD and non-OECD averages persist in real estate investment, construction, distribution, transport, telecommunications, media and financial and professional services. Restrictions in these areas may therefore affect not only market entry, but also the scale, efficiency and timing of investment required to support sustainable and inclusive growth.
(open=0; closed=1)
Note: Both panels reflect indices based on regulation in force up to 31 December 2024. Economy-wide scores are shown for 2024, with 2018 values reported for ASEAN economies for comparison. OECD and non-OECD averages refer to 2024 values only. Sectoral results are based on unweighted FDIRRI sector scores, which do not account for differences in sectors’ economic relevance and therefore capture only the incidence and intensity of statutory restrictions applied in each sector. The OECD average covers all 38 Member countries. The non-OECD average covers 57 economies, excluding AMS. The ASEAN average refers to only 10 Member States; Timor-Leste is not currently covered by the FDIRRI. Further methodological details are available in the latest FDIRRI methodological paper (OECD, 2024[10]).
Source: OECD (2025[11]), FDI Regulatory Restrictiveness Index – Scores database (2018 and 2024 results), https://data-explorer.oecd.org/s/3cr.
Recent policy developments since 2018 across ASEAN economies reflect both continued liberalisation and the persistence of targeted restrictions. In the Philippines, reforms adopted in 2022 narrowed the scope of activities classified as ‘public utilities’, easing foreign equity limits in telecommunications and several transport services.1 The Philippines also liberalised foreign ownership in renewable energy projects through regulatory changes adopted between 2019 and 2022.2 In Indonesia, reforms implemented in 2021 removed foreign equity caps across a wide range of services and infrastructure-related activities, and further changes in 2024 repealed nationality-based execution requirements for selected electricity infrastructure projects.3 In Viet Nam, the foreign ownership cap for air transport enterprises was increased in 2020.4 Targeted restrictions nonetheless remain, including preferential treatment for locally owned firms in public procurement of construction services in Brunei Darussalam and foreign equity caps in a limited number of manufacturing activities in Malaysia.5
At the regional level, these developments reinforce ongoing efforts to liberalise services and deepen economic integration through ASEAN agreements, with important implications not only for services markets but also for manufacturing competitiveness and participation in regional and global value chains (OECD, 2019[9]). Experience under the earlier ASEAN Framework Agreement on Services (AFAS) indicates that it achieved some important liberalisation, notably in transport, and that its commitments often went beyond those undertaken under the General Agreement on Trade in Services (GATS). It nonetheless served mainly to lock in standards of treatment and market access for ASEAN services providers rather than to drive liberalisation. More meaningful services liberalisation was mostly driven by unilateral reforms (OECD, 2019[9]). The ASEAN Trade in Services Agreement (ATISA), which governs trade in services, including through commercial presence, represents a significant shift in approach through the adoption of a negative-list architecture, which has the potential to support further liberalisation. While this framework enhances transparency and regulatory discipline, available evidence suggests that its impact on effective market opening and regional integration is likely to emerge gradually and unevenly across Member States, reflecting transition periods, implementation capacity and the scope of remaining reservations (Martin and Sauvé, 2025[12]). Together, these patterns in statutory openness to FDI and regional services commitments provide important context for understanding how national legal frameworks regulate the admission, treatment and protection of foreign investment across ASEAN economies.
National investment-related laws represent one of the most important policy tools to harness sustainable investment. In fact, the presence of a sound, consistent and transparent legal framework is especially important when it comes to investments in sectors contributing to the green and digital transition, due to the high risks they pose and the high operational costs they entail. In recent years, investment-related legal reforms in ASEAN have accelerated, particularly in response to emerging strategic priorities. While there is no “one-size-fits-all” to investment law-making, most AMS seem to follow a similar approach in this area. Indeed, except for Brunei Darussalam and Singapore, all AMS have dedicated investment laws. These are often complemented by additional instruments, either addressing specific aspects of investment policy, such as incentives, or regulating investment in specific sectors targeted by liberalisation efforts (e.g. Viet Nam’s Law on Electricity No. 28/2004/QH11; Cambodia’s Sub-Decree No. 146 ANK/BK on Economic Land Concessions). It should be noted, however, that having an investment law is neither a guarantee of, nor a prerequisite for, a sound investment policy framework. In fact, many countries (including OECD Members) do not have a specific investment law. While such a law may add transparency to the legal framework, it risks creating uncertainty when it is inconsistent with other laws (OECD, 2015[4]).
When present, AMS national investment laws pursue a variety of functions (Bonnitcha, J.; Nikièma S. H.; St John, T., 2023[13]). All of them set out clear criteria governing the admission of foreign investments in AMS territories (Figure 4.2). They also frequently set out rules on the governance of investment authorities as well as on monitoring and oversight of the implementation of investment projects, including with respect to transparency and reporting obligations. Only half of the AMS national investment laws cover issues relating to investment facilitation6 and the administration of investment incentives. The same considerations apply to traditional investment law purposes, such as the definition of investment protection standards and mechanisms for the resolution of disputes between the government and investors. Less than half of ASEAN investment laws, instead, provide for specific investor obligations, including with respect to social and environmental issues.
Note: The figure describes how frequently a specific function appears in AMS investment laws.
Source: OECD elaboration based on AMS investment laws.
4.4.1. Investment protection standards in ASEAN investment laws are overall aligned with the ACIA, although country differences remain
The most traditional function of national investment laws, at least from an historical perspective, is to provide for guarantees and standards of protection for investors and their investment activities7. In general, national investment laws tend to address a similar set of issues, mostly concerning the protection of the investors’ property as well as the treatment they are entitled to in their relationship with state authorities. The guarantees and standards typically found in national investment laws are also often reinstated in additional instruments making up the national legal framework on investment (e.g. Constitution, civil codes, sectoral laws). Domestic protections on investment also interact with investment instruments adopted at bilateral and regional levels. Treaties such as the ACIA set out specific standards of protection for investors, thus giving rise to issues of co-ordination and coherence between the domestic and international regulation of investment. Some of these standards, such as national treatment and most-favoured nations treatment, also appear in ASEAN-level instruments that, while not specifically addressing investment, might still have an impact on the same, such as the ATISA.
In the ASEAN context, investment protection provisions are included in the national laws of Cambodia, Indonesia, Lao PDR, Myanmar, Timor-Leste, and Viet Nam. Other AMS countries (i.e., Malaysia, Philippines, and Thailand) do not include investment protection among the functions performed by their investment laws. The lack of investment protection provisions in national investment laws does not mean that protections do not exist. In this case, the investment protection function will instead be performed by other instruments within the broader legal framework. In Malaysia, for example, investment protection is ensured under the Federal Constitution and sectoral legislation, and through the application of common law principles and the country’s IIA network.
Even among countries whose investment laws include investment protection provisions, there are significant differences concerning the standards of protection granted to investors (Table 4.1).
Note: The table only considers AMS investment laws that include standards of protection. Highlighted cells indicate that the standard of protection is included in the relevant AMS investment law.
Source: OECD elaboration based on AMS investment laws.
4.4.2. Compared to the ACIA, AMS investment laws vary in how they address protections against direct and indirect expropriation
National investment laws and international instruments on investment protection are firstly concerned with shielding investors from unlawful expropriation or nationalisation of their investment and associated assets. In the ASEAN context, the ACIA sets out the conditions under which expropriation can lawfully take place (Article 14). In particular, expropriation is possible only when it is carried out: (i) for a public purpose; (ii) in a non-discriminatory manner; (iii) in accordance with due process of law; and (iv) upon payment of compensation without delay (prompt), in a manner equivalent to the fair market value of the expropriated investment (adequate) and in a fully realisable and freely transferable currency (effective).
All national investment laws in ASEAN set out protection provisions against direct expropriation, which occurs when the state obtains a formal transfer of title or physically seizes the property. The way in which the conditions for lawful expropriation are drafted, however, varies between countries. The laws of Myanmar and Cambodia provide for lawful direct expropriation requirements in line with the ACIA protections. Other countries, instead, only mention some of the requirements set out at the international level. More specifically:
Indonesia’s investment law only requires that, in the event of expropriation, compensation be paid in accordance with fair market value of the expropriated assets.
The investment law of Lao PDR allows investments to be nationalised or expropriated only when this is justified by a public interest and clarifies that, in this case, the investor must be compensated based on the market value of the expropriated assets.
The law of Timor-Leste clarifies that, in cases where it is “necessary to resort to requisition or expropriation”, the State will do so in a duly justified and non-discriminatory manner and upon the payment of prompt, adequate and fair compensation. However, no explicit reference is made to the need to link the “due justification” requirement to the existence of a public interest.
The investment law of Viet Nam similarly notes that expropriation is permitted only for specific public interests, such as ensuring national defence and security, reacting to a state of emergency or acting for the prevention or recovery of natural disasters. In this case, it also provides that the investor shall be provided compensation in accordance with applicable laws.
In these cases, the ACIA appears to set out higher standards of protection for investors, as the national laws mentioned above do not consider expropriation requirements such as non-discrimination and compliance with due process of law. In addition, when discussing the compensation requirement, the above-mentioned national laws focus exclusively on the adequacy of compensation (i.e. equal to the market value of the expropriated assets) without mentioning the need for the same to be also prompt and effective, as specified under ACIA standards. AMS should assess whether the provisions on direct expropriation in their domestic investment laws are consistent with ACIA standards and, if not, they should consider updating the relevant provisions to ensure full alignment with international standards and best practices.
Partially different is the regime on indirect expropriation, which occurs when the state implements a regulatory action that interferes with the use or enjoyment of the investment without necessarily depriving the investor of the formal title over the same. In general, national investment laws in ASEAN countries seem to rely on three different approaches. Some AMS countries (i.e., Indonesia, Lao PDR and Viet Nam) do not include any express reference to indirect expropriation in their national investment law. In this case, investors will be able to find protection if indirect expropriation is prohibited under additional investment-related instruments (e.g. Constitution, land code) or in case of extensive interpretation of standards of protection against direct expropriation by domestic courts or arbitral tribunals. An alternative approach may be found in the investment law of Cambodia and Timor-Leste, which treats direct and indirect expropriation jointly. In particular, the former simply provides that the state “shall not undertake any expropriation which may affect, either directly or indirectly” an investment; while the latter refers to expropriation policies “that directly or through equivalent measures” may entail an expropriation. In these cases, the conditions applicable to direct expropriation, including non-discrimination, compensation and compliance with legal principles and procedures, will explicitly apply to indirect expropriation as well.
The third, and most detailed, approach is the one followed by the investment law of Myanmar, in alignment with ACIA standards, which sets out a detailed regime governing indirect expropriation. Both instruments explicitly prohibit indirect expropriation and set out the criteria that the interpreter should consider for the purpose of determining, on a case-by-case basis, if an indirect expropriation exists. Such elements include, in particular, the economic impact of the measure on the value of the investment, whether the government’s action breaches the investor’s legitimate expectations based on the government’s prior written commitments, and whether the regulatory action is disproportionate or inconsistent with the objective that the government wanted to achieve. Both the ACIA and Myanmar’s national investment law clarify that regulatory measures adopted in a non-discriminatory manner to protect public interest objectives do not constitute indirect expropriation. The two, however, vary in how they define such public interests. On the one side, Myanmar’s investment law broadly refers to the government’s objective to regulate economic interests or support social objectives. On the other side, instead, the ACIA expressly refers to specific public interest objectives such as public health, safety and the environment, adopting a language in line with the one typical of international investment agreements. Regardless of the specific language, the last approach providing for a specific regime applicable to indirect expropriation appears to be the one that safeguards foreign investors the most, in line with existing international standards and practices.
Contrary to direct expropriation, there are no international best practices concerning the regime applicable to indirect expropriation. Even OECD countries do not address investors’ protection against indirect expropriation in a harmonised manner, with some laws not addressing this issue at all. Should AMS wish to regulate indirect expropriation through their domestic investment laws, they may wish to ensure alignment with the ACIA regime, thus expressly clarifying the conditions and criteria applicable to indirect expropriation, including relevant regulatory exceptions supporting public interest objectives.
4.4.3. Standards of treatment in AMS investment law vary considerably, making the identification of comparable trends difficult
In addition to ensuring protection of property rights, investment laws are also concerned with the treatment that investors are entitled to receive in their relationship with state authorities, first and foremost with respect to non-discrimination. Except for Viet Nam, national investment laws in AMS all provide for a prohibition of discrimination on the basis of nationality and for the equality of treatment between all types of investors. In certain instances, the prohibition of discrimination is subject to exceptions. This is the case of Cambodia and Timor-Leste, which expressly allow for the possibility of discriminating investors on the basis of nationality with respect to land ownership. Particularly noteworthy is also the case of Myanmar. Rather than opting for a broad prohibition against discrimination, its investment law adopts the more specific “national treatment” standard, clarifying that the government will accord to foreign investors “treatment no less favourable” than the one it grants to domestic investors with respect to the expansion, management, operation and disposal of the investment (Article 47, para. a). The law also sets out a “most-favoured-nation (MFN) treatment”, providing to foreign investors from a country a treatment no less favourable than the one given to foreign investors from another country that are “in like circumstances”. However, the law does not provide any indications as to how the existence of “like circumstances” should be assessed.
The inclusion of “national treatment” and “MFN treatment” provisions in national investment laws is not particularly common. These standards are more often included in international investment agreements (IIAs), including the ACIA and the ATISA, where it is used by the host state to extend to investors from the home state treatment provided, in like circumstances, to investors from a third state under another investment treaty (Dolzer, Kriebaum and Schreuer, 2022[14]). As national investment laws apply the same protections and benefits to all investors falling under their scope of application, the equality of treatment between different investors can already be ensured through the inclusion of a broad prohibition against discrimination, without having to resort to a “MFN treatment” standard. In general, incorporating IIAs standards – such as national treatment and MFN treatment – into domestic laws carries significant risks. In particular, it could unduly constrain regulatory autonomy, expose the state to expansive and unintended interpretations through domestic litigation, and create inconsistencies with the existing legal framework, thus increasing legal uncertainty.
Another difference in standards of protections between national and international legal frameworks concerns the inclusion of a fair and equitable treatment (FET) guarantee. This is also typically found in IIAs, including in the ACIA, and does not commonly appear in national investment laws, save for very limited exceptions (e.g. Bangladesh). This is because other parts of a state’s domestic legal framework will generally address the issues that are covered under the FET. Even in the IIA context, the interpretation of what the FET standard entails is one of the most common grounds of dispute between investors and host states. Arbitral tribunals have often interpreted the standard extensively, to also protect the investor’s legitimate expectations as to the stability of the regulatory framework.
In ASEAN, Myanmar, Timor-Leste and Viet Nam appear to grant FET to investors. The national investment laws of Timor-Leste and Viet Nam, in particular, adopt a particularly broad language. The law of Timor-Leste generally states that “all investors are entitled to” FET (Article 11), while the law of Viet Nam states that the government “shall treat investors equitably” (Article 5, para. 5). The inclusion of a FET provision in a national investment law might produce unintended negative consequences on the domestic right to regulate and should therefore be avoided, especially when the standard is broadly drafted. If FET is still included in a national investment law, it is generally advisable to introduce a more restrictive language to minimise potential risks. This is the approach adopted by the national investment law of Myanmar. Drawing from the language on FET included in the ACIA, the law clarifies that FET refers to the investor’s right to obtain information on any measures or decisions which have a significant impact on its activities and its right to due process of law and to appeal administrative measures, including relating to amendments to licenses, permits or endorsements granted by the government (Article 48). Such a clarification helps limiting the interpretative discretion inherent in the FET standard and minimise the risks associated with the same.
As to other standards of treatment commonly included in national investment law, all AMS except Lao PDR provide to investors explicit guarantees on the free transferability of funds, in alignment with the international standards of protection enshrined in the ACIA. In addition, certain national laws go beyond the ACIA standard by providing for additional guarantees and protections. It is the case of guarantees on the hiring of foreign personnel (i.e., Cambodia, Myanmar, Timor-Leste), explicit protections for intellectual property rights (i.e., Cambodia, Lao PDR, Timor-Leste) or specific guarantees of access to land through lease and concession agreements (i.e., Cambodia, Myanmar, Timor-Leste). The national investment law of Viet Nam also includes additional provisions setting out a prohibition of performance requirements and a stabilisation clause in favour of the investor – although the stabilisation does not extend to regulatory changes in areas relating to national defence and security, public order, public health and environmental protection.
4.4.4. AMS investment laws are consistent in how they address the resolution of investment disputes
An additional function of national investment laws is to regulate the procedures for the settlement of disputes between investors and the government. In fact, dispute settlement is an essential and often complementary element of investment protection, and AMS investment laws that provide for guarantees and protections for investors (i.e., Cambodia, Indonesia, Lao PDR, Myanmar, Timor-Leste and Viet Nam) also regulate the available mechanisms to resolve investment disputes. In this respect, relevant AMS investment laws are highly consistent in how they deal with dispute resolution mechanisms. In the first instance, they all provide for amicable settlement as first avenue of dispute resolution, in certain cases also through reference to specific procedures (e.g. negotiations and conciliation). Should amicable settlement fail, then the parties will be able to seek resolution before domestic courts or to enter into a specific agreement submitting the dispute to either domestic or international arbitration, based on their choice.
The investment laws of Lao PDR and Myanmar also provide for additional dispute settlement avenues. Starting from the latter, the investment law specifically requires the Myanmar Investment Commission, the domestic investment promotion agency, to establish an investor grievance committee to prevent and resolve the occurrence of investment disputes (Article 82). Grievance mechanisms can be an important tool to allow investors to voice their concerns (e.g. with regard to the government’s administrative actions or possible changes in regulations affecting the investment) as early as possible, and to foster the achievement of a resolution before the emergence of a full-blown dispute (UNCITRAL Working Group III, 2024[15]). Notably, a well-functioning grievance mechanism can play a key role in avoiding expensive litigation, including in the context of treaty-based investor-state arbitration, and in ensuring ongoing collaboration and FDI commitments from investors that may otherwise abandon investment plans or projects (OECD, 2020[16]). Myanmar’s investment law does not provide any indication as to how the Investor Grievance Committee should function, including with respect to its relationship with other dispute resolution mechanisms envisaged therein. Additional details are set out in a 2020 regulation, which provides some details of its design and functioning processes, clarifying the composition of the members of the Investor Grievance Committee, the general powers of the Committee to gather facts and submit recommendations to the government regarding investment disputes and annual reporting requirements. Information concerning the length of time during which an investor must pursue an amicable settlement before it can start legal proceedings and a time limit for the institution of legal proceedings are, however, notably missing (OECD, 2020[16]).
The national investment law of Laos PDR also envisages a special “administrative dispute resolution procedure” entrusted to the investment one-stop-shop service and the Investment Promotion and Supervision Committee (Article 95), with a view to facilitating amicable resolution. However, the law does not provide any additional information as to how the procedure is expected to be implemented. The investment law also expressly includes the Organisation for Economic Dispute Resolution (OEDR), a specialised government agency, among the institutions that parties may have recourse to for the resolution of economic disputes (Article 96). Dispute resolution under the OEDR procedure can occur either through arbitration or mediation, depending on the parties’ choice (Lao Premier, 2013[17]).
4.4.5. AMS investment laws rely on a variety of tools and approaches to pursue sustainable development objectives
Investment laws can play an important role in fostering an investment climate that promotes and supports sustainable development objectives, including the green transition and digital transformation. In the ASEAN context, AMS adopt a variety of approaches to pursue sustainability through their domestic legal frameworks on investment. These range from an underlying recognition of the importance of sustainability as a guiding principle for the implementation of investment projects to the incorporation of specific investor obligations and the identification of policy tools that can steer investment towards sustainable development goals. In general, most AMS investment laws consider sustainable development as an overarching policy goal, guiding investment activities in their territories.
Several AMS consistently mention environmental protection or sustainable development as main objectives under their national investment laws (i.e. Indonesia, Lao PDR, Myanmar, Timor-Leste and Thailand), with varying degrees of emphasis. Indonesia explicitly grounds the investment law in the “principle of sustainability” and specifies that investments must consider and prioritise the protection and conservation of the environment (Article 3). Myanmar similarly includes an explicit reference to the development of a responsible investment climate which does not harm the natural or the social environment (Article 3). Timor-Leste’s law, instead, refers to specific sustainability objectives, such as poverty reduction and employment creation, sustainable economic growth through respect for natural ecosystems and the rational use of resources, promotion of gender equality and the reduction of socioeconomic inequalities (Article 4). Other AMS, instead, list specific components of the broader concept of “sustainable development” among the overarching objectives of their investment legislation. For example, the investment law of Cambodia emphasises socio-economic development rather than “sustainable development” as such, while Viet Nam’s investment law takes a narrower approach and encourages investment that supports sustainable economic growth.
In addition to highlighting the importance of sustainable development as an overarching policy objective, a subset of AMS investment laws sets out concrete policy tools to achieve it. An important instrument in this respect consists in the inclusion of investor obligations in investment laws. These legal requirements can ensure that investors contribute to national and regional development priorities by supporting broader environmental and social goals. Investor obligations can take various forms and cover a wide range of areas (Table 4.2).
Note: Only AMS investment laws that include sustainable development-related provisions have been considered.
Source: Based on AMS investment laws.
Across AMS, investors are generally required to comply with domestic laws and regulations. This duty usually encompasses legislation relating to, for example, environmental protection, labour standards, human rights, taxation, and anti-corruption. In certain jurisdictions, environmental protection obligations, and in particular the performance of a prior Environmental Impact Assessment (EIA), are also set out as a specific obligation under investment laws, sometimes acting as a condition to the approval or implementation of investments. In Cambodia, for example, investors must obtain an Environmental Protection Contract or complete an EIA as a condition for their investment application (Article 7). Similarly, Viet Nam requires investment proposals to include a preliminary assessment of environmental impacts (Article 34). Additional obligations seek to strengthen transparency in the implementation of the investment project, including from an environmental perspective, by providing for explicit reporting obligations. Indonesia mandates companies to submit a report on their investment activities (Article 17). Cambodia requires investors to submit semi-annual and annual reports detailing compliance with their social and environmental obligations (Article 11) while, in Viet Nam, investors must provide quarterly and annual reports on environmental treatment and protection (Article 72).
Several AMS investment laws also highlight the importance of respecting local traditions, customs, and cultures. In Indonesia, investors are required to respect the cultural traditions of local communities and operate under the principle of “togetherness”, which encourages them to promote the public welfare of local communities themselves (Article 3). The investment law of Lao PDR requires respect for local customs and cultural values (Article 73), while Myanmar provides that investors must avoid damage to cultural heritage in the implementation of their activities (Article 65). Thailand’s Foreign Business Act similarly sets out an obligation to take cultural considerations (including concerning arts, customs, folklore, and handicrafts) into account when licensing businesses, particularly where their activities might affect cultural heritage (Sections 5 and 7).
Alongside environmental sustainability, digital transformation represents a complementary policy priority across AMS. AMS investment laws place clear emphasis on the importance of technology, particularly in the areas of technology transfer, innovation, and research and development (R&D). This is the case in Cambodia, Indonesia, Lao PDR, Timor-Leste and Viet Nam, where investment promotion is closely tied to technological advancement. Technology-related investor obligations emerge as indirect but strategic mechanisms to support digital transformation. Several countries impose requirements that contribute to building digital and technological capacity, particularly through technology transfer and skills development. For instance, in Indonesia, the investment law explicitly aims to enhance the national technological base, by requiring companies employing foreign workers to provide training and technology transfer to Indonesian employees (Article 10). Similarly, the investment law of Lao PDR provides that investors must promote employment by upgrading professional education and transferring technology to local workers (Article 72). In another example, the investment law of Timor-Leste requires investors to promote professional training of Timorese workers, including for the improvement of technical and managerial knowledge (Article 23).
Where they are included, investor obligations in investment laws are most effective when designed in a manner that is coherent with the broader domestic legal and regulatory framework, including environmental and social legislation. In addition, investment laws, including in the ASEAN context, also rely on additional policy instruments such as incentives to steer capital towards activities with high economic, social, and environmental returns (ASEAN, 2024[1]). For instance, Cambodia offers investment incentives in sectors such as environmental management and protection, biodiversity conservation, the circular economy, and green energy and technology, contributing to climate change adaptation and mitigation (Article 24). A more detailed discussion of how AMS investment laws address incentives for sustainable development – and whether investment laws should address investment incentives at all – is provided in Chapter 3.
The conclusion of IIAs complements ASEAN’s investment policy. Over time, both ASEAN and individual AMS have negotiated a vast network of IIAs, including bilateral investment treaties (BITs), deep free trade agreements (FTAs) and treaties with investment provisions. According to recent ASEAN data, starting from the 1960s and as of April 2024, AMS have concluded over 350 IIAs (ASEAN, 2024[1]). For the most part, these instruments are old-generation BITs, that is, treaties that were concluded in the 1980s and 1990s. These treaties’ designs, characterised by unclear and unspecific descriptions of governments’ obligations, have led to uncertainty about the scope of obligations that runs counter to the need for clear and unambiguous rules for investments. Such an uncertainty may, in certain circumstances, produce unintended consequences on states’ ability to regulate in pursuit of sustainability objectives. More broadly, old-generation IIAs typically do not incorporate sustainable development considerations.
Experiences with use and interpretation of these older treaties from the early 2000s onwards has led governments around the globe to undertake modernisation efforts, changing the design of substantive provisions in favour of a more specific framing of government obligations. These new designs, concerning clauses addressing FET, MFN treatment, NT, indirect expropriation and ‘full protection and security’, are now used universally and consistently, and many jurisdictions, including in ASEAN, have used them consistently for several years. The adoption of new designs for new IIAs, however, does not resolve the legacy of older treaties that make up over 80% of the global treaty population. These remain in force and continue to create uncertainty about the contours of relevant government obligations, exposing state parties to claims under interpretations that were not intended or anticipated when the treaties were concluded. In this context, governments are considering options to address these issues in a pragmatic and efficient manner. Considerations of a possible modernisation of investment treaties take place under the umbrella of the OECD, and over 100 jurisdictions are invited to participate.8
Beyond ongoing efforts to modernise old-generation investment treaties, new-generation IIAs in the ASEAN context also address sustainable development concerns, adopting a variety of approaches. A first category of treaty provisions considers sustainable development in the context of traditional IIAs language, for example through references to sustainable development in the treaty preamble, the introduction of safeguards to the host state’s policy and regulatory space to protect public interests (e.g. right to regulate provisions, carve-outs from investment protection standards), or provisions calling on states not to lower their environmental or social standards for the purpose of attracting investment. More recently, however, newer treaties are starting to incorporate provisions that are aimed – explicitly or implicitly – at fostering sustainable investment in the host state. Notably, such “provisions on sustainable investment” require the host state to take active measures aimed at improving the domestic investment climate for the specific purpose of harnessing sustainable investment (OECD, 2024[18]). The reliance on such approaches varies widely depending on whether IIAs are entered into at the ASEAN level or by individual AMS.
4.5.1. ASEAN-level IIAs contain limited references to sustainable development concerns, although policy directions in this area are undergoing a shift
In general, IIAs entered into by ASEAN still contain limited references to sustainable investment or sustainable development more broadly. The 2009 ACIA, for example, does not include any explicit reference to either concept. As an old-generation IIA mostly focused on protection, the ACIA only provides a limited consideration to sustainable development-related concerns, and specifically to environmental protection. In fact, the agreement clarifies that general regulatory measures, infringing upon the investment, that are adopted to protect the environment do not give rise to an instance of indirect expropriation. Such a clarification is standard in all ASEAN IIAs. It appears, for example, also in the 2009 ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), which follows a structure similar to the ACIA, as well as in the more recent Regional Comprehensive Economic Partnership (RCEP), adopted in 2020.
In recent times, the space for consideration of sustainable development concerns has expanded beyond these narrow boundaries. In 2023, the parties to the AANZFTA adopted a second protocol to the original agreement, introducing a new “Trade and Sustainable Development” chapter. In this context, the parties reinstate their intention to promote investment in a way that contributes to sustainable development objectives (Article 13.1, para 4). To this end, they explicitly recognise their sovereign right to develop, set, administer and enforce domestic laws and policies in the area of investment and sustainable development and that it is inappropriate to weaken or reduce levels of protection in their environmental or labour standards to encourage investment (Article 13.1, para 5).
Outside of traditional IIAs, ASEAN is pursuing sustainable development goals through different policy instruments, including the adoption of international agreements regulating topics at the intersection of economic policy and sustainable development concerns. Exemplary in this respect are ASEAN’s efforts to strengthen digitalisation supporting trade and investment. The 2019 ASEAN Agreement on Electronic Commerce has played a pivotal role in bolstering investors’ confidence in the digital markets (ASEAN, 2024[1]). Building on this instrument, AMS have further engaged in the negotiation of a new ASEAN Digital Economy Framework Agreement (DEFA), which is expected to further drive major investment flows into digital infrastructure and services.
4.5.2. AMS investment treaties are more receptive to sustainable development concerns, but significant country-level differences exist
Sustainable development considerations are finding increased recognition in new-generation IIAs entered into by individual AMS. At the multilateral level, treaties like the 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – to which Brunei, Malaysia, Singapore, and Viet Nam are a party – address the social and environmental dimensions of sustainable development in multiple ways. In its preamble, the agreement reaffirms the importance of promoting corporate social responsibility, cultural identity and diversity, environmental protection and conservation, gender equality, indigenous rights, labour rights, inclusive trade, sustainable development and traditional knowledge, as well as the importance of preserving the parties’ right to regulate in the public interest. The CPTPP also sets out specific provisions seeking to balance environmental and social concerns against investment objectives, including by safeguarding state parties’ right to regulate in the public interest, including to pursue environmental, health or other regulatory objectives (Article 9.16), and by introducing the parties’ obligation not to lower environmental laws and standards to encourage trade and investment (Article 20.3). In line with the ACIA and broader ASEAN practice, the CPTPP also limits the scope of certain investment protection standards, and in particular indirect expropriation, by clarifying that non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations.
Notably, the CPTPP also introduces some examples of “provisions on sustainable investment”, which seek to encourage parties to actively pursue targeted aspects of sustainable development, looking in particular at environmental and social objectives. Yet, their effectiveness remains limited, as they are drafted in declaratory language, without imposing obligations of any kind on the state parties. Specifically, the CPTPP first recognises the importance of trade and investment in environmental goods and services as a means of improving environmental and economic performance and addressing global environmental challenges. It also recognises the key role that the agreement itself can play in promoting investment in environmental goods and services in the free trade area (Article 20.18).
Obligations encouraging the parties to proactively adopt measures to pursue specific environmental or social objectives contributing to sustainable development are, instead, making a limited appearance in a few bilateral IIAs entered into by specific AMS. The EFTA-Malaysia Economic Partnership Agreement (2025) first reinstates the parties’ right to regulate in the public interest (e.g. Article 8.6, Article 12.3) and their obligation not to lower environmental standards to attract and encourage investment (e.g. Article 8.6, Article 12.4). It then goes a step further than other IIAs by imposing obligations on the parties to pursue and facilitate sustainable investment. Specifically, Article 12.7 provides that the parties “shall strive to facilitate and promote foreign investment, trade in and dissemination of goods and services beneficial to the environment”, such as environmental technologies, sustainable renewable energy, energy-efficient and eco-labelled goods and services. Investment promotion and facilitation obligations also extend to foreign investment contributing to sustainable development more broadly. The EFTA-Malaysia EPA also addresses the link between investment and climate change, highlighting the parties’ commitment to, among others, “promote the contribution of investment to the transition to a low-carbon economy and to climate-resilient development” (Article 12.10).
Similar provisions also appear in the EFTA-Thailand Free Trade Agreement (2025), where the parties commit to promote the contribution of investment to the low-carbon economy and climate-resilient development (Article 10.8). The parties to the EFTA-Thailand FTA, however, also undertake an additional set of obligations to actively support sustainable investment. These include: (i) promoting and facilitating foreign investment in goods and services that contribute to sustainable development, including those that are subject to ecological, fair or ethical trade schemes; (ii) promoting the development and use of sustainability certification schemes that enhance transparency and traceability throughout supply chains; and (iii) promoting the contribution of investment towards a resource efficient and circular economy (Article 10.12).
While these provisions reflect a growing awareness of the connection between investment and sustainable development objectives, their relevance is, for the time being, limited at best. For the most part, IIAs concluded by AMS continue to address sustainable development primarily through “negative” provisions – such as those reaffirming the parties’ right to regulate or commitments not to lower environmental and social standards – without requiring the adoption of concrete measures to align investment and sustainability objectives, particularly in the environmental field. Even where IIAs include provisions encouraging proactive engagement, these are frequently drafted in either soft and non-binding language – thus without creating any formal obligations on state parties – or as “best-effort” obligations, leaving flexibility as to the measures to achieve the desired objectives. Moreover, the few IIAs that do include binding “best efforts” obligations, such as the EFTA-Malaysia EPA and the EFTA-Thailand FTA, have not yet entered into force, further limiting the possibility of assessing their concrete effects in practice.
IIAs entered into by AMS also devote limited attention to other sustainable development-related concerns, in particular digitalisation. Some FTAs entered into in the ASEAN context include an “electronic commerce” or “digital commerce” chapter, but these are mostly concerned with trade issues and do not extend to digital investment. This is the case of the Second Protocol to the AANZFTA, the RCEP, or the Indonesia-United Arab Emirates Comprehensive Economic Partnership Agreement (2022). A limited reference to the importance of digitalisation to promote investment appears in the context of the Small and Medium-Sized Enterprises (SMEs) chapter, highlighting the key role that technology can play in supporting SMEs’ access to global markets and investment opportunities. Provisions of this type appear, for example, in the MERCOSUR-Singapore Free Trade Agreement (2023) or in the Cambodia- United Arab Emirates Comprehensive Economic Partnership Agreement (2023).
While IIAs offer opportunities to further highlight the connection between investment and sustainable development, including in support of the green and digital transition, it is important to bear in mind that such provisions are unlikely, by themselves, to produce the desired effects. Rather, their impacts will depend on effective implementation at the domestic level. States wishing to introduce provisions supporting sustainable investment in their IIAs will, therefore, need to pay specific attention to domestic implementation practices. This entails, among others, prioritising policy coherence across relevant regulatory frameworks, effective intergovernmental co-ordination, and adequate institutional and administrative capacity. In this respect, instruments such as the ASEAN Investment Facilitation Framework could provide useful guidance to AMS in the implementation of treaty commitments on sustainable investment (Box 4.2). The establishment of monitoring and evaluation mechanisms will also be key to assess progress towards the intended objectives.
As IIAs – including those concluded by AMS – increasingly incorporate provisions aimed at proactively supporting sustainability objectives –particularly in relation to the green and digital transition – there is growing need for guidance on how such commitments can be effectively implemented at the domestic level.
At the ASEAN level, particularly useful guidance can be drawn from the ASEAN Investment Facilitation Framework, adopted by AMS in 2021. This non-binding framework sets out a series of principles and actions aimed at facilitating investment in the ASEAN region, which AMS commit to implementing at the domestic level in accordance with their legal frameworks and international obligations.
The Framework addresses key investment facilitation areas, including transparency of investment-related measures and information, the streamlining of administrative processes, the use of digital technologies – such as digital platforms – and the provision of aftercare services. Across these areas, it identifies concrete measures for domestic implementation, which can serve as practical guidance for AMS in operationalising investment-related treaty commitments.
Additional guidance can be found in the ASEAN Sustainable Investment Guidelines, adopted on 24 March 2026 by the ASEAN Coordinating Committee on Investment. Similar to the ASEAN Investment Facilitation Framework, the ASEAN Sustainable Investment Guidance have non-binding nature and are intended to promote sustainable and responsible investment practices and business climate improvements.
Source: ASEAN (2021[19]), ASEAN Investment Facilitation Framework, https://asean.org/wp-content/uploads/2021/11/ASEAN-Investment-Facilitation-Framework-AIFF-Final-Text.pdf.
4.5.3. ASEAN countries are pursuing new international policy tools to address issues at the intersection of investment and sustainable development
IIAs are not the only international instrument available to align investment and sustainable development objectives. International practice, including in the ASEAN region, is increasingly moving towards the development of new forms of international economic co-operation where sustainable development objectives are put front and centre of the parties’ agendas. International Green Economy Collaborations (IGECs) are one example of such “new approaches” to sustainable investment. IGECs can be broadly defined as “international collaborations aimed at achieving mutual environmental and industrial benefits through supporting structural changes in shared value chains” (Aisbett et al., 2023[20]). Contrary to IIAs, where investment represents the parties’ focus, agreements in the form of IGECs seek to pursue broader sustainable development outcomes across economic, environmental and social dimensions. More specifically, IGECs are focused on actions that generate mutual benefits for both parties, such as the undertaking of joint research projects or co-ordination of climate finance to third parties.
IGECs are increasingly negotiated to pursue co-operation in the fields of decarbonisation and transition to a low-carbon economy. The Singapore-Australia Green Economy Agreement (2022) is a non-binding partnership that sets out a broad collaboration framework between the parties to support economic growth, create jobs in green sectors, promote decarbonisation and mainstream sustainability in national policies and plans. In this context, investment is only one of the many areas where the parties undertake to co-operate, including by setting up information sharing mechanisms, pursuing regulatory co-operation and supporting research and development. Notably, the GEA provides that the parties will collaborate to “facilitate and promote investment that will support decarbonisation efforts and open up new green economy opportunities” (paragraph 9.a). Examples of activities in this area include, among others, the promotion of green economy investment co-operation with government agencies to expand opportunities for business and industry and fostering investment in sustainable food systems. Another area of collaboration relates to the support to green and transition finance, to be pursued by, among others, advancing robust global climate-related financial disclosures and reporting standards, and strengthening the environmental, social and governance ecosystem in state parties to improve decision making by businesses and investors (paragraph 9.c).
More recently, Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam joined the Indo-Pacific Economic Framework (IPEF) Clean Economy Agreement (2024), with a view to advancing regional co-operation to accelerate deployment of clean energy technology. The preamble to the agreement recognises that clean economy transitions offer significant investment opportunities and underscores the importance of the objective of enabling sustainable and inclusive investment to reduce greenhouse gas emissions and build climate resilience in the IPEF region. On this basis, it sets out obligations on the parties to encourage investment in several areas of the clean economy, including new energy infrastructure, hydrogen ecosystems, methane emissions reduction infrastructure, climate-smart and resilient agriculture, food systems innovation, and sustainable water-related infrastructure.
The IPEF Clean Economy Agreement also highlights the importance of developing conducive legal frameworks that can lead to enhanced investment in clean energy and that can incentivise broad participation in energy markets. To this end, it first sets out several areas of co-operation in the field of investment, including to enhance regional grid connectivity and energy efficiency, energy market stability, and sustainable finance for the clean economy. It then addresses technical assistance and capacity building initiatives in key areas, including workforce development (e.g. through higher and technical/vocational education and trainings, and exchange programmes), project development for the creation of a pipeline of investment-ready projects, and support in the development, implementation, and enforcement of regulations and policies to reduce greenhouse gas emissions and adapt to the impacts of climate change.
Outside of the environmental area, IGECs are being pursued to achieve additional sustainability-related objectives, for example in the field of digitalisation. This is the case of the Singapore-New Zealand-Chile Digital Economy Partnership Agreement (2020), which regulates parties’ co-operation to, among others, “enhance investment opportunities for SMEs in the digital economy”. To this end, the parties undertake to encourage the participation by domestic SMEs in digital platforms that could help them link with international suppliers, buyers and other potential business partners (Article 10.2). In practice, such a provision refers to the operationalisation and use of a specific investment facilitation instrument, i.e. domestic supplier databases able to link domestic companies with foreign investors. Outside of this brief mention, however, the DEPA does not provide additional consideration to investment-related issues linked to digitalisation, appearing instead more focused on trade-related concerns.
As with sustainable investment provisions in IIAs concluded by AMS, it is too early to assess whether these new forms of international co-operation will have any tangible impacts in supporting the green and digital transition. To evaluate effectiveness over time, it will be important for AMS to establish appropriate monitoring and evaluation mechanisms to assess whether these arrangements are achieving their intended objectives in practice.
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← 1. Republic Act No. 11659 amending the Public Service Act, in force since 9 April 2022; and Implementing Rules and Regulations of Republic Act No. 11659 (2023).
← 2. DOE Circular No. DC2019-10-0013; Department of Energy (2022), DOE Circular No. 2022-11-0034 amending the Implementing Rules and Regulations of Republic Act No. 9513 (Renewable Energy Act of 2008).
← 3. Presidential Regulation No. 49 of 2021 amending Presidential Regulation No. 10 of 2021 on Investment Business Fields; Ministry of Industry, Regulation No. 33 of 2024, repealing nationality-based execution requirements for selected electricity infrastructure projects.
← 4. Decree No. 89/2019/ND-CP amending regulations on air transport business conditions, effective 1 January 2020; Decree No. 31/2021/ND-CP guiding implementation of the Law on Investment (2020).
← 5. Local Business Development Circular, Issue No. 1/2019, introducing preferential treatment for locally owned firms and locally produced goods in public procurement of construction services; Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Annex I – Non-Conforming Measures, identifying foreign equity caps applicable to selected motor vehicle manufacturing activities and batik production.
← 6. According to the OECD, investment facilitation involves a whole-of-government approach to encourage responsible and sustainable investments by providing new and existing investors with a transparent, predictable and efficient regulatory and administrative framework for investment. It combines tools, policies and processes that should be adopted by host countries to reduce or eliminate potential and existing obstacles faced by investors once they have decided to invest and maximise the positive contributions of investment to the economy (Novik and de Crombrugghe, 2018[21]).
← 7. Additional functions, and namely investment admission, investment incentives and investment promotion and facilitation, are discussed in Chapters 1 and 4 of this report.
← 8. More information on the process of the modernisation of investment treaties is available at https://www.oecd.org/en/topics/the-future-of-investment-treaties.html.