Economic Law Reforms in the ASEAN Emerging Economies: A Review of Three Decades’ Paths 9819915554, 9789819915552

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Kobe University Monograph Series in Social Science Research

Terukazu Suruga Phanhpakit Onphanhdala Yuka Kaneko   Editors

Economic Law Reforms in the ASEAN Emerging Economies A Review of Three Decades’ Paths

Kobe University Monograph Series in Social Science Research Series Editors Noritsugu Nakanishi, Kobe University Graduate School of Economics, Kobe, Japan Shigeyuki Hamori, Kobe University Graduate School of Economics, Kobe, Japan Editorial Board Kazumi Suzuki, Kobe University Graduate School of Business Administration, Kobe, Japan Hiroki Yasui, Kobe University Graduate School of Law, Kobe, Japan Tomoko Kinugasa, Kobe University Graduate School of Economics, Kobe, Japan Yuka Kaneko, Kobe University Center for Social Systems Innovation, Kobe, Japan Takahiro Sato, Research Institute for Economics and Business Administration, Kobe University, Kobe, Japan

The Kobe University Monograph Series in Social Science Research is an exciting interdisciplinary collection of monographs, both authored and edited, that encompass scholarly research not only in the economics but also in law, political science, business and management, accounting, international relations, and other sub-disciplines within the social sciences. As a national university with a special strength in the social sciences, Kobe University actively promotes interdisciplinary research. This series is not limited only to research emerging from Kobe University’s faculties of social sciences but also welcomes cross-disciplinary research that integrates studies in the arts and sciences. Kobe University, founded in 1902, is the second oldest national higher education institution for commerce in Japan and is now a preeminent institution for social science research and education in the country. Currently, the social sciences section includes four faculties—Law, Economics, Business Administration, and International Cooperation Studies—and the Research Institute for Economics and Business Administration (RIEB). There are some 230-plus researchers who belong to these faculties and conduct joint research through the Center for Social Systems Innovation and the Organization for Advanced and Integrated Research, Kobe University. This book series comprises academic works by researchers in the social sciences at Kobe University as well as their collaborators at affiliated institutions, Kobe University alumni and their colleagues, and renowned scholars from around the world who have worked with academic staff at Kobe University. Although traditionally the research of Japanese scholars has been publicized mainly in the Japanese language, Kobe University strives to promote publication and dissemination of works in English in order to further contribute to the global academic community.

Terukazu Suruga · Phanhpakit Onphanhdala · Yuka Kaneko Editors

Economic Law Reforms in the ASEAN Emerging Economies A Review of Three Decades’ Paths

Editors Terukazu Suruga Center for Social Systems Innovation Kobe University Kobe, Japan

Phanhpakit Onphanhdala Vientiane Capital Lao People’s Democratic Republic

Yuka Kaneko Center for Social Systems Innovation Kobe University Kobe, Japan

ISSN 2524-504X ISSN 2524-5058 (electronic) Kobe University Monograph Series in Social Science Research ISBN 978-981-99-1555-2 ISBN 978-981-99-1556-9 (eBook) https://doi.org/10.1007/978-981-99-1556-9 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

About This Book

This book reviews the periodic changes in the legal policies of the late-developing ASEAN countries, often known as the CLMV countries (Cambodia, Laos, Myanmar, and Vietnam), in their continuous path toward globalization after the collapse of the socialist bloc. The book also identifies the characteristics of the legal reforms in their present stage guided by the common framework under the ASEAN Economic Community (AEC) moving toward 2025. The first stage is illustrated by the ASEAN-style utilization of foreign investments as reflected in all investment laws and policies of CLMV countries in the 1990s, which featured entry control (as “sticks”) and investment incentives (as “carrots”). Those controls and incentives were the means to induce investors to assume various performance requirements to contribute to industrial policies. The second stage witnessed a shift toward enhanced liberalization as an endeavor toward the WTO accession during the 2000s, as seen in the integrated investment laws that appealed for the national treatment of foreign investors. At the same time, those investment laws emphasized the substantive provisions (e.g., fair and equitable treatment and indirect expropriation) and procedural protections (e.g., provision of Investor–State Dispute Resolution mechanisms) as an appeal for stabilization of the investment climate. The third stage of legal policy, as evidenced by the recent amendments to the investment laws, is newly focused on environmental and social considerations, which seems to be an indispensable response to the increasing social protests against the negative impacts of investment promotion. Simultaneously, the means of administrative controls over investors, established in the first stage, are uniquely utilized for the realization of new goals.

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Purpose This volume is a product of an interdisciplinary study between legal scholars and economists on the outcomes of the past three decades of economic law reforms in the Asian socialist market reform countries, often called the CLMV (Cambodia, Laos, Myanmar, and Vietnam). These three decades after the collapse of the COMECON (Council for Mutual Economic Assistance) regime in the early 1990s have seen a path of drastic legal reforms for the CLMV to meet with the international requirements to seek a stance in the world trade order. Such a path has, however, been a long and winding road which started with the initial reception of the market-oriented legal models provided by the international donor agencies such as the World Bank and the ADB (Asian Development Bank), backed by the pressure of trade negotiations with the U.S. and other developed countries in the accession process to the WTO (World Trade Organization), but became increasingly affected by the legal policies taken by the core countries in the ASEAN (Association of Southeast Asian Nations) which has applied the so-called ASEAN way, making much of the mutual respect to the independence of each development policy. The ASEAN way is, however, in itself in a process of change toward a gradual integration, particularly in the major areas of economic law, under the initiative of the ASEAN Economic Community (or AEC) toward the completion in 2025. Economic law reforms in the CLMV countries look, indeed, like a battlefield of different law models dedicated to the development. The essence of policy orientation of “legal transplant” led by international donor agencies such as the World Bank was not different from that of the structural adjustment programs which were conducted in central and south American nations to overcome the cumulative debt problem triggered by the strong dollar policy of Reaganomics in the early 1980s, known as the “Washington Consensus.” It was policy guidance toward economic growth through the promotion of deregulation to encourage foreign investment and a macro-economic policy aimed at currency stability through tight fiscal policy and high-interest rates. By the time when the CLMV countries started to accept the

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donors’ guidance, the world had seen numbers of the structural adjustment programs fail, but the neo-institutionalists including the World Bank’s then vice president Ibrahim Shihata explained it as a result of poor governance, and instead, called for additional programs aimed at legal and judicial reform in the campaign for “good governance” and “rule of law.” A series of model laws emerged to guide the legal reform, mostly based on the neo-liberal policy orientation, and have continued to be applied up to the present, despite the paradigm shift of development goals during these three decades after the introduction of Human Development Index (HDI) in the 1990s, through the Millennium Development Goals (MDGs) in the 2000s, and the Sustainable Development Goals (SDGs) toward 2030. On the other hand, “legal transplants” in actual practice have shown a diversity due to the tendency of the recipient countries to modify the donor-oriented model laws, instead of literally transplanting them, so as to integrate them into the holistic legal regime under each country’s constitution, including the maintained socialist goals, as well as existing norms in each society maintained since the “legal pluralism” applied in the colonial time. The integrity of legal system has often been considered indispensable by the CLMV countries in order to link the existing legal regime with the individual economic laws being transplanted. Japanese ODA supported Civil Code drafting in Vietnam, Cambodia, Laos in response to the request by each government, to meet the needs of establishing the integrity of holistic legal system under the Code as ultimate source of norms in deductive application of general principles. Japan has made enormous efforts to respond to such a need of the socialist market reform countries, as Netherlands (Leiden University) extended support to the drafting of Russia’s 1995 Civil Code. Such code-drafting support by donors from the continental law family, however, invited inter-donor conflicts with the international donors which basically follow the Anglo-American model. This conflict of models between donors has been a target of the emerging academic field known as “Law and Development” studies. One extreme in this field is the supporters of neo-institutional development economics, such as the “legal origin” theory by Raphael La Porta and his colleagues around the World Bank Institute, and the “convergence” theory led by Katrina Pistor et al. which guided the governance projects at the ADB. The other extreme is the critical legal studies led by David Trubek and his successors who have led a collaborative research network on law and development at the Law and Society Association. Given the complexity of a legal system, which is a unique consequence of legal history and involves both written and unwritten legal norms rooted in that society, it is not appropriate to use legal system reform as a simple instrument for the realization of certain economic policy. Rather, it seems that a cautious, empirical approach is needed, beyond the contentions of the theorists at the two extremes, to understand each path of efforts made by the lawmakers in these Asian emerging economies in sought for a suitable legal design to achieve a certain policy goal within the different context of each legal environment. Instead of evaluating the success of transplanting any established models, this research aims at the identification of different paths

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taken in target economies for economic law reforms after the initial adaptation of the same models, in response to each local policy need.

Method This research aims at a joint approach by economists and lawyers such that the economists ascertain the periodical policy goals guiding the development path of each of the target Asian emerging economies, particularly after the initiation of socialist market reform in the late 1980s, through the lengthy accession process to the WTO in the 2000s, and the participation in the ASEAN with the initial effort to catch-up with the foreign investment policies of the core ASEAN member countries, and later with the changing policy needs toward the ASEAN economic integration, while the lawyers applies their expertise in identifying changing legal designs in major economic laws, as well as the reality of their implementation, in each stage of these periodical changes in economic policy in the target countries. The economic analysis will be guided by the understanding of the development policy choices of the target countries from the perspective of development economics, including the authors’ direct involvement in the policy review of the target countries. Since Asian emerging economies have achieved high economic growth by a policy utilizing foreign direct investment, this research compares the target countries particularly focusing on foreign direct investment inflows. This research makes full use of statistics from the data provided by international organizations, statistical office or related ministries of each government, and Japanese organizations related to international trade and investment to conduct the comparison. Objective grasp of the situation is required for evaluation of the policy and proper policy making. Governance, human capital, and infrastructure also affect the foreign direct investment inflows. Accordingly, these factors are compared statistically on the target countries. The legal analysis in this research enshrines a wider target of economic law reforms guided by the international donor agencies and the negotiation for WTO accession during these decades, but in this volume, it has particular focuses on the areas which have particularly shown periodical changes of legal designs worthy to investigate further into, namely, foreign investment law, competition law, labor law, laws for dispute resolution and enforcement, and property law. Methodologically it is characterized by, first, a comparative analysis of the texts of local laws of the target countries, with a reference to the development of detailed interpretation through case law as far as it is available. Such an orthodox approach to the substance of domestic law has been lacking in both the neo-institutional theorists guided by the macro differentiation of legal families, and the critical legal studies that has basically been led by American scholars who lack interest in a systemic interpretation of code systems. Second, this research will pay attention to the empirical reality of the implementation of the legal reforms, or in other words, the gap between the legal texts and the social reality of normative choices, through field research including interviews with local

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jurists who are involved in legal dispute resolution in each target country on a daily basis. This combination of comparative text reading and empirical approach to dispute resolution will enable comprehension of the overall changes to the legal designs both on paper and in reality, at each periodical stage of the development policy changes ascertained by the economists as aforementioned. For example, even though the same law model was offered by the international donor agencies to the CLMV countries for the corporate and financial sector adjustment program, and implemented through the ROSC (Report on the Observation of Standards and Codes), a rating system on the conformity to model laws guided by the World Bank and the IMF (International Monetary Fund), each country has modified the model to meet their own needs. As a result, Vietnam, which enacted its Civil Code in 1995 and revised it in 2004 and 2014, as well as Cambodia, which enacted its Civil Code in 2007, have both been faced with inter-donor conflicts between the World Bank group that contends its model law reflects the international best practice, and Japanese assistance which contends that the Civil Code should be treated as the superior principle that binds all subordinate laws in the civil and commercial spheres, and the legal designs in the two countries have fluctuated as a result of a compromise to fill the gap. Lao law, on the other hand, has increasingly referred to environmental and social considerations, and the recently adapted 2020 Civil Code is expected to function as the fundamental basis of policy balance. Myanmar has revived the exploitative capitalist design of the British colonial-era Indian Code and has not caught up with the post-war legal development of other commonwealth countries, which ironically is a good fit for the neo-liberal orientation of the contemporary Washington Consensuses model, but has met with increasing social protests and resulted in compromised dispute resolution. The comparative method backed by the empirical approach of legal sociology in this research is expected to be a method for better identifying the points where gaps between the law and social reality exist in each periodical stage of development policy, and also the efforts made by lawmakers and enforcers to modify the law to mitigate such gaps.

Structure of This Volume This volume contains eight chapters that are the results of the aforementioned joint study. Chapter 1 by Terukazu Suruga and Phanhpakit Onphanjdala investigates the circumstances of the inflow of the foreign direct investment in the CLMV countries, with the implication that even Vietnam, which looks the most successful of the four countries, failed to invite supporting industries in the electrics/electronics industry, as well as the auto industry, and resulted in an economy heavily dependent upon imports. The other three countries leave much to be desired in the areas of control of corruption, government effectiveness, rule of law, and educational attainment. This chapter concludes that, while it is expected that countries receive more

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FDI by having good investment climates, there is a need to further investigate the detailed requirements for the institutional improvements which the qualified foreign investors are calling for. Chapter 2 by Yuka Kaneko is a review of the policy tendencies of the economic law reforms in the CLMV countries since the initiation of socialist market reform in the late 1980s, with a focus on the periodical changes to foreign investment laws and policies in response to international commitments such as bilateral trade agreements/investment treaties and accession to the WTO, and then gives an overview of the variation in recent economic law reforms, under the guidance of the common framework of the ASEAN Economic Community (AEC). An implication is a trend of re-regulation, or an increasing emphasis on administrative approach that mandates the state’s agencies to intervene in contractual relations in the name of contemporary policy considerations such as protection of environment, labor, consumers, and smallmedium enterprises (SMEs), rather than the market-based approach enforced by the parties’ own initiative at court or through alternative dispute resolutions (ADR). This trend of law reform retains both risks of discretionary application which may harm the predictability of investors, and also of a laissez-faire economy if the government seldom exercises its regulatory power. Chapter 3 by Makoto Kurita is a comparative review of ASEAN competition policy and law-making. In the last two decades, most of the Asian economies have promulgated competition laws, due to various reasons including external pressure from trading partners. While they share certain common features in the contents of the laws, the degree of implementation varies. In particular, the independence of the competition authority is one of the underlying causes of this difference, since in most of the ASEAN countries (except in Indonesia and the Philippines) the relevant authority is attached to a line ministry in charge of trade and commerce. This chapter also envisages the future of regional cooperation on competition law enforcement among competition authorities through mechanisms such as the ASEAN Competition Enforcers’ Network (ACEN), and the role of legal technical assistance. Chapter 4 by Kozo Kagawa attempts at identifying the common characteristics of labor dispute resolution in the ASEAN least developed countries, through a comparative perspective established by this chapter. Based on the classification between rights disputes and interests disputes, as well as between collective and individual disputes, this chapter finds a tendency in labor disputes that right-based disputes in the ASEAN least developed countries are mostly treated as an individual dispute, and therefore dealt with by the judicial courts, but the formation of case law has been delayed. This chapter calls for further comparative analysis which extends to consideration of the differences in the political systems, legal traditions stemming back to the colonial law, normative culture, and the incorporation of the informal sector. Chapter 5 by Shiro Kawashima casts a focus on civil dispute resolution systems in Vietnam, as a typical example of legal enforcement in the Southeast Asian Way, characterized by the promotion of mediation in the course of the formal civil procedural law regime, as well as the grassroots practice of village mediation. This chapter also

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induces lessons from the Japanese legal assistance for civil procedure code reform in Vietnam. Chapter 6 by Yoshifumi Akanishi is an attempt at comparative analysis of asset preservation procedures and compulsory execution systems as the institutional infrastructure of debt recovery in the ASEAN least developed countries, mostly through comparison with Japanese law. Remaining problems include the need to overcome the weakness in enforcement of arbitration awards due to the discretion of the court, the trustworthiness of the real property registration systems, and streamlined objection systems in the course of judgement execution. Chapter 7 by Kenzo Okawa is an analysis of the development support by international donors for Laos’ real property system reform, in particular Phases 1 and 2 of the Laos’ Land Titling Project led by the World Bank with German and Australian support. A critical review is provided on the limited achievement in terms of the expected outcomes of the project, such as the decrease in dispute resolution and financial promotion, while social disputes are further increasing. The author is a member of the Japanese ODA support for the drafting and implementation of the 2020 Lao Civil Code. Chapter 8 by Terukazu Suruga is a concluding chapter, which attempts a review of the implementation of foreign direct investment policy in Laos, as a typical example of the countries which have aimed at economic growth through foreign investment promotion. Despite the obvious increase of capital inflow during these decades since the new economic policy, which is considered to be a successful result of the foreign investment law which emphasizes various preferential treatments for investments, the problem of overdependence on the mineral resource and electricity industries is deepening. In order to realize sustainable and inclusive growth, investment that promotes the development of a manufacturing industry that is linked to the global supply chain is indispensable, and the building of capacity to implement the law for such a policy direction is awaited.

Contents

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN Least Developed Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . Terukazu Suruga and Phanhpakit Onphanhdala

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2 Policy Choices in the Economic Law Reforms of ASEAN Emerging Economies: A Comparative Perspective . . . . . . . . . . . . . . . . . Yuka Kaneko

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3 Comparative Approach to ASEAN Competition Policy and Law . . . . Makoto Kurita 4 Characteristics of Labour Disputes Resolution in the Four ASEAN Least Developed Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kozo Kagawa 5 Development of Consensual Dispute Resolution Procedures in Vietnam: An Aspect of Legal Development Support and the Development of ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shiro Kawashima

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6 Asset Preservation Procedures and Compulsory Execution as Basic Framework for Debt Recovery in the ASEAN Late-Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Yoshifumi Akanishi 7 Status of the Reform of Laos’ Real Property System and a Perspective on Legal Development Support: A Fundamental Consideration of Phases 1 and 2 of the Lao Land Titling Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Kenzo Okawa

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8 Foreign Direct Investment and Inflow Climate in Laos by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Terukazu Suruga Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

Editors and Contributors

About the Editors Terukazu Suruga obtained a Ph.D. in economics at Osaka University, Japan. He is now professor emeritus at Kobe University. He has held several visiting positions at institutions including Washington University, Flinders University, Beijing University, the Mongolian Market Research Institute, KIMEP University, and National University of Laos. He has published numerous papers on foreign direct investment (FDI), development economics, and labor economics. He has written Labour and Employment Society in Laos (in Japanese) and has edited Changing Employment Practices and Female Labor Force (in Japanese). Phanhpakit Onphanhdala obtained a Ph.D. in economics in 2008 from Kobe University, Japan, where he worked during 2008–2011, and at the National University of Laos during 2011–2019. He was the deputy director of the Research Center under the National Institute for Economic Research, Lao PDR, during 2019–2020. Currently, he is a senior economist and independent researcher. His research interests include labor market analysis, FDI and trade, agribusiness, logistics, and economic integration. Yuka Kaneko, LL.D., is a professor and the deputy executive director at the Center for Social Systems Innovation, Kobe University, Japan. She is specialized in Asian comparative law, law and development, law and society, and disaster law. Her edited books include Asian Law in Disasters: Toward a Human-Centered Recovery (Routledge, 2016), Civil Law Reforms in Post-colonial Asia: Beyond Western Capitalism (Springer, 2019), Land Law and Disputes in Asia: In Search for an Alternative Development (Routledge, 2021), Build Back Better: Issues of Asian Disaster Recovery (Springer, 2021), Insolvency Law Reforms in the ASEAN Emerging Economies: Consequences of the Donor Model Designed for Economic Crises (Springer, 2022), and Reallocation of Social Risks in a Pandemic: Changing Law and Contractual Relations of Asian SMEs under COVID-19 (Springer, 2022). She is a member of

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the Board of Directors of the Japanese Association of Sociology of Law, and also a member of the Editors-in-Chief of the Asian Journal of Law and Society.

Contributors Yoshifumi Akanishi Ex Osaka Hight Court, Fuji Partners Law Office, Kyoto, Japan Kozo Kagawa Kobe University, Kobe, Japan Yuka Kaneko Kobe University Center for Social System Innovation, Kobe, Japan Shiro Kawashima Professor, Doctor of Law, Doshisha University School of Law, Kyoto, Japan Makoto Kurita Faculty of Law, Hakuoh University, Oyama, Japan Kenzo Okawa Setsunan University, Neyagawa, Japan Phanhpakit Onphanhdala Vientiane Capital, Lao People’s Democratic Republic Terukazu Suruga Center for Social System Innovation, Kobe University, Kobe, Japan

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 7.1

Fig. 7.2 Fig. 7.3 Fig. 8.1

FDI inflow in Vietnam. Sources UNCTAD . . . . . . . . . . . . . . . . . . . FDI inflow in Myanmar, Cambodia and Lao PDR. Sources UNCTAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in the number of transactions registered after titling (all types). Source World Bank 2010: 16 transaction types include: sale, mortgage, inheritance, transfer, lease, subdivision and consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Variations in the mean fee per property transaction. Source [11] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revenues from land tax and property registration. Source Ministry of natural resources and environment . . . . . . . . . . . . . . . . FDI net inflow in Lao PDR. Source UNCTAD . . . . . . . . . . . . . . . .

6 11

178 179 179 192

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List of Tables

Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 1.8 Table 2.1 Table 2.2 Table 2.3 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 6.6

Main economic indicators for ASEAN least developed countries (2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FDI net inflows (USD billion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . FDI inflows in Vietnam by country . . . . . . . . . . . . . . . . . . . . . . . . FDI inflows in Vietnam by industry . . . . . . . . . . . . . . . . . . . . . . . FDI inflow in Myanmar by country . . . . . . . . . . . . . . . . . . . . . . . . FDI inflows in Myanmar by industry . . . . . . . . . . . . . . . . . . . . . . Human Capital Index (2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Worldwide governance indicators . . . . . . . . . . . . . . . . . . . . . . . . . Three Contexts of the Economic Law Reforms of CLMV Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy choices of international investment rules . . . . . . . . . . . . . . Choices in the law making in ASEAN late developing countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Competition laws and competition authorities in ASEAN . . . . . Competition laws and competition authorities in North East Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comparison of substantive provisions among CLMV competition laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal technical assistance programs on competition policy and law to ASEAN in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International comparison of preservation procedures . . . . . . . . . . International comparison of compulsory execution systems . . . . The yearly number of civil judgment execution (filled at the judgment enforcement agencies—not at the court) . . . . . . The yearly total amount of civil judgment execution Price: Milllion VND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trend of civil judgement execution filed at the court . . . . . . . . . . Trend of the yearly average price of the auction data presented in IDR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 5 7 9 12 12 19 20 30 33 50 56 56 58 64 142 152 156 156 158 159

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Table 7.1 Table 7.2 Table 7.3 Table 7.4 Table 7.5 Table 8.1 Table 8.2 Table 8.3 Table 8.4 Table 8.5 Table 8.6

List of Tables

Coverage of systematic titling under first and second land titling projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Progress of systematic filling until november 30, 2008 (projects 1 and 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Incidence of disputes over land in the five years before 2009 . . . Time taken to resolve land-related disputes in 2003 . . . . . . . . . . Relationship between titling and credit source . . . . . . . . . . . . . . . Industry GDP in Lao PDR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industry exports in Lao PDR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electricity generation, consumption, export and import (GWh) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power supply of EDL (GWh) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monthly power supply of 2018 (GWh) . . . . . . . . . . . . . . . . . . . . . Lao worldwide governance indicators . . . . . . . . . . . . . . . . . . . . . .

173 174 175 176 177 195 196 200 201 202 208

Chapter 1

Foreign Direct Investment Inflow and Investment Climate in ASEAN Least Developed Countries Terukazu Suruga and Phanhpakit Onphanhdala

Abstract ASEAN least developed countries, that is, Vietnam, Myanmar, Cambodia and Lao PDR are trying to diversify their manufacturing sector and exports through receiving foreign direct investment (FDI). However, there is fierce competition to obtain high grade FDI. Accordingly, this paper investigates the FDI inflows to these countries and their investment climate for their further development. According to the comparison, Vietnam has received more FDI than the other countries in the manufacturing sector such as motorcycle, car, mobile phone and electrons and can diversify the exports. However, Vietnam still cannot develop the supporting industries especially the local suppliers. The other three countries cannot receive adequate FDI in Manufacturing. Although the obstacles of investment differ from country to country, quality of workers, electricity and corruption are main obstacles for several countries. This paper compares the investment climate by using the JETRO Survey on Business Conditions of Japanese Companies in Asia and Oceania, Human Capital Index by World Bank, and Worldwide Governance Index. The result of comparison shows that Vietnam is remarkably better on most of investment climate. The other three countries are required to improve quality of workers, infrastructure and governance.

1.1 Introduction Since ASEAN leading countries such as Malaysia, Thailand and Indonesia have participated in global value chains of manufacturing by receiving a lot of foreign direct investment (FDI), they have promoted economic growth, diversified exports and adopted technology. As Baldwin [1] explains, the cost of transferring ideas T. Suruga (B) Kobe University, Center for Social System Innovation, GSICS Bldg 2-1 Rokkodaicho, Nada-Ku, Kobe 657-8501, Japan e-mail: [email protected] P. Onphanhdala House Unit No. 43, Houiyhong Village, Chanthabouly District, 01000 Vientiane Capital, Lao People’s Democratic Republic © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_1

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T. Suruga and P. Onphanhdala

has drastically declined by the information and communications technology (ICT) revolution, making it possible to move part of the production process to more costeffective region. That is, it is possible that technology or know-how in developed countries and cheap labor in developing countries are combined. Because Malaysia, Thailand and Indonesia are located near developed areas such as Japan, South Korea and Taiwan, they have achieved comparatively high industrialization. ASEAN least developed countries, that is, Vietnam, Myanmar, Cambodia and Lao PDR delayed the start of economic development because of international conflicts, civil wars and the failure of socialist economies. Although each county has faced different circumstances, they have also achieved economic development by receiving FDI, and continue to plan to do so in order to achieve greater economic development. However, except for Vietnam, they have not received enough or adequate FDI, and their diversity of industrialization is not enough. There is fierce competition to receive FDI in manufacturing, as we can understand it from the fact that only a limited number of countries has successfully developed manufacturing. Accordingly, the improvement of investment climate is required to receive adequate FDI. As for investment climate, we can consider properly educated and trained labor, wage level, infrastructure such as electricity, roads, development of laws, governance and institutions. Skilled workers are not enough in ASEAN least developed countries, meaning greater access to education is especially required in the countries, except for Vietnam. Since their minimum wages have been increasing recently, which have followed the increase in Thailand, there is a possibility that the attraction of cheap labor will decrease in the future. Myanmar and Cambodia face the problem of electricity supply and Lao PDR has the problem of high transportation cost due to being a landlocked country. The problem of governance or institutions is not improved in all four countries, and corruption and the inefficiency of bureaucracy continue. In addition, the refugee issue of the Rohingya and political instability in Myanmar and the dictatorship in Cambodia pose a risk of economic sanctions. On the other hand, the quick inflow of FDI has harmful effects. As Suruga [20] has explained, since the construction of hydroelectric power stations for domestic consumption was guaranteed to provide enough profits in Lao PDR, a huge amount of FDI quickly inflowed to construct a lot of power stations. The Lao government forecasted too much domestic demand, and thus too much power was supplied. According to the contract, the Lao public electricity company has to buy a determined amount of electricity even if it is not needed. This is one example of a government not being able to properly administrate a quick inflow of FDI. In addition, because the Lao government could not properly select the companies which applied for land concessions for investigating minerals in the mining sector, the development of mining did not proceed smoothly resulting natural environmental problems. Furthermore, as for the construction of dams and the Lao-China high speed railway, the government did not sufficiently compensate the replacement of the residents; this also resulted in the destruction of the natural environment. This paper analyses the FDI inflows and their investment climate in ASEAN least developed countries.

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN …

3

1.2 Comparison of Economic Size and Conditions in Four ASEAN Countries The main economic indicators are summarized in Table 1.1 based on ADB data. Regarding each countries’ population, Vietnam has 97 million and Myanmar has 54 million, which are rather large compared to Cambodia’s 16 million and Lao PDR’s 7 million. Since Vietnam has a relatively large population and its economy is the most developed among the four countries, Vietnam’s GDP is especially large among them. The size is four times of Myanmar’s GDP, which is the second largest. The main purposes of FDI are firstly cheap labor and secondly to sell the products at the domestic market. Accordingly, Vietnam has the most attractive domestic market and Myanmar has the second most attractive market. Cambodia’s and Lao PDR’s relatively small populations are not as attractive for domestic sales. Per capita GDP of Lao PDR is USD 2,783, that of Vietnam is USD 2,740 and they are higher than those of Cambodia and Myanmar. Comparing Vietnam and Lao PDR, since Vietnam has developed more in manufacturing and has achieved diversity of industry, we have the impression that the income level of Vietnam is higher than that of Lao PDR. However, Lao PDR has a higher weight of mining and power generation industries, which have high productivity. This fact increases its per capita GDP. If we consider per capita GDP as a proxy of wage, the wage differential is small between the two countries, and FDI inflows from Vietnam and Lao PDR would not occur Table 1.1 Main economic indicators for ASEAN least developed countries (2019) Population (Million persons)

Nominal GDP (USD billion)

Per capita GDP (USD)

Structure of GDP Agriculture

Industries

Services

(Three years average)

Vietnam

96.5

261.64

2740

15.5

38.3

46.2

7.0

Myanmar

54.3

65.99

1245

21.4

38.0

40.7

6.3

Cambodia

16.0

26.73

1621

22.1

36.5

41.4

7.1

Lao PDR

6.9

19.12

2783

17.7

35.5

46.8

6.7

Long-term public debt/GNI 2018 (%)

HCI (2020)

Inflation rate (three years average, %)

Trade balance to GDP (%)

Trade amount to GDP (%)

Fiscal balance to GDP (%)

Revenue to GDP (%)

Growth rate (%)

Vietnam

23.03

0.69

3.27

−3.4

25.7

5.0

Myanmar

19.72

0.48

6.77

−2.6

10.2

−3.6

40.5

Cambodia

29.69

0.49

2.43

0.7

22.1

−15.5

137.4

Lao PDR

53.01

0.46

2.03

−4.3

15.0

−7.9

63.2

a

193.6

The ratio of fiscal balance for Vietnam is in 2017, and for Cambodia and Lao PDR are in 2018 b The ratio of trade amount to GDP for Lao PDR is in 2018 Sources ADB Economic Indicators

4

T. Suruga and P. Onphanhdala

in search for cheap labor. The four countries have been achieving good economic growth, and their growth rates are stable at 6 to 7%. The Human Capital Index (HCI) is calculated by the World Bank, which “measure[s] the human capital that children born today can expect to attain by their 18th birthdays, the HCI highlights how current health and education outcomes shape the productivity of the next generation of workers and underscores the importance of government and social investments in human capital.” The maximum value is one and the human capital is higher as the value is closer to one. According to Table 1.1, the HCI of Vietnam is absolutely high among the four countries. We can recognize that Vietnam also has advantage on human capital, which is important for attracting FDI. The inflation rate of Myanmar is high at an average of 6.77% over three years compared to the other three countries. The other three countries have low inflation rates and are stable. The ratios of international trade to GDP are more than 100% in Vietnam and Cambodia, and thus they show a trade pattern of importing intermediates and capital goods and exporting processed products. As compared to these two countries, the processing trade in the global value chain is not well developed in Myanmar and Lao PDR. While the ratio of budget deficit to GDP is not too large in all four countries, the ratio of long-term public debt to Gross National Income (GNI) is especially large and 53% in Lao PDR. Lao PDR borrowed a lot of money for infrastructure construction, particularly from China.

1.3 Comparison of FDI Inflows Among ASEAN Least Developed Countries The data of net FDI inflow from UNCTAD (United Nations Conference on Trade and Development) are summarized in Table 1.2. The data are flows of FDI from 1990 to 2018 and stocks of FDI in 2018. These data are the amount of investment actually implemented and not the amount of investment only approved. Furthermore, the data are the amount from which the withdrawal of investment is subtracted. Regarding the stock of FDI in 2018, the amount of Vietnam is definitely large. The amount of Vietnam is USD 103 billion, 3.3 times of Myanmar, 4.3 times of Cambodia and 12 times of Lao PDR. However, if we consider the population, per capita FDI inflow is less in Vietnam than in Cambodia or Lao PDR. Probably the differences of industrial share in FDI affect it. This section analyzes the FDI inflows in the four ASEAN countries by home country and received industry.

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN …

5

Table 1.2 FDI net inflows (USD billion) 1990

Lao PDR

Cambodia

Myanmar

Vietnam

6

0

225

180

1991

7

0

235

375

1992

8

33

149

474

1993

30

54

92

926

1994

59

69

135

1945

1995

95

151

318

1780

1996

160

294

587

2395

1997

86

168

879

2220

1998

45

243

684

1671

1999

52

232

304

1412

2000

34

149

91

1289

2001

24

149

15

1300

2002

5

145

18

1400

2003

19

84

1855

1450

2004

17

131

730

1610

2005

28

381

110

1954

2006

187

483

724

2400

2007

324

867

373

6981

2008

228

876

603

9579

2009

190

985

27

7600

2010

279

1404

1691

8000

2011

301

1539

1118

7519

2012

294

2001

497

8368

2013

427

2069

584

8900

2014

721

1854

946

9200

2015

1119

1823

2824

11,800

2016

997

2476

2989

12,600

2017

1599

2788

4341

14,100

2018

1320

3103

3554

15,500

8670

23,740

31,360

102,791

15.06

5.93

11.09

118.70

46.53

50.74

FDI Stock 2018

FDI Stock per Capita (%) 13.22 FDI Stock per GDP (%) 54.53 Sources UNCTAD

6

T. Suruga and P. Onphanhdala

1.3.1 Vietnam The movement of net FDI inflows in Vietnam is drawn in Fig. 1.1 separately from the other three countries because its amount is much larger in comparison. As we can recognize from Table 1.2 and Fig. 1.1, a boom of FDI has happened three times: in the mid-1990s, in the mid-2000s and since 2015. ICT has quickly developed since the beginning of the 1990s; the cost of administration on production activity in foreign countries has declined and thus FDI inflows have started to increase in Vietnam. Although FDI inflows began declining after the Asian currency crisis in 1977, they have again increased rapidly since 2007 when Vietnam joined the WTO. After the global financial crisis in 2008, it stagnated until 2014. However, it has been increasing since 2015 when Samsung Electronics started the full-scale production of mobile phones in Vietnam. Regarding FDI inflows by home country, only approved amounts are available from the General Statistics Office of Vietnam. The data of approved FDI have problems, such as the project was approved but it was not actually implemented, the project was implemented in less than the approved amount, and the amount of withdrawal is not deducted. Table 1.3 shows the stock at the end of 2019 and the flow of FDI inflows in 2018 and 2019 by home country. The biggest amount of FDI stock at the end of 2019 is from Korea with a share of 18.75%, and the next is from Japan with a share of 16.34%. These two countries’ shares are very close and the sum of the two home countries is 35.09%. However, the number of FDI projects is 8,504 from Korea and 4,402 from Japan and the number from Korea is considerably larger. Although Singapore follows Korea and Japan with a share of 13.70%, it is a possibility that its amount of FDI includes the investment by the local subsidiaries of Korea or Japanese companies. Taiwan (8.91%), Hong Kong (6.53%), British Virgin 18000 16000 14000 12000 10000 8000 6000 4000 2000

Fig. 1.1 FDI inflow in Vietnam. Sources UNCTAD

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

0

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN …

7

Islands (5.98%) and China (4.48%) follow. East Asian countries mainly invest in Vietnam. The notable point of Korean investment is the investment by the Samsung group on mobile phones and their related parts which are main exports of Vietnam. According to JETRO [9], the total amount of investment by Samsung group is USD 17.5 billion, and its share in total FDI from Korea is approximately 30%. The exports by Samsung Vietnam were more than USD 60 billion in 2018, and the share in total exports from Vietnam is one quarter. The company has one appliance factory in southern Vietnam and two mobile phone factories in northern Vietnam. According to Vietnam’s General Department of Customs, the shares of exports in 2018 were as follows: 1. Telephones, Mobile phones and parts, 20.2%, 2. Textiles, 12.5%, 3. Computers and Electrical Table 1.3 FDI inflows in Vietnam by country Stock at the end of 2019

FDI inflow in 2018 FDI inflow in 2019

Numbers Amount Share Numbers Amount Numbers Amount (USD of (USD (USD Mil.) amount Mil.) Mil.) (%)

Share of amount (%)

Korea

8,504

68,102

18.74

1,071

7,321

1,181

8,344

21.42

Japan

4,402

59,364

16.34

440

8,945

454

4,169

10.70

Shingapore

2,424

49,772

13.70

228

5,250

304

4,421

11.35

Taiwn

2,695

32,378

8.91

141

1,045

155

1,883

4.83

Hongkong

1,751

23,722

6.53

174

3,253

346

8,178

21.00

British Verginia Is

841

21,723

5.98

42

1,885

46

1,406

3.61

China

2,826

16,284

4.48

408

2,532

705

4,115

10.56

Maleysia

617

12,635

3.48

42

438

37

221

0.57

Thailand

563

10,908

3.00

41

763

49

927

2.38

Netherlands

345

10,053

2.77

20

396

30

839

2.15

USA

991

9,308

2.56

88

555

109

477

1.22

Samoa

349

7,385

2.03

5

244

58

945

2.43

Cayman Is

118

7,177

1.98

14

91

8

508

1.30

Canada

198

5,029

1.38

38

405

29

183

0.47

UK

378

3,717

1.02

40

590

36

304

0.78

France

565

3,604

0.99

48

293

47

180

0.46

Luxembourg 52

2,466

0.68

3

19

5

57

0.15

Garmany

2,054

0.57

29

398

36

152

0.39

352

Swizerland

163

1,991

0.55

11

86

21

108

0.28

Australia

479

1,910

0.53

43

609

52

231

0.59

Total

30,943

363,310 100

3,147

36,368

4,028

38,952

100

Sources General Statistical Office of Viet Nam

8

T. Suruga and P. Onphanhdala

products, 12.1%, 4. Machinery, Instruments and Accessories, 6.7%, 5. Footwear, 6.7%. The exports are diversified and some of them are technologically advanced. On the other hand, the shares of imports were as follows: 1. Computers and Electrical parts and products, 18.2%, 2. Machinery, Instruments and Accessories, 13.9%, 3. Telephones, Mobile phones and parts, 6.7%, 4. Textile fabrics 5.4%, 5. Steel, 4.2%. We can expect that Vietnam imports electrical parts and machinery for the production of mobile phones and exports the products to the USA or China; other Korean manufacturing companies follow the investment of Samsung Electrons in Vietnam. The data of FDI flow in 2018 show that Japan invested the largest amount, 24.59%, followed by Korea, 20.13%, and the sum of the two countries was 44.72%. The third was Singapore, 14.44%, and this ranking is almost the same with that of FDI stock. However, the ranking differs in 2019. Korea invested the largest amount, 21.42%, followed by Hong Kong, 21.00%, Singapore, 11.35%, the Japanese ranking went down to the fourth, 10.70%, and the fifth was China, 10.57%. FDI from China and Hong Kong has increased rapidly probably due to the effects of US-China trade friction. Table 1.4 shows the approved FDI by industry from the database of the General Statistical Office of Vietnam. From the stock at the end of 2019, manufacturing received a definitely large number and amount of FDI projects, the number is 14,463, its share is 46.7%, the amount is USD 214.6 billion, and the share is 59.1%. This huge FDI in manufacturing has diversified and advanced technologically exports. According to the data of FDI flow in 2019, the manufacturing sector also received the largest number and amount of FDI. The number was 1,385, the share was 34.4%, the amount was USD 25.2 billion and the share was 64.7%. A lot of FDI has inflowed to Vietnamese motorcycle and car production mainly by Japanese companies. A lot of research has been implemented in these sections, including: Fujita [3] and Ikebe [5] on motorcycles and Kim (2016), Ikebe [5] and Ishikawa [6] on cars. The approval of FDI started about motorcycles at the beginning of the 1990s, and Japanese companies received approval for their investments in the mid-1990s. Although the imports of Chinese cheap autocycles increased rapidly in the 2000s, five member companies of the Vietnam Motorcycle Association (Honda Vietnam, Vietnam Suzuki, Yamaha Motor Vietnam, Taiwanese company and Italian company) currently have a more than 90% share of total sales. The share of nonmember companies is obviously very small. The five member companies sold 3.26 million motorcycles in 2019. According to the announcement of Honda Vietnam, it sold 2.57 million motorcycles, and the share in the five member companies is 79%. Honda Vietnam has the largest share in the Vietnamese market. According to Ikebe [5], the Vietnamese production number of motorcycles was more than 3.6 million units in 2018, this number is the fourth largest in the world following India, China and Indonesia. Vietnam exported 815 thousand motorcycles and imported less than 70 thousand. The parts industries have also developed well, and the ratio of local contents is high. Although the number of local parts companies has been increasing, foreign-owned parts companies still make up the majority of the total

58,439

132

75

1,696

4,572

828

842

2,149

72

871

3,238

442

526

148

135

147

30,943

Electricily/Gas

Water

Construction

Wholsale/Retail

Transportation

Accomodation/Food Services

Information/Communications

Finance

Real Estate

Science/Technology

Administration/Support Services

Education/Training

Health/Social Wellfare

Arts/Entertainment

Other Services

Total

Sources General Statistical Office of Vietnam

823

14,463

Manufacturing

363,310

829

3,388

1,979

4,376

973

3,448

3,875

11,990

5,092

8,155

10,406

2,857

23,654

214,610

4,898

108

Mining

3,518

499

Agriculture

100

0.23

0.93

0.54

1.20

0.27

0.95

16.09

0.23

1.07

3.30

1.40

2.24

2.86

0.79

6.51

59.07

1.35

0.97

3,147

9

7

9

73

77

391

95

5

248

104

77

788

118

7

20

1,106

2

11

36,369

23

1,139

154

80

194

997

8,253

34

592

374

441

1,728

659

300

1,817

19,378

26

181

Amount (USD Mil.)

FDI inflow in 2018 Numbers

Share of amount (%)

Numbers

Amount (USD Mil.)

Stock at the end of 2019

Table 1.4 FDI inflows in Vietnam by industry

4,028

12

6

7

72

67

518

127

13

310

106

105

1,140

139

6

15

1,365

2

18

38,952

48

63

212

67

128

1,840

3,860

1,172

530

491

357

2,594

994

250

1,011

25,196

35.6

104.1

Amount (USD Mil.)

FDI inflow in 2019 Numbers

100

0.12

0.16

0.55

0.17

0.33

4.72

9.91

3.01

1.36

1.26

0.92

6.66

2.55

0.64

2.59

64.69

0.09

0.27

Share of amount (%)

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN … 9

10

T. Suruga and P. Onphanhdala

amount. Since the supporting industries and local parts companies have developed well, the autocycle sector is a successful example. In contrast, according to Ikebe [5], 17 car companies such as Toyota, Ford and Honda are operating their factories in Vietnam, but the total production number of cars was only 260 thousand in 2018. Toyota has the largest share of production but produced only 66 thousand units (the share was 24%). Since the production size is small, foreign parts companies have not invested, and the rate of local contents is approximately only 10%. Although the history of car production is still short as compared to Thailand, this is an unsuccessful example in the present circumstances.

1.3.2 Myanmar Figure 1.2 draws the historical movement of net FDI inflows in Myanmar, Cambodia and Lao PDR. According to Table 1.2 and Fig. 1.2, we recognize that the net FDI inflows in Myanmar have been fluctuating widely as compared to Cambodia and Lao PDR. This is partly because there were huge projects on natural resources and power generation stations in Myanmar. There were years when the FDI inflows were smaller than those in Cambodia despite its smaller population and economic size because of economic sanctions by the USA and uncertainty caused by civil wars. Although the FDI inflows increased in the middle of the 1990s with the boom of investment in Asian countries, they stagnated by the start of the Asian currency crisis in 1997 and American economic sanctions. The civil government started in 2011, the international exchange was widened and the FDI inflows started increasing. After the National League for Democracy (NLD) headed by Aung San Suu Kyi took power in 2016, the FDI inflows increased. A coup in February 2021 removed her from power and reinstated a military regime, since which, the conflict continues. These troubles will probably negatively affect FDI inflows. Kagawa et al. [11] showed the statistics on the share of direct investment between foreign and domestic, which is from Facts and Figures about Myanmar. According to this book, the shares of FDI were 27.5% in 2011/12, 8.2% in 2012/13, 22.5% in 2013/14 and 35.3% in 2014/15. Myanmar’s fiscal year is from April to March until 2018/19 and from October to September from 2019/20. The domestic direct investment was definitely larger than the FDI. The data of FDI by home country are available on the approved FDI from the Myanmar Directorate of Investment and Company Admission. The data (the FDI in special economic zones (SEZ) was excluded but the FDI in SEZ was only 2.25% of total FDI) are summarized in Table 1.5. According to Table 1.5, regarding the accumulation of FDI until the end of March, 2020, the rank of the amount is Singapore, China, Thailand and Hong Kong. The total of the top four countries is 76.7%. The UK in Table 1.5 means British Overseas Territories. As we can see some examples in the JETRO World Report on Trades and Investments: Myanmar, Singapore subsidies of Japanese Companies invest in Myanmar. There is a possibility that foreign companies invest in Myanmar through regional headquarters in Singapore. Since the

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN …

11

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

Lao PDR

Cambodia

Myanmar

Fig. 1.2 FDI inflow in Myanmar, Cambodia and Lao PDR. Sources UNCTAD

civil government started in 2011, we compare the data before 2011 and after 2011 in Table 1.5. While the share of China is the largest at 26.62%, the second is Thailand at 26.54%, the third is Hong Kong at 17.50%; before March, 2011, the share of Singapore is the largest at 42.95% and the second is China at 23.83% after April 2011. The amount of FDI from China is still large even after 2011 because a huge amount was invested in the electricity sector in 2011/12. Thailand’s share decreased from 26.54% to 3.70% due to the investment in natural gas decreasing. After 2011, many countries increased their FDI, such as Vietnam (0.07% to 4.42%), Netherlands (0.66% to 2.74%), Japan (0.59% to 2.08%) and India (0.52% to 1.20%). Home countries for FDI are diversified after the start of the civil government in Myanmar. According to Honma [4], Japanese companies often invest through foreign subsidies, such as Singapore, due to the tax system or the management of the group member companies in the Asian region. Additionally, there is a Thilawa special economic zone which was jointly developed by Japan and Myanmar. If we take the above two facts into account, Japanese FDI from 2011 to September 2019 is estimated to rank third. Table 1.6 summarizes the FDI inflows by industry and we can recognize that the recipient industry differs between before and after 2011. While the major industries are electricity (40.29%), oil and gas (38.32%) and mining (7.75%) before 2011, after 2011, they are transportation and communication (22.06%), manufacturing (21.13), oil and gas (18.47%) and electricity (15.84%). Although resources-related industries were the main FDI recipients before the civil government, FDI inflows have diversified after the change of government. The investment in SEZ is mainly conducted in manufacturing (the share of amount is 81.5%) and regarding home country, it is conducted by Japan (34.73%), Singapore (33.65) and Thailand (9.23%). Myanmar was called the last frontier of Asia for investment. However, the FDI inflows have not been so large as the expectation. One of the reasons is the country

12

T. Suruga and P. Onphanhdala

Table 1.5 FDI inflow in Myanmar by country Accumulation until 2020/3

Accumulation 1988/4–2011/3

Accumulation 2011/4–2020/3

Numbers

Amount (USD Mil.)

Share of amount (%)

Amount (USD Mil.)

Share of amount (%)

Amount (USD Mil.)

Share of amount (%)

Shingapore

322

22,631.3

26.77

1,804.0

5.00

20,827.2

42.95

China

465

21,151.2

25.02

9,596.8

26.62

11,554.4

23.83

Thailand

139

11,364.8

13.44

9,568.1

26.54

1,796.7

3.70

Hongkong

257

9,659.3

11.43

6,308.5

17.50

3,350.8

6.91

UK

103

4,904.4

5.8

2,660.0

7.38

2,244.5

4.63

Korea

183

4,042.4

4.87

2,916.9

8.09

1,125.5

2.32

Vietnam

26

2,168.2

2.56

23.6

0.07

2,144.6

4.42

Malaysia

71

1,965.5

2.32

975.1

2.70

990.4

2.04

Netherlands

25

1,567.7

1.85

238.8

0.66

1,328.9

2.74

Japan

118

1,220.4

1.44

211.9

0.59

1,008.5

2.08

India

34

771.8

0.91

189.0

0.52

582.8

1.20

Total

1,984

84,543.2

100

36,049.4

100

48,493.8

100

Sources Directorate of Investment and Company Admission, Myanmar 2020 March Table 1.6 FDI inflows in Myanmar by industry Accumulation until 2020/3 Numbers Amount (USD Mil.)

Accumulation 1988/4–2011/3

Share Amount of (USD amount Mil.) (%)

Accumulation 2011/4–2020/3

Share of Amount amount (USD (%) Mil.)

Share of amount (%)

Oil/Gas

154

22,773.4 26.94

13,815.4 38.32

8,958.0

18.47

Electricity

27

22,204.6 26.26

14,523.4 40.29

7,681.2

15.84

Manufacturing

1,274

11,986.7 14.18

1,738.6

10,248.1 21.13

Transportation/Information 61

4.82

11,011.3 13.02

313.3

0.87

10,698.1 22.06

Real Estate

62

6,069.2

7.18

1,056.5

2.93

5,012.8

10.34

Tourizm/Hotels

85

3,150.8

3.73

1,064.8

2.95

2,086.0

4.30

Mining

71

2,904.9

3.44

2,794.5

7.75

110.5

0.23

Stock Farming/Fishery

70

788.7

0.93

315.4

0.87

473.3

0.98

Agriculture

34

414.1

0.49

173.1

0.48

241.0

0.50

Industrial Park

7

327.1

0.39

193.1

0.54

134.0

0.28

Construction

2

37.8

0.04

37.8

0.10

0.0

0.00

Other Services

137

274.6

3.4

23.7

0.07

250.9

0.52

Total

1,984

84,543.2 100

36,049.4 100

48,493.8 100

Sources Directorate of Investment and Company Admission, Myanmar 2020 March

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN …

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risk, which is induced by the continuation of troubles with ethnic minorities. As Takahara [21] described the historical movement of the car industry in Myanmar, Suzuki was approved in 2013 to establish a 100% owned car company firstly as a foreign company and started the production. Suzuki had a plan to build a factory in the Thilawa SEZ and have absolutely the top share. Toyota also built a plant in the Thilawa SEZ and is awaiting the start of production. The amount of car production is limited, and they use CKD (Complete knockdown) or SKD (Semi Knockdown) systems.

1.3.3 Cambodia Table 1.2 and Fig. 1.2 show the net FDI inflows in Cambodia. They started increasing in the mid-1990s, but they decreased until the mid-2000s due to the Asian Currency Crisis. They have been increasing again since the mid-2000s, and this trend was not affected by the Global Financial Crisis. The data of direct investment by home country from 2015 to 2019 are available on the homepage of the Council for the Development of Cambodia (CDC). According to this site, the share of direct investment by Cambodia has been fluctuating from 27.6% to 78.2%. Regarding foreign countries, the Chinese shares are definitely the largest at 74.2% in 2018 and 78.2% in 2019. These data are approved FDI and are limited to the FDI which was implemented by the projects approved as QIPs (Qualified Investment Projects) outside of SEZ. Since projects on banking, insurance and construction are not approved as QIPs, FDI in these industries is not included in the data. The British Virginia Islands have the second largest share of FDI in 2019, but according to JETRO [10], this investment is implemented by Chinese companies. When this investment is included in Chinese FDI, the actual Chinese share is 88.0%. Japan has the third largest share at 6.29% followed by Thailand at 1.54% and Vietnam at 1.38%. JETRO [10] shows the sum of the FDI from the CIB (Cambodia Investment Board) in the CDC and the data of investment in SEZ from the CSEZB (Cambodia SEZ Board). According to the sum, the Chinese shares are 73.38% in 2018 and 78.1% in 2019, and they are almost the same with the data from the CDC alone. The data of FDI stock by home country are available from the homepage of the CDC. Regarding the accumulation from 1994 to 2005, Malaysia had the largest share at 35.67% and China had the second largest at 15.96%. However, Chinese investment has increased rapidly since the latter half of the 2000s, and for the accumulation from 1994 to 2019, Chinese investment has the largest share (43.62%), followed by Korea (12.32%), the UK (including British Overseas Territories, 10.02%), Malaysia (7.18%), Japan (6.26%), Hongkong (6.10%) and Vietnam (4.62%). The FDI by industry is presented in JETRO [9, 10], which summarize the data from the CIB. Tourism and hotels have the largest share (51.7%) followed by manufacturing (38%) in 2019. Since the first expressway (from Sihanoukville to Phnom Penh) was constructed in Cambodia, construction and infrastructure have the largest share (42.14%) in 2018. Excluding this especially huge amount of construction and

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T. Suruga and P. Onphanhdala

infrastructure, manufacturing has the largest share (47%) and tourism and hotels have the second largest share (37.14%). We can recognize that tourism and hotels and manufacturing are the main recipient industries in Cambodia. In the manufacturing industry, the clothing and textiles sector has the largest share at 14.71% in 2017, 7.19% in 2018, and 10.7% in 2019. The largest export item was clothing and accessories (knit and crochet); we add footwear, gaiters, and clothing and accessories (not knit and crochet) to the amount and then the summation is 61% in total exports from Cambodia in 2015, according to Tanaka [22]’s calculation using the UN Comtrade Database. The largest imports were knitted and crocheted fabrics and the third largest was manmade staple fabrics. From these data, we recognize the structure of the garment sector in Cambodia that imports textile fabrics and exports clothing. JETRO [10] also presents the trade structure. The share of clothing was 54.9% in exports, other garment products 8.6% and shoes 8.4%, and the sum of the three items is 71.9% in 2019. On the other hand, the share of sewing materials was the largest at 19.2% in imports. These data also confirm the structure of the garment sector in Cambodia. Tanaka [22] presented the number of factories, total sales, wage payment, and employment in the garment sector by using the 2011 Economic Census of Cambodia. The share in all of manufacturing is 35.2% for number of factories, 33.4% for total sales, 63.8% for wages, 70.6% for employment, and 85.1% for female employment. The garment sector has an especially large share for employment. Regarding the registered garment factories by country, China has the largest number of factories, even larger than the domestic Cambodian factories. Taiwan and Korea follow for the number of factories. Cambodia heavily depends upon tourism and garment sectors for exports, and acquisition of foreign currencies and FDI has also been conducted mainly in the two sectors. The diversification of sectors is required for Cambodian economic development and thus it should receive FDI in more various sectors.

1.3.4 Lao PDR Table 1.2 and Fig. 1.2 describe the historical movement of net FDI inflows in Lao PDR. They began increasing in the mid-1990s and then decreased during the Asian currency crisis. They began increasing again in the mid-2000s and stagnated during the global financial crisis, but rebounded soon and increased rapidly in the mid-2000s. Since Lao PDR is a land-locked country, three of its neighbors—China, Thailand and Vietnam—have major weight on trade, FDI, tourists, etc. According to the accumulation of FDI from 1989 to 2019 by the Ministry of Planning and Investment (MPI), the order of the amount and number of FDI projects is China, Thailand and Vietnam. The share of amount is respectively 42.73%, 20.07%, and 16.91%, respectively. The sum of the three countries is 79.71%. Malaysia and Korea have the next largest shares, but only 3.38% and 3.20% respectively. Chinese investment has

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recently increased its weight through the Laos-China Railway, expressway, hydropower generation stations, transmission lines and so on. However, as Yamada [25] points out, the Ministry of Industry and Commerce has authority to give permission for general business, and the MPI only has authority to give permission for concessional business by the revision of the foreign investment law in 2010. Accordingly, FDI by general business is excluded from the data of the MPI since the beginning of the 2010s. Since the domestic market is small and the fund for investment is not enough, the share of Lao domestic direst investment in total direct investment stock is only 36.37%. Lao PDR heavily depends upon foreign countries for direct investment. According to the FDI stock by industry, using the data of the MPI, electricity and mining, which are main export industries, in Lao PDR, received large amounts of FDI and their shares are 29.76% and 24.61%, respectively. The sum of the two industries is 54.37% and more than half of the total. Service has the third largest share at 15.92%, and agriculture has the fourth at 11.67%. Manufacturing has the next share, but it is only 5.83%. The Lao share of the mining and manufacturing industries in GDP in Table 1.1 is almost same with the other three countries. However, the share of electricity and mining, which is larger and that of manufacturing is smaller in Lao PDR. Although Lao PDR is required to receive FDI in manufacturing in order to diversify the exports, so far it is difficult for Lao PDR to receive enough investment because of several obstacles. However, it should be noted again that FDI in general business is excluded since the beginning of the 2010s.

1.3.5 Summary of FDI Inflows We analyzed the FDI inflows in ASEAN least developed countries and we can point out the three characteristics as follows. (1) They have received FDI mainly from Asian countries. (2) They received large amounts of FDI not only from high income countries such as Japan, Korea and Singapore but also from middle income countries such as China, Thailand and Vietnam. Recently, the Chinese presence is impressive. (3) They, except for Lao PDR, received FDI mainly in the manufacturing industry. Although the development of ICT has declined the cost on the transmission of ideas and know-how and the FDI inflows in these countries, face-to-face communication is still required for successful FDI. However, since the cost on movement of persons is still expensive, close distance is important, which means that FDI inflows from Asian countries are central.

16

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1.4 Issues on FDI Inflow Climate This chapter tries to evaluate the investment and management environments of the four countries by using the JETRO Survey on Business Conditions of Japanese Companies in Asia and Oceania. The JETRO Survey has an advantage that only foreign companies replied to the questions but its problems include that it is limited to only Japanese companies and the sample size is small in the case of Lao PDR, that is, 38 samples in the 2019 survey. Regarding the survey on management problems, the multiple answers method is applied. This survey has been conducted every year, but the recent survey results have been affected by the COVID-19 pandemic. Accordingly, the survey in 2019 is used in this paper.

1.4.1 Vietnam According to the JETRO Survey 2019, 65.8% of Vietnam subsidies expected operating profit, 13.9% of the companies expected to break even, and 20.2% of the companies expected operation loss. This forecast was completely better than those of the other three countries. Regarding the management problems, “Increased wages” was most commonly cited at 72.0%, followed by “Difficulty in local procurement of raw materials and parts” at 56.2%, and “Difficulty in quality control” at 49.9%. The fourth problem is “Growing market shares of competitors (cost-wise competition)” at 48.0%, and the fifth is “Complicated customs clearance procedure” at 41.8%. The top five in ranking of management problems in 2018 is the same with that in 2019. However, the ratios in 2019 decreased, which means these problems were improved. One special feature of the survey results for Vietnam is to cite the problem of “Complicated customs clearance procedure”. These results in management issues reflected by the recent rises in minimum wage, the slow development in supporting industries, and the inefficiency of officers.

1.4.2 Myanmar According to the survey, 38.0% of Myanmar subsidies expected operating profit, 18.3% of the companies expected to break even, and 43.8% of the companies expected operating loss. The management performance was the worst among the four countries. The year of establishment is almost the same with that in Cambodia and Lao PDR. 69.2% of the companies cited “Electricity shortage”, and this problem has the largest rate. The rate increased in 2019 from 42.3% in 2018. This is partly because the amount of rain in the dry season was less than the average in 2019. “Difficulty in

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local procurement of raw materials and parts” follows, and the rate is 65.4%. “Quality of employees” has the third largest rate at 56.8%. “Difficulty in recruiting middle manager” is the fifth at a rate of 50.0%. Myanmar has problems with electricity shortage and human capital. According to U Han Zaw [23], regarding generation capacity, hydro power generation has the central share at 57.7%, gas-fired power generation has a 38.6% share, and the sum of the two is 96.3%. The household electricity rate is only 43%, and the government has a plan to increase this rate to 100% by 2030. Natural gas is produced domestically, but this production is most important for exports to earn foreign currency. Therefore, the government has difficulties to use it for electricity generation, but has a plan to increase the power generation by using natural gas in the future. Since it needs a lot of funds to build huge power generation stations, the quick solution is to make IPPs (independent power producers) by using foreign capital. However, the price of power was very cheap at 2 or 3 cents per kWh (kilo watt hour), because power was produced by hydro power generation, which has a relatively cheap cost in Myanmar. Accordingly, the Myanmar Electric Power Generation Enterprise is required to buy power at a cheap price, and it was difficult for IPPs to make new power plants. According to Osada [17], the electricity prices increased in July 2019 for the first time in five years. If the government can flexibly approve the rise in electricity price, there is a possibility that many power stations will be constructed, and the problem of electricity shortage will be solved in the future.

1.4.3 Cambodia 48.4% of Cambodian subsidies expected operation profit, 22.1% of the companies expected to break even, and 29.5% of the companies expected operation loss. The forecasted performance was similar to those in Lao PDR and Myanmar, but it is better than those in the two countries. Regarding the management problem, the top five items mentioned as problems were as follows: 1. “Increased wages” at 75.7%; 2. “Difficulty in local procurement of raw materials and parts” at 70.3%; 3. “Electricity shortage” at 64.9%; 4. “Difficulty of quality control” at 56.8%; and 5. “Quality of employees” at 55.0%. The ratios of “Increased wages” in 2019 increased from those in 2018. This fact reflects the recent large rises in minimum wage of the garment industry. “Electricity shortage” was mentioned, like in Myanmar, partly because of a water shortage in the dry season in 2019. Additionally, in spite of increasing demand for electricity by the satisfactory economic growth, the government cannot supply enough electricity.

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1.4.4 Lao PDR 38.73% of Lao subsidies expected operation profit, 29.0% of the companies expected to break even, and 32.3% of the companies expected operation loss. This forecasted performance was a little better than that in Myanmar. The number of samples is only 38 companies, and the sample size is not enough. Regarding the management problems, the most mentioned item was “Increased wages” at 70.6%, followed by “Difficulty of quality control” at 52.9%, “Quality of employees” at 50.0%, “Electricity shortage” at 47.1%, and “Complicated customs clearance procedure” at 41.4%. The results reflect that manufacturing is not well developed in Lao PDR, and the skill level of people is very low because the education quality is low and they do not have experience in jobs. “Complicated customs clearance procedure” reflects the inefficiency of officers. Electricity is one of the most important exports, and Lao PDR is trying to become “a battery of South East Asia”. Lao PDR has enough capacity for the production, but the reason for the problems is partly because of the water shortage in the dry season in 2019 and problems of management and technology on transmission. Suruga [19] selected foreign-owned companies in Lao PDR from the Enterprise Survey 2012 by the World Bank and analyzed the data. The multiple answers on obstacles for operation were utilized for the analysis. “Lack of properly educated labor force” was the most mentioned as an obstacle at 27.7%, followed by “Electricity shortage” at 23.1%, and “Taxation” at 20.7%. This result is very similar to that of the JETRO Survey. The quality of employees is a serious problem in Lao PDR.

1.5 Comparison of Human Capital We can use the share of persons at least completing upper secondary education to population over 25 years old in Vietnam and Cambodia from World Development Indicators (WB) to compare the spread of education. According to these statistics, the share of Vietnam is 30.9% in 2009 and that of Cambodia is 15.4% in 2015. Myanmar and Lao PDR conducted a Population Census in 2015, but these statistics are not adopted for World Development Indicators. According to the Myanmar Population Census, the ratio of persons over 25 years old whose highest educational attainment is secondary school is 8.5%, and the ratio of persons whose highest education attainment is University is 6.4%. The sum of the two numbers is 14.8%. In the case of Lao PDR, the ratio is 15.5%. The spread of education in Vietnam is absolutely higher. The quantitative spread of education is firstly important, but also the quality of education is important. World Bank [24] compared the reading ability of adults between Vietnam and Lao PDR. While the failure rate of examinations on reading is 56% in local areas and 33% in urban areas in Lao PDR, the rate is only 5% in urban areas in Vietnam. The report wrote that the reading ability of persons graduated from

1 Foreign Direct Investment Inflow and Investment Climate in ASEAN …

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Table 1.7 Human Capital Index (2020) Children survival rates

Quantity of Quality of education education

Adjusted schooling years

Adults survival rates

Healthy growth

HCI

Vietnam

0.98

12.9

519

10.7

0.87

0.76

0.69

Myanmar

0.95

10.0

425

6.8

0.80

0.71

0.48

Cambodia

0.97

9.5

452

6.8

0.84

0.68

0.49

Lao PDR

0.95

10.6

368

6.3

0.82

0.67

0.46

Sources World Bank Human Capital Indicators

post-secondary school in Lao PDR is almost the same with that of persons graduated from primary education in Vietnam. The previously mentioned Human Capital Index by the WB is constituted of five factors, that is: 1. Share of children surviving past the age of 5; 2. Quantity of education (expected years of schooling by age 18); 3. Quality of education (harmonized test scores); 4. Adult survival rates (share of 15-years-olds who survive until age 60); and 5. Healthy growth among children (stunting rates of children under 5). Harmonized test scores are estimated by using the test program for International Mathematics and Science Studies, and the scores are between approximately 300 and 600. The statistics for the Human Capital Index are presented in Table 1.7. Adjusted schooling years mean that expected years of schooling by age 18 are adjusted by the quality of education. Vietnamese scores are higher than the other countries in all items and the differences are huge, especially for quantity and quality of education. The other three countries have similar levels, but regarding Lao PDR, the quantity of education is higher while the quality of education is lower, so the adjusted schooling years are shorter than those of Myanmar and Cambodia.

1.6 Comparison of Governance If a developing country with cheap labor can participate in global value chains (GVCs), its employment increases, exports are diversified and economic growth is promoted. It is necessary for developing countries to receive FDI to participate in GVCs. As Nunn [15] and Dollar and Kidder [2] explained, since products which have a complex GVC involve exchange of many goods among various companies in production, contract enforcement is very important. That is, they are contractintensive goods. In addition, products which need more relation-specific investment, heavily depend upon the legal quality because if companies have invested relationspecific facilities, it is difficult to utilize them for other purposes. As Nunn [15] verified, industries producing these products are high technology and high valueadded industries. Accordingly, a reliable law system is required to participate in GVCs through receiving FDI.

20

T. Suruga and P. Onphanhdala

Table 1.8 Worldwide governance indicators Cambodia

Lao PDR

Myanmar

Vietnam

Control of corruption

−1.326

−0.983

−0.588

−0.485

Government Effectiveness

−0.569

−0.673

−1.069

−0.003

0.108

0.415

−1.309

0.203

Regulatory quality

−0.505

−0.792

−0.753

−0.386

Rule of law

−1.115

−0.843

−1.033

−0.003

Voice and accountability

−1.221

−1.739

−0.887

−1.446

Political stability

Souces World Bank Worldwide Governance Indicators

Worldwide Governance Indicators by the World Bank measure the governance level from the six aspects by using the 31 data sources made by 25 institutes such as Freedom House, Global Competitive Report. The different number of data sources is used for estimating the WGI of each country. The six aspects are: 1. Voice and Accountability, 2. Political Stability and Absence of Violence/Terrorism, 3. Government Effectiveness, 4. Regulatory Quality, 5. Control of Corruption, and 6. Rule of Law. The estimated values are measured assuming that the world average is zero. Accordingly, the indicators show the relative position of each country. The indicators are in the range of 2.5 to −2.5. We can compare the six indicators in 2018 for the four countries in Table 1.8. The positive values, which indicate higher values than the world average, were found only on Political Stability and Absence of Violence/Terrorism in Cambodia, Lao PDR and Vietnam. The values of Vietnam are better, as a whole, than those of the other three countries, and Vietnam is also leading on governance. Myanmar has improved all the indicators except for Political Stability after 2011, that is, the start of the civil government. The aspect of Political Stability has been worsening because of ethnic minorities troubles. Government Effectiveness and Political Stability have been improved in Cambodia, Political Stability and Regulatory Quality have been improved in Lao PDR, and Government Effectiveness, Regulatory Quality and Rule of Law have been improved in Vietnam. However, Control of Corruption and Voice and Accountability have not been improved at all in the three countries.

1.7 Other Surveys Rattanakhanfu and Tangkitvanich [18] conducted a survey asking 25 Thai companies about the investment climate of Thailand and the least developed four ASEAN countries. According to the results, the overall score of Thailand was 4.1 on a scale of zero to five, followed by Vietnam (3.3), Lao PDR (2.8), Cambodia (2.7), and Myanmar (2.1). The score of Thailand is definitely high, but that of Vietnam is the highest among the AEAN least developed countries and that of Myanmar is very low. This

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survey evaluated three fields, that is, Administration (Public Security, Administrative Services, Legal Certainty), Infrastructure (Electricity, Communication, Transportation) and others (Employee, Land and Finance). The ranking of each field is almost the same with that of the overall score. The Japan Bank of International Cooperation conducts a survey on oversea business operations of Japanese manufacturing companies every year. The features of this survey are that the survey is limited to manufacturing companies and presents the ranking of promising countries. The survey correspondents are companies which have more than three oversea subsidies, and the number of correspondents is 530 in 2020. Vietnam is the third promising country in the medium-term following China and India, Myanmar is the tenth, Cambodia is the twenty-third and Lao PDR is the twenty-eighth. The reasons for Vietnam being a promising country are its growth potential of the local market (59.5%) and cheap labor (42.7%). The problems are obscure implementation of law (35.8%), fierce competition with other companies (32.1%) and increased wage of employees (30.3%). The reasons for Myanmar being a promising country are its growth potential of the local market (64.0%) and cheap labor (52.0%), the same as Vietnam. The problems are underdeveloped infrastructure (68.4%), underdveloped law (52.6%) and difficulty of recruiting managers (47.4%). These items are similar to the results of other surveys.

1.8 Other Determinants for FDI This section considers the flexibility of labor market, labor union and policies for oversea labor movement as other factors related to FDI. The flexibility of the labor market is determined by the procedure of dismissal, severance pay and the legal procedure for unfair dismissal. Javorcik and Spatareanu [7] and Olney [16] analyzed the effect of dismissal on FDI. There are two opinions on this issue. One is that if foreign companies freely dismiss their employees in a country, they invest more in the country. The other is that if a country has an established institute, dismissal is rather difficult, and the country receives more FDI. Neumayer and de Soysa [14] etc. analyzed the effect of labor unions on FDI. There are also two opinions on this issue. One is that as managers tend to not like labor unions, countries which do not require companies to recognize labor unions receive more FDI. The other is that since companies can improve working conditions and reduce labor turnover by channeling the voice and grievances of workers through labor unions, the existence of labor unions increases the receptance of FDI. Javorcik et al. [8] and Kugler and Rapoport [13] analyzed the effect of oversea labor movement on FDI. There are also two different opinions on this issue. One is that since the promotion of oversea labor movement induces a rise in domestic wage and decreases the attractiveness of cheap labor, the policy of oversea movement decreases FDI. The other is that a network between two countries is created by oversea labor movement, and thus it is helpful to rise FDI inflows. Vietnam actually adopts policy

22

T. Suruga and P. Onphanhdala

promoting labor export. Many workers, legally and illegally, move from Myanmar, Cambodia and Lao PDR to Thailand. Of course, the number of oversea movements heavily depend upon the host countries’ policies.

1.9 Conclusion The important issues for least developed ASEAN countries are to receive adequate FDI and thereby diversify their manufacturing and exports. This chapter investigated the FDI inflows in the four countries. Regarding Vietnam, a variety of FDI is conducted, promoting the diversification of manufacturing and exports. Particularly, the FDI by Samsung group and other Korean companies contributes advancing exports. However, the supporting industries have not developed well in the electrics/electronics industry, just like the auto industry, and their parts depend upon imports. Since the international competition is fierce to receive high grade FDI, good environments for FDI are required. The obstacles for FDI differ somewhat among the four countries, but quality of employees, electricity shortage, and corruption are issues for several countries. Worldwide governance indicators and the human capital index are calculated for international comparison. According to these measures, Vietnamese circumstances for FDI are absolutely the best among the four ASEAN countries. The other three countries leave much to be desired for control of corruption, government effectiveness, rule of law, and educational attainments. While it is expected that countries receive more FDI by having good investment climate, there is a possibility that the investment climate is improved through the relation with received foreign companies. This kind of factor should be taken into account for analyzing the relation of FDI and investment climate.

References 1. Baldwin, R. (2016). The great convergence: Information technology and the new globalization. Harvard University Press. 2. Dollar, D., & Kidder, M. (2017). Institutional quality and participation in global value chains. In Global value chain development report 2017: Measuring and analyzing the impact of GVCs on economic development, WTO, Ch. 7, pp. 161–173 3. Fujita, M. (2013). The development in import substitution industries and the changes of policiesthe case of autocycle industry in Vietnam and its implications for Myanmar. In Kubo, K. (Ed.), Transition strategy and economic policy in Myanmar and Vietnam, Ch. 2. IDE, pp. 65–100. (in Japanese) 4. Honma, T. (2020). Trends and perspective of investment climate in Myanmar-scenario for leap from the last Frontier. In Kudo, T. & Ohki, H. (Eds.), Myanmar economy under Aung San Suu Kyi administration-growth strategy of the Lase Frontier. Bunshin-Do, Ch. 2, pp. 41–71. (in Japanese).

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5. Ikebe, R. (2020). Car and autocycle industries in Vietnam. In Yamada, M. & Karikomi, S. (Eds.) Asian dynamism and economic development in Vietnam, Bunshin-do, Ch. 11, pp. 179–196. (in Japanese). 6. Ishikawa, K. (2019). Car industrial policy and distribution in Vietnam. Institute of Social Science, Senshu University, Annual Bulletin of Social Science, 53, pp. 3–24. (in Japanese). 7. Javorcik, B. S., & Spatareanu, M. (2005). Do foreign investors care about labor market regulations? Review of World Economics, 141(3), 375–403. 8. Javorcik, B. S., Ozden, C., Spatareanu, M., & Neagu, C. (2011). Migrant networks and foreign direct investment. Journal of Development Economics, 94(2), 231–241. 9. JETRO. (2019). Annual report on world trade and investment 2019. Japan External Trade Organization (JETRO). (in Japanese). 10. JETRO. (2020). Annual report on world trade and investment 2020. JETRO. (In Japanese). 11. JILPT. (Ed.) Kagawa, K., Nishizawa, N., Kitazawa, K., & Tsutsumi, Y. (2017). Labour and employment society in Myanmar: Investment environment for Japanese Companies, Japan Institute for Labour Policy and Training (JILPT) (in Japanese). 12. Kim, Y. (2016). Current status and issues of automobile and auto components industries in Vietnam. In Nishimura, H., & Kobayashi, H. (Eds.), The automobile and auto components industries in ASEAN. Keiso-Shobo, Ch. 3, pp. 191–212 (in Japanese). 13. Kugler, M., & Rapoport, H. (2007). International Labor and Capital Flows: Complement or Substitutes? Economics Letters, 94, 155–162. 14. Neumayer, E., & de Soysa, I. (2006). Globalization and the Right to Free Association and Collective Bargaining: An Empirical Analysis. World Development, 34(1), 31–49. 15. Nunn, N. (2007). Relationship-specificity, incomplete contracts, and the pattern of trade. Quarterly Journal of Economics, 122(2), 569–600. 16. Olney, W. W. (2013). A race to the bottom? Employment protection and foreign direct investment. Journal of International Economics, 91, 191–203. 17. Osada, N. (2020). Myanmar. In IDE (Ed.) Yearbook of Asian affairs. Institute of Developing Economies (IDE), pp. 415–438. (in Japanese). 18. Rattanakhamfu, S., & Tangkitvanich, S. (2017). Strategy and issues of Thailand companies on investment in CLMV. In Ishida, M., Umezaki, S., & Yamada, Y. (Eds.), Thailand plus one corporate strategy, Keiso-Shobo, Ch. 3, pp. 71–102. (in Japanese). 19. Suruga, T. (2016). Economic development and investment climate in Lao PDR. Journal of Economics and Business Administration, 213(6), 15–21. (in Japanese). 20. Suruga, T. (2020). Natural resource management. In Joint policy research and dialogue program for fiscal stabilization in Lao PDR, Final report, Working group 2, JICA, pp. 60–81. 21. Takahara, M. (2016). Automobile industry in Myanmar. In Nishimura, H. & Hideo K. (Eds.), The automobile and auto components industries in ASEAN. Keiso-Shobo, Ch. 9, pp. 259–275. (In Japanese). 22. Tanaka, K. (2017). Trade and investment in Cambodia. IDE Discussion Paper No. 667. 23. U Han Zaw. (2019). Current status of Myanmar’s electricity sector. https://greatermekong.org/ sites/default/files/Attachment%2011.3_Myanmar.pdf. 24. World Bank. (2014). Lao development report 2014, World Bank. 25. Yamada, N. (2018). Basic knowledge for Lao PDR, Mekong publishing co. (in Japanese).

Chapter 2

Policy Choices in the Economic Law Reforms of ASEAN Emerging Economies: A Comparative Perspective Yuka Kaneko

Abstract This chapter is a review of the periodical changes of policy tendencies of the economic law reforms in the ASEAN’s late developing economies or CLMV (Cambodia, Laos, Myanmar and Vietnam) since the initiation of socialist market reform in the late 1980s, with a focus on the foreign investment law and policy in response to international commitments through investment treaties and accession to the World Trade Organization (WTO). An overview of the recent stage of economic law reform, under the guidance of the ASEAN Economic Community (AEC)’s common frameworks, a trend of re-regulation is detected with an increasing emphasis on the administrative approach to contractual relations in the name of contemporary policy considerations such as protection of environment, labor, consumers, and smallmedium enterprises (SMEs), rather than the market-based approach enforced by the parties’ own initiative at court or through alternative dispute resolutions (ADR). Such a trend of economic law reform retains both risks of discretionary application which may harm the predictability of investors, and also of a laissez-faire economy if the government seldom exercises its regulatory power.

2.1 Introduction This chapter intends to review the periodical policy changes in the economic law reforms of the ASEAN emerging economies, often referred to as the CLMV group (Cambodia, Laos, Myanmar and Vietnam), in their contemporary attempt to materialize a market-oriented economy guided by socialism, an experiment started since after the end of cold war. Such a review will also invite a reconsideration of the validity of international donor assistance to law reforms, which has been linked to Y. Kaneko (B) Kobe University Center for Social System Innovation, Kobe, Japan e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_2

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the policy agenda for economic development based on foreign investment promotion, known as the Washington Consensus.1 When a nation’s law reform is aimed at foreign investment promotion, what circumstances may be created in the other aspects of its legal policies is a question that is open for review. But before going into such a review, it is worthwhile to recall the plural contexts of their contemporary legal reforms. First, there is the context of entry into the global regime of free trade, following the collapse of the COMECON (Council for Mutual Economic Assistance) regime. In the process of multilateral negotiation for the accession to WTO (World Trade Organization), bilateral negotiation with leading member countries including the United States had to take place individually, which necessitated a lengthy process of more than a decade before concluding in a long list of commitments for law reforms to introduce a market economy: Vietnam achieved WTO accession in 2007 only after materializing all commitments for liberalization that were made in the US-Vietnam Trade Agreement in 1997; Laos also took a decade to join the WTO in 2013 by realizing the commitments based on the US-Laos Trade Agreement concluded in 2003; Cambodia is a rare example, realizing the accession in 2004; Myanmar has been a member of the WTO since its establishment in 1995 but instead it was also obliged to fulfil a long list of commitments for the lifting of trade bans by the US and EU, known as the Framework for Economic and Social Reforms (FESR) made public in 2012. The conditionalities, or the conditions for disbursement of money tranches under the structural adjustment loans extended by the international financial agencies such as the World Bank and the Asian Development Bank, have also added serious pressure to compel legal reforms.2 These agencies have also been known for their promotion of law models in major economic law areas, mostly reflecting a policy orientation of deregulation,3 coupled with a rigorous application of indicator surveys to evaluate the degree of transplant of the donor models,4 including foreign investment law reform for the elimination of entry restrictions, land law reform for realizing a free land market, procedural law reform for the enforcement of intellectual property rights, and the adoption of law models for secured transactions and corporate insolvency law reforms as the foundation of financial liberalization.

1

See Trubek [33] as a critical review of law reforms guided by the Washington Consensus. For example, Vietnam’s policy making has been guided by the World Bank under the Structural Adjustment Loan No. P004829 throughout the period from 1994 to 2018; similarly Laos was under the Structural Adjustment Loan No. P004209 from 1996 through 2018; Cambodia was under the Structural Adjustment Loan No. P058544 from 2000 through 2003; Myanmar has been under the Financial Sector Development Loan No. P154389 of the World Bank from 2016 through 2021. 3 AS for a review of model laws introduced by international financial agencies, see Kaneko [12–14, 15]. 4 THE Report of the Observation of Standards and Codes (ROSC) is an example of a rating project that evaluates the degree of obedience of the country’s legal system to the law models recommended by the World Bank and the International Monetary Fund (IMF). Vietnam was put under the ROSC analyses on corporate law in 2006, and in 2013, and on the accounting principles in 2016 [37–39]. 2

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The second context is regionalism, since accession to the Association of Southeast Asian Nations (ASEAN) in the late 1990s.5 ASEAN has vigorously accumulated its efforts to establish a common market, as materialized by the launching of the ASEAN Economic Community (AEC) in 2015, which is aimed toward the realization of an integrated regional market by 2025 as envisaged in the “AEC Blueprint 2025”, which consists of five strategic goals of (i) “a highly integrated and cohesive economy” as a unified market and also production basis, (ii) “a competitive, innovative, and dynamic ASEAN” as a strengthened presence in the global market, (iii) “enhanced connectivity and sectorial cooperation” including the opening up of particular service sectors such as IT, energy, health care as well as agribusiness, (iv) “a resilient, inclusive and people-oriented, people-centered ASEAN” as representing the re-distributional considerations, and (v) “a global ASEAN”, which is a slogan emphasizing multilateral and regional approaches rather than a bilateral approach to participate in the global rulemaking. The Blueprint also contains common goals for economic law reforms in each context of the strategic goals, such as the reform of competition law, consumer law, and intellectual property law in the context of the aforementioned goal of (ii) “a competitive, innovative, and dynamic ASEAN”; the emphasis on “regulatory excellence,” including critical legal policy issues such as land law mentioned in the “Masterplan on ASEAN Connectivity” (MPAC) that was introduced in the context of the aforementioned goal of (iii) “enhanced connectivity and sectorial cooperation”; as well as the issues of small-medium enterprises (SMEs) in the context of the aforementioned goal of (iv) “a resilient, inclusive and people-oriented, peoplecentered ASEAN.” Furthermore, in 2017, the “Consolidated Structural Action Plan” (CSAP) was adopted as a strategic plan to realize the Blueprint, containing 153 strategic measures and 325 action plans, including issues on law reform. Specifically, the CSAP (sections 10–13) refers to the ASEAN Comprehensive Investment Agreement (ACIA) that was put into effect in 2012 as the framework for investment liberalization in the context of the Blueprint’s aforementioned goal of (i) “a highly integrated and cohesive economy”. It also makes particular reference to the ASEAN Trade in Services Agreement (ATISA) aimed toward investment promotion in the service sectors (sections 6–9), which is in contrast to the past regime of the 1994 ASEAN Framework Agreement on Services (AFAS), which gave discretion to the member countries to maintain foreign restrictions in the service sectors. The CSAP also contains practical frameworks for the promotion of ASEAN’s common standards: in the field of competition law, for example, it contains provisions for harmonization between national laws, coordination of the competition clauses between Free Trade Agreements (FTA), and a framework for monitoring (sections 27–33); as for consumer protection law, references are made to particular goals such as the promotion of alternative dispute resolution (ADR) and the establishment of small claims courts (sections 34–38). The sections on intellectual property emphasize the goal of harmonization between national laws, as well as particular policy strategies such as the promotion of branding of SMEs (sections 39–42, 125). The CSAP also, in 5

Accession to ASEAN was realized by Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.

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the context of the Blueprint’s aforementioned goal of (iv) “a resilient, inclusive and people-oriented, people-centered ASEAN”, refers to financial promotion measures through the reform of mortgage and insolvency law (section 126), legal issues that facilitate long-term relationships between large companies, regional financers, and chambers of commerce and industries (section 127), as well as the need for fundamental reform of SME promotion law (section 128). The law for promotion of micro and SMEs is also emphasized in the context of reducing the disparities between the member countries (sections 140–144). The issue of corporate social responsibility (CSR) is mentioned in the context of regionalization of stakeholders according to the “ASEAN Standards and Conformance Strategic Plan 2016–2025” (section 145). Thus, the strategic goals of the Blueprint show a remarkable tendency in seeking regionalism under the AEC in an attempt at economic integration between the member states, which aims at achieving global competitiveness together, instead of fighting a zero-sum game within a closed market. However, despite this common ideal, concrete proposals regarding the ways to prevent deterioration in the gaps between the winners and losers among the member states are not yet visible: if the investors from advanced economies utilize the zero tariff status within the AEC to concentrate their production sites in a particular country in ASEAN as a regional export base to other ASEAN member countries, instead of seeking to export to the global market, the result might be the exploitation of the CLMV markets by such intra-ASEAN investors.6 To avoid being a loser, the member countries may be trapped in a race to the bottom, by lowering taxation and weakening labor and environmental standards, which will only result in a policy imbalance in regard to socio-environmental considerations. The third point is the national goal of CLMV to establish an integrated legal system. Since colonial independence, all of the ASEAN late developed countries have tread a difficult historical path towards national integration due to prolonged civil wars backed by external interventions, and, accordingly, their legal systems are still immature. Fundamental legal reform was started in the 1990s after the collapse of the Soviet bloc, with a particular emphasis on the establishment of a fundamental code regime, under the influence of the code-making in former socialist countries led by the 1995 Russian Civil Code, and the 2020 China’s Civil Code which integrated the series of codification efforts through the 1986 Civil General Principles, 1997 Contract Law, and 2007 Property Law.7 In this regard, it is necessary to mention the role of Japanese support for code drafting in Vietnam (1995, 2005 and 2015 Civil Code), Cambodia (2007 Civil Code which entered into force in 2011) and Laos (2020 Civil Code),8 which have been an attempt at enhancing predictability in civil

6

On the concern about winner-loser separation in the intra-ASEAN economic relations under the AEC, see Ishikawa et al. [8] and also JETRO [10]. 7 For details see Kaneko [18, 19]. 8 See Kagawa and Kaneko [12], Kaneko [21].

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and commercial transactions by formalizing several hundreds of default rules,9 the impact of which is open to critical review, together with the functioning of judicial interpretation that bridges the sophisticated wording of code provisions and the needs of the society. These different contexts often bring about different design choices for economic laws, adding complication to the legal reforms in the ASEAN emerging economies (see Table 2.1). This article intends to identify the periodical tendencies of legal reforms in the CLMV countries, with a particular focus on foreign investment law and policy, for the purpose of categorizing the different legal design choices of the target countries, as a methodological attempt to prepare for the comparative evaluation of the results of these legal reforms. The following Sect. 2.2 will first confirm the requirements imposed by international investment rules, Sect. 2.3 will review the paths that the investment laws of these emerging economies have taken in response to the international commitments, Sect. 2.4 will observe the trends in economic law reform in the interface with the changing investment law and policy, and Sect. 2.5 will give a summary.

2.2 Diversification of International Investment Rules Since the initiation of their market-based economic reform policies, the CLMV countries have constantly campaigned for the promotion of foreign investment as the central means of economic growth. However, legal design choices for foreign investment promotion can vary, as implied from the fact that there are no integrated investment rules even in the international sphere, while the WTO has failed to establish common investment rules, and the variety of bilateral and regional negotiations have resulted in the fragmentation of provisions under bilateral investment treaties (BITs) and free trade agreements (FTAs) around the globe. The CLMV countries have been trapped in the conflicts between the different policy models for investment promotion. This section will try to identify the differences and changes between the legal policies of these countries over time, and the outcomes in the reforms of relevant areas of law, in light of the recent trends in international investment rules (as summarized in Table 2.2). First is the American standard, which has been developed through the accumulation of BIT negotiations since the US-Canada BIT in 1979, and promoted as a de facto global model through the periodically published Model BITs, modeled after the North American Free Trade Agreement (NAFTA) in 1993.10 The basic characteristic of the American standard is the constant prioritization of the interests of investors, 9 Regarding individual support projects, see the various issues of the ICD News published by the International Cooperation Department of the Research and Training Institute of Japan’s Ministry of Justice. 10 The U.S. Model Bilateral Investment Treaty was first published by the United States Trade Representatives (USTR) in 1984, and periodically revised thereafter, including 2004 and 2012 versions.

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Table 2.1 Three Contexts of the Economic Law Reforms of CLMV Countries Globalization (e.g. BIT/FTA/WTO, structural adjustment)

Regionalism (e.g. AEC blueprint, CSAP)

Legal and judicial reform (e.g. Japan’s civil code drafting support)

Investment law

– National treatment – Incremental including entry liberalization of – Fair and equitable service investment treatment (CSAP6-9, – Facilitating the CSAP14-19) enforcement of ISDS – Preliminary awards proceedings to ISDS (ACIA, CSAP10-13)

Review of ISDS agreement in the stay of litigation; recognition & enforcement of ISDS awards

Competition law

– Transparency (hardcore cartels, safe harbor, etc.) – Independence of competition agency (World Bank/OECD Guidelines, etc.)

– Unfair trade practices – Independence of competition agency

Intellectual property law

– Strengthening of – Harmonization of – Institutional reform substantive legislation and of intellectual protection (extension treaties (CSAP property court – Court research of protection period, 39-42) officers – Branding of MSMEs etc.) (CSAP 42,125) – Strengthening of enforcement mechanisms

Land law

– Promotion of land market – Mandatory land title registration for the liberalization of land transactions

Strengthening of land expropriation law (MPAC)

Contract law

– Freedom of contract (minimization of judicial or administrative intervention) – Freedom of cancellation (compensation for non-performance)

– Consumer protection – Compulsory law (CSAP34) provisions as the – SME law, protection basis of judicial of relational trade intervention in (CSAP127-128) contracts – Promotion of trade versus consumers’ interests – Protection of relational contracts (continued)

Mutual coordination and monitoring of each legislation (CSAP31-32)

– Voluntary land title registration – Land readjustment

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Table 2.1 (continued) Globalization (e.g. BIT/FTA/WTO, structural adjustment)

Regionalism (e.g. AEC blueprint, CSAP)

Legal and judicial reform (e.g. Japan’s civil code drafting support)

Labor law

– Core labor standards (minimum requirements such as the prohibition of forced labor) – Freedom of dismissal

Free migration of skilled labor and their protection (CSAP20-21)

Doctrine of restriction of dismissal

Judiciary versus alternative dispute resolution

Adversary system and jury trials: – Procedural freedom – Minimization of judicial or administrative intervention

Small claims court (for consumer protection: CSAP34)

Modification to adversary system for judicial fact-finding (judge’s right of clarification, prior proceedings, etc.)

ADR and commercial courts

– Mediation prior to litigation – Parties’ procedural autonomy – Eased requirements for recognition and enforcement of mediation agreements Eased responsibility of directors (self-regulatory system by the audit committee inside the board of directors; business judgement rule, etc.)

ADR, small claims court (CSAP34)

Enforceability only for court-annexed conciliation

Corporate Social Responsibility (CSAP145)

Stricter responsibility of directors, comprehensive authority of the board of auditors, creditors’ objection procedures, etc

Company law

Insolvency law

Corporate Management Promotion of SME Rescue Model (DIP, finance (CSAP 126, automatic stay, super SAP SMED 2025) priority of New Money, classification of creditors and cram down, minimization of judicial review, etc.)

Availability of plural procedures for the free choice of the parties; -Civil rehabilitation procedure (DIP, separate enforcement by secured creditors protected) (continued)

as evident in such design features as the definition of “investment” based on a broad, asset-based illustrative list that maximizes the target scope of the investment rules (2012 US Model BIT section 1). It then strengthens the substantive provisions for the investors’ interests, such as treatment of investors and investments which features not only the regular provisions of national treatment and most favored nation treatment,

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Table 2.1 (continued) Globalization (e.g. BIT/FTA/WTO, structural adjustment) Secured transactions

Regionalism (e.g. AEC blueprint, CSAP)

Promotion of revolving Promotion of SME mortgage on whole finance (CSAP 126) assets: – Comprehensive coverage of collateral without identification – Comprehensive coverage of secured credits (future, collective, without maximum limit) – Registration system – Private enforcement

Legal and judicial reform (e.g. Japan’s civil code drafting support) Prohibition of revolving mortgage on whole assets: – Identification of collateral required – Identification of secured credits required (maximum limit) – Prohibition of private foreclosure – Repayment of residue required

(Compilation by the author)

but also the “fair and equitable treatment” clause that stems back to the protection of aliens during the absolute monarchy era (ibid. section 5), investment guarantee clauses that expand the reach of compensation for exploitation to include “indirect expropriation,” which is a concept that includes a wide variety of restrictions involving economic impact (ibid. section 6), while no room for exemptions is envisaged under these “fair and equitable treatment” and”indirect expropriation” clauses (ibid. section 14). This results in rigorous enforcement through the Investor-State Dispute Settlement (ISDS) (ibid. section 23 –30), including in particular arbitration at the International Center for Settlement of Investment Disputes (ICSID) under the World Bank group (ibid. section 25). The US Model BIT is, on the other hand, constantly indifferent to the environmental and social considerations known as the “Singapore Issues,” which were actively debated in the preparatory stage of the establishment of the WTO but were not included in the initial agreements and have seen no meaningful progress thereafter, even during the Doha Millennium Round of negotiations. The US Model BIT (section 12–13) merely has environmental and social clauses providing not to derogate from the existing domestic law, instead of referring to universal minimum standards; also, they are described as mere best effort clauses (“shall strive to” “shall ensure”) to be handled through consultation, instead of legal obligations which trigger the dispute resolution mechanism. In contrast to the American standard, the draft Multilateral Agreement on Investment (MAI), which is the result of intensive multilateral negotiation that took place at the OECD (Organization for Economic Co-operation and Development) during the period of 1995–1998, represents a stance that attempts a policy balance between

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Table 2.2 Policy choices of international investment rules Priority of investors (e.g. US Model BIT) Definition of investment

Policy balance Utilization of (e.g. Canadian Model investors BIT) (e.g. ASEAN-ACIA)

Asset-based illustrative Asset-based + listing conceptual definition

Conceptual definition including the contribution to development (e.g. FDI)

Treatment of investors – National treatment – National treatment as equal treatment – Most favored nation for all actors treatment – Fair and equitable – Cautious approach treatment (customary to the overuse of international law on fair and equitable the special treatment treatment (Neer of aliens) test)

– Exceptions to national treatment (e.g. Positive List/ Negative List) – Narrowed interpretation of fair and equitable treatment

Investment guarantees – Broad interpretation of “indirect expropriation” (sole effect approach)

– Narrowed interpretation of “indirect expropriation” – Discretionary exercise of state’s regulatory power

– Details the elements of “indirect expropriation” – Clarifies the scope of the state’s regulatory power (environment, social, health, etc.)

Performance requirements

Non-TRIM categories WTO-TRIM acceptable in exchange for incentives

TRIM minus approach

Investor-state dispute settlement (ISDS)

Comprehensive consent to the ICSID Additional Facility in BITs

– Priority of domestic courts (cf. Calbo Principle) – Narrowing the consent to ISDS

Attempt to establish an international investment court toward the formation of international common rules

Compilation by the author

investment promotion and other goals including environmental and social considerations.11 While the main text of the MAI is basically a restatement of the NAFTA model, its footnotes contain a number of critical comments and alternative proposals from among the delegations, including from Europe, Japan and Korea who were keen to establish transparent rules for policy balances, such as the clarification of the concept of “investment,” detailed regulation on “performance requirements” (PRs) and the excessive provision of investment incentives, and environmental and social clauses containing binding provisions (“shall”) based on the universal standard. Even 11

The draft OECD-MAI (Multilateral Agreement on Investment) was released to the public in 1998 in response to the increasing criticism of the closed negotiations.

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though the draft-MAI was not finalized due to the withdrawal of leading delegations including the U.S, its rule-based stance towards policy balance has been one of the most influential sources in the succeeding international rule-making arena, especially the re-negotiation of FTAs and BITs led by the EU, Canada and certain developing countries in search for more balanced investment rules. For example, the Canada Model Foreign Investment Promotion and Protection Agreement (2021) represents a balanced approach to modify the de facto standard led by the U.S., which had resulted in an accumulation of ISDS cases overly prejudicial to investor protection at the sacrifice of other policy considerations. Its changes include deleting the “fair and equitable treatment” clause that functioned as a catch-all clause for investor protection, instead employing a “minimum standard of treatment” clause as the customary international law to exclude extreme unfairness (section 8), clarifying the elements of “indirect expropriation” (section 9), detailing the regulatory powers over matters including environmental and social policy, disaster management and security, gender considerations, and cultural issues (section 3, section 22) and emphasizing the “responsible business conduct” of investors (section 16). The third category of investment rules is those representing the interests of developing countries aiming at industrialization through the selective utilization of foreign investments, by way of foreign investment law that features entry restrictions, restrictions on foreign ownership share, and various policy obligations (known as “performance requirements” such as the local content obligation that require the achievement of a certain ratio of local procurement, the export obligation to meet a certain ratio, etc.) that are often imposed in exchange for investment incentives. The ASEAN Comprehensive Investment Agreement (ACIA), adopted in 2009 and in force since 2012, is typical of this category, containing provisions which allow room for maintaining foreign entry restrictions as an exception to the principle of national treatment (art. 9), permitting the continued imposition of “performance requirements” given in exchange for investment incentives unless they obviously infringe the General Agreement on Trade Related Investment Measures (TRIMs) under the WTO (art. 7), and attempting to narrow the scope of investors’ ISDS claims based on catch-all provisions such as “fair and equitable treatment” and “indirect expropriation” by manipulating the definition of the term “covered investments” (art. 4, art. 11a, art. 14), as well as other measures. As the WTO regime proceeds without establishing integrated, comprehensive rules for international investment, the gaps among the various BITs and FTAs have caused tremendous confusion in the law and policy making of developing countries, especially including the CLMV countries.

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2.3 Investment Laws of the CLMV Countries: Changing Phases of Development Policies (1) Policy Axes Immediately after turning to market-based economic reform upon the collapse of the COMECON regime, the CLMV countries started to attempt economic law reforms, and their first target was foreign investment law. Vietnam started with the 1987 Foreign Investment Law, which was a replication of China’s relevant law, and gradually formed its own investment policy through amendments to the law in 1990 and 1992, the enactment of the 1996 Foreign Investment Law and its amendment in 2000, and the enactment of the 2006 Investment Law that integrated the regulations for foreign and domestic investors for the first time, which was succeeded in 2014 and 2020 versions. Cambodia started with the 1994 Investment Law that featured an abundance of investment incentives, highlighted its liberalization of foreign entry in amendments in 2003, and the new investment law of 2021 has impressed the furtherment of investment promotion. Laos has basically followed the path of Vietnam in many areas of economic law, but its foreign investment law has been characterized by a unique stance of transparency, starting with the 1994 Foreign Investment Law that was a product of drafting support by a Japanese professor, and the 2009 Investment Law that features national treatment, and its amendment in 2016 that emphasizes environmental and social considerations. Myanmar has also introduced a series of investment laws, starting from the 1988 Foreign Investment Law that was enacted soon after the military coup and replaced by the 2012 Investment Law under the 2008 Constitution, followed by amendments in 2015 and the enactment of the 2016 Investment Law which integrated the foreign and domestic investment policies, as well as the 2014 Law on Special Economic Zones.12 A cross-cutting review of these investment laws of the CLMV countries will show us a certain common path of policy changes among them. The first phase was a policy of restriction, where the foreign investment law was a means of controlling foreign investments through an entry permit system instead of offering national treatment. While such a restrictive mode of foreign investment law is not rare, and is even said to be a stereotype among developing countries in search of an import-substitution policy as a means of industrialization, such as the countries in Central and South America, a characteristic of the first phase of the CLMV countries’ foreign investment laws was a combined method that utilized such entry restrictions together with abundant investment incentives, which were often coupled further with various performance requirements, such as export obligations and requirements for local employment. For example, Vietnam’s 1987 Foreign Investment Law and its successor 1996 Foreign Investment Law were typical of such a combinational structure, with the industrial sectors where foreign entry was permitted designated in a narrow “positive list” (i.e., restricted in principle and admitted as an exception) (1996 Law art. 3), separate incorporation rules for foreign investors outside the 12

See Kaneko & Ye [16].

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normal regime of enterprise law (art. 4, art. 11–19a), and the linking of tax reductions and other incentives (art. 38–48) with a series of performance requirements (art. 8 direct investment obligation, art. 25 local employment and training obligation, art. 29 technology transfer obligation, art. 31 local content obligation, etc.), the infringement of which would result in the cancellation of the investment permit (art. 52 s.3). Cambodia’s 1994 Investment Law featured an investment permit system without restricting the industrial sectors (art. 1 and art. 7), but instead designated export-oriented and labor-intensive sectors as promoted industries (art. 4) that were linked to a discretionary regime of investment incentives (art. 14). Laos’ 1994 Foreign Investment Law followed the Vietnamese approach in terms of foreign entry restrictions (art. 24) linked to investment incentives (art. 16–18), coupled with performance requirements such as a direct investment requirement (art. 6) and a local employment and training requirement (art. 11) that would trigger the cancellation of an investment permit in case of failure to comply (art. 29). However, a more balanced approach was taken towards regulation transparency, such as a “negative list” approach (free entry in principle with restriction as an exception in sensitive areas, in consideration of national security, the environment, health, etc.) being taken for entry restrictions (art. 2). Myanmar’s 1988 Foreign Investment Law was also characterized by a combined structure of entry control (art. 10) that used the positive list approach to restrict access by sector, which implied industrial policy considerations such as the promotion of export-oriented, resource-intensive, high-tech, or labor-intensive investments (art. 4) that were linked to investment incentives (art. 21). This series in the first phase of foreign investment laws in the CLMV countries reminds us of those of the ASEAN core member countries in the 1980s, such as Malaysia’s 1986 Investment Promotion Act and the 1999 amended Alien Business Act of Thailand, which featured the use of sticks (performance requirements) and carrots (investment incentives) in combination as an attempt at the selective utilization of foreign investment for industrialization, which was implemented in a timely manner to induce investors, in particular Japanese investors who at that time sought overseas production bases in order to avoid the US-Japan trade conflict. The second phase of investment law of the CLMV countries was characterized by a compromise between the restrictive framework of selective investor-utilization succeeded from the previous phase and the new mode of design features promoting investment liberalization as a strategy for WTO accession. The first of such design features was the promotion of “national treatment” through the easing of foreign entry restrictions. Vietnam’s 2006 Investment Law integrated the former dualistic regulations for foreign investors and domestic investors (art. 1), ceased the “positive list” approach to restrictions by sector and shifted to the “negative list” approach, which separately identified the prohibited sectors and the sectors with entry controls subject to conditions (art. 4, 29–30), while clarifying the nature of foreign entry control as a preliminary step to enterprise registration under the Law on Enterprise (art. 50). The same 2006 Law increased the transparency of the regime of investment incentives by categorizing the targets by industrial sector and geographical location (art. 27–28), and emphasizing the legal nature of performance requirements such as technology transfer as a contribution to policy goals, instead of an obligation

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unilaterally imposed by the government (art. 40–43), as if creating distance from the blatant investor utilization policy of the previous era. The 2003 amended Investment Law of Cambodia impressed its liberal stance by abolishing the system of foreign entry permits in principle, and instead rewrote its policy goal as the provision of incentives to “Qualified Investment Projects” (art. 6–7), even though the designation of “Qualified Investment Projects” was subject to the discretion of the government (art. 12, 14), and the incentives were linked to certain performance requirements, which was evidence that the 2003 amendment had not completely graduated from the ASEAN-style investor utilization approach. The 2009 Investment Law of Laos featured the integrated regulation of both foreign and domestic investors, which followed the changes to the Vietnamese law, but maintained the entry permit system as a procedural step prior to incorporation under Laos’ Law on Enterprise (art. 17– 19). The 2012 Foreign Investment Law of Myanmar, on the other hand, continued the previous regime of separate regulation of foreign investors and maintained the “positive list” approach of sectorial restrictions (art. 8, 19–20), although its broad coverage was almost close to a “negative list” approach in substance, while strengthening the combined use of investment incentives (art. 27) and performance requirements (art. 17 k, 24, etc.) as if trying to catch up with the ASEAN-style utilization of selected investors. The second design feature of investment law in this stage of WTO accession was the strengthened provisions for investor treatment and investment guarantee. In addition to the traditional minimum clauses for investment guarantee such as the prohibition of nationalization and the freedom to make foreign remittances, the CLMV countries started to incorporate typical clauses in response to the trend of de facto standards developed thought the US-led BITs and FTAs, such as the provisions of “fair and equitable treatment” and “indirect expropriation.” For example, Vietnam’s 2006 Investment Law inserted a provision (art. 11) to guarantee permits and incentives would not be cancelled once given even if the law or policy changes, although it did not explicitly refer to the term “indirect expropriation”. The 2003 amended Investment Law of Cambodia deleted the reservation on the prohibition of discrimination (art. 8). The 2009 Investment Law of Laos newly inserted a reference to the prioritization of international treaties in its investment guarantee clause (art. 60). Myanmar’s 2012 Foreign Investment Law had a provision on investment guarantee which declared that once an investment permit was granted it would not be cancelled without sufficient reason (art. 29). The third design feature of the second phase of investment laws was dispute resolution clauses which explicitly provided for investor-state dispute settlement (ISDS). In contrast to the first phase of investment laws which were characterized by dispute resolution clauses prioritizing domestic means of dispute resolution such as litigation at a local court or local arbitration (e.g. 1997 Vietnam Foreign Investment Law, art. 24) or administrative dispute resolution mechanisms (e.g. Myanmar 1988 Foreign Investment Law art. 12), which was reminiscent of the Calvo Doctrine in the colonial independence era, the second phase of investment laws were characterized by explicit references to foreign arbitration, especially ISDS, for the settlement of disputes between the host state and investors. Vietnam’s 2006 Investment Law (art.

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12, section 4), for example, added a reference to means other than domestic litigation or arbitration that were provided under contracts and treaties. Each of the Cambodian revised Investment Law in 2003 (art. 20), Lao 2009 Investment Law (art. 78–82) and Myanmar 2012 Foreign Investment Law (art. 43) took a similar approach that offered an open choice to the parties between administrative dispute settlement by the investment committee, and domestic and foreign litigation and arbitration, as long as amicable consultation is attempted first in the initial stage. However, in this stage, there was also a cautious approach to preclude the abuse of ISDS claims in international forums, such as the definition clause of the term “investment” under the Lao 2009 Investment Law (art. 3) that required the actual performance of business activities, which implied an intention to narrow the jurisdiction of ISDS forums. The third phase of investment laws appearing from the 2010s onwards, after the realization of WTO accession or the initiation of trade relations with leading economies, was characterized by a more balanced approach between investment liberalization and other policy considerations such as socio-environment concerns and the materialization of fair competition, with an increased basis for administrative supervision over investment activities. Vietnamese law, for example, on the one hand continued to promote the furtherment of its liberalization of foreign entry through a series of amendments to the Investment Law in 2014 and 2020, such as the narrowed sectorial restrictions for conditional foreign entry (art. 7–8 of 2020 amendment), exemption to the requirement to obtain an investment permit prior to incorporation for small-medium enterprises (ibid. art. 22), and the abolishment of all types of performance requirements, which included not only the obvious categories that violated the WTO’s General Agreement on Trade-Related Investment Measures (TRIMs) such as the local content and the export obligations but also non-TRIM requirements such as the obligations to conduct research and development activities and to site the headquarters in the country (ibid. art. 11) On the other hand, it also increased the series of provisions on compliance with laws regarding matters such as land, the environment, construction standards, labor protection and disaster management (ibid. art. 42, section 3), with explicit provisions on the suspension or withdrawal of investment permits in the case of infringement of these regulatory requirements (ibid. art. 47, section 2, art. 48, section 2). This tendency is more prominent in Laos’s 2016 amended Investment Law, such as its new incorporation of “environment-oriented growth and sustainable development” as one of the ultimate policy goals (art. 1), repeatedly referring to compliance with the law as the investor’s obligation (art. 2, 4, 5 item 1, etc.), providing obligations towards environmental consideration, labor protection and training, contribution to poverty alleviation, etc. as conditions for investment incentives (art. 9 item 3–5, 8), and explicitly providing for social consideration (art. 73) and environmental consideration (art. 74) requirements, while the infringement of such clauses triggers the suspension or withdrawal of the investment permit (art. 86, 87, section 2). Myanmar’s 2016 Investment Law is also characterized by a new definition of “investment” which contains a “direct” investment requirement that obliges an investor to have a controlling interest in the enterprise (art. 3), and repeatedly providing for environmental (art. 65, g, art. 89) and social considerations (art. 51 c, art. 65 i through l), the infringement of which triggers administrative

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penalties for the failure to comply with the conditions of the investment permit or the endorsement of the investment incentives (art. 85). Cambodia’s new Investment Law promulgated in 2021 also contains a provision to enable the government to terminate the investment in cases where it “adversely affects the environment or national security or public interests or people’s welfare” (art. 31, section 4) as well as a blanket clause regarding the infringement of laws and regulations in general (ibid section 3). In sum, the investment laws of the ASEAN late developing countries started by catching up with the legal designs of the ASEAN core countries’ successful investment policies that were applied before the establishment of the WTO, which featured controlled foreign entry and a variety of performance requirements coupled with discretionary offering of abundant incentives as a means of utilizing selected foreign investors for industrialization. But in the later process of negotiation for accession to the WTO, as the CLMV countries gradually became aware that the global commitment to investment liberalization under the WTO regime critically contradicted with the ASEAN interventionist method, the foreign investment laws of these countries took a shift towards a legal design featuring upmost treatment rather than the control of investments. The third phase is, however, showing a tendency of returning to the original controlling model, where the typical design featuring a combination of entry restrictions, performance requirements, and incentives has been revived based on the outlook towards contemporary regulatory needs in the context of environmental and social considerations.

2.4 Legal Development in the Third Phase To ascertain the substance of the balanced approach envisaged in the contemporary phase of investment laws of the CLMV countries, the overall trend of the legal policy orientation should be investigated through a review of not only legislative changes but also administrative enforcement and judicial interpretation. To facilitate such a comprehensive understanding, a quick sketch of recent legislative changes in each target country will be attempted in the following, with a focus on the debated areas such as environmental and social considerations, competition law, consumer protection law, and small-medium enterprises. (1) Environmental and Social Considerations In the last stage of the Uruguay Round that worked toward the finalization of the WTO agreements, the so-called “Singapore Issues” drew much attention, including the question of whether or not to incorporate environmental and social clauses into the WTO agreements for the purpose of preventing eco- and social dumping, or in other words, a malicious “race to the bottom” between host countries trying to attract foreign investors by lowering environmental and labor protection standards. The issues were intensively debated at the Singapore Ministerial Conference in 1993, but the WTO started in 1995 without explicitly covering these issues, entrusting them to further negotiation in the Millennium Round during the 2000s, which was

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another failure. The OECD’s negotiation of the Multilateral Agreement on Investment (MAI), which took place from 1995 through 1998, also failed to reach a conclusion, revealing a great distance between the delegations’ positions which, on one extreme, aimed at the establishment of a “universal standard” that would apply to all member countries as a mandatory rule (“shall”) to be enforced through the WTO’s dispute resolution mechanism, and at the other end of the spectrum, contended for a nonbinding clause (“should”) that only invites settlement through “consultation” by promising to make an effort not to derogate from the present status of a country’s “domestic” standards.13 The latter stance of a non-binding approach has basically been maintained by the U.S.-led BITs and FTAs up to the present and supported by influential institutional economists,14 with periodical slight changes such as the reference to a slightly more binding expression (e.g. “shall strive to”) on seemingly more universal but narrowed standards (e.g. the “core labor standard” which refers merely to the four basic conventions of the International Labor Organization). This backwardness of international rule-making seemed to have been a cause of the low priority placed on environmental and social considerations in the ASEAN emerging economies, which have established something equivalent to international standards but have not always rigorously implemented them, as evident in the nominally procedural operation of the environmental and social impact assessment procedure,15 as well as the existence of a large-scale informal sector outside of the reach of formal labor laws that feature advanced socialist protections such as the control of minimum wages and restriction of dismissals.16 But in recent times, emphasis has increasingly been placed on corporate social responsibility (CSR) in the regional initiatives by the ASEAN Economic Community, such as CSAP (section 145) referring to the “ASEAN Standards and Conformance Strategic Plan 2016–2025”. There is an obvious trend of increasing democratic pressure against the developmental governments, as the disparity in distribution enlarged as a negative result of the growth-centric policy. Host governments are sometimes obliged to suspend development projects in response to serious protests against land confiscation,17 but such suspension of investment projects can trigger extremely costly investor-state dispute settlement (ISDS) at the international forums. Even the influential international donors such as the World Bank have been compelled to provide grievance mechanisms regarding environmental and social considerations towards the affected population in development projects involving large scale land

13

As envisaged, for example, in the NAFTA Investment Rule, article 1114, section 2, which reads “it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures.”. 14 For example, Djankov et al. [5] argued that stricter labor law results in the increase of informal employment, gender inequality, and unemployment. 15 See e.g. Sakumoto [30]. 16 SEE e.g. [11]. 17 The local protest against Chinese investment in the Myitsone Dam construction in Kachin State of Myanmar resulted in the suspension of the project by presidential order in 2011.

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expropriation and the eviction of communities.18 However, it might be difficult to reach a fundamental solution to these disputes without analyzing the substantive issues of the disputes between the rights of investors and local populations.19 Given this need for a substantive basis for the resolution of policy conflicts, the ASEAN countries seem to be in the stage of seeking a detailed regulatory basis which enables a balanced consideration of conflicting interests between the investors and the local populations. (2) Competition Law The establishment of international common competition rules was vigorously sought as one of the areas of “Singapore Issues” in the process of establishment of the WTO. If the global liberalization of trade and investment are promoted without establishing global competition rules, the formation of global monopolies would be a natural result. But the WTO started without competition rules and the 2001 Doha Declaration (art. 23) failed to include it in the agenda for the Doha Millennium Round negotiations; instead, the International Competition Network (ICN) was proposed as a non-binding initiative led by the U.S., which is a mere framework for international corporation between the competition agencies around the world.20 In one sense, it was an initiative to impede the formation of binding global competition rules. As if operating in tandem with this non-binding approach to competition issues in the multilateral framework, the regional initiative under the CSAP (sectios 27– 33) of the ASEAN Economic Community merely aims at mutual cooperation in the monitoring of the implementation of domestic competition policy and law, instead of the formation of any regional common competition rules as seen in the EU’s competition law. Then, what are the characteristics of domestic competition law and policy in the ASEAN countries? There are certain varieties, as revealed in the contrast between the 1999 Trade Competition Law of Thailand and the 1999 Competition Law of Indonesia, both of which were the first competition laws enacted among the ASEAN countries under the pressure of the post-Asian Currency Crisis legal reforms led by the World Bank and the IMF. While the former has seldom been implemented, as if being held as a trump card to be played, the latter has been eagerly implemented particularly in the field of regulating hardcore cartels. This diversity of implementation has been explained by the degree of independence of each competition agency.21 Among the ASEAN late developing countries, Vietnam was the first to introduce its Competition Law in 2004, in the same year as Singapore and the Philippines, but its implementation has been slow, despite decade-long support by the Japan Fair Trade Commission (JFTC); this is often explained as a result of Vietnam’s competition 18

FOR a review of procedural details of complaint mechanisms of international financial agencies, see [14]. 19 For the legal causes of land disputes in Asia, see Kaneko et al. [20]. 20 As for the background of the initiation of the International Competition Network, see https:/www. internationalcomeptitionnetwork.org/about. 21 See Kurita [25].

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agency being placed under the Ministry of Industry and Commerce, which imitates the Thai law, while strategic sectors such as telecommunications and energy have been placed under separate regulation by the line ministries. The 2015 Competition Law in Laos and the 2015 Competition Law in Myanmar similarly introduced a competition commission under the commerce ministry, and an actual case of the competition law being applied has yet to be seen. Cambodia is still in the process of finalizing a bill on competition law that was drafted in 2018. While Vietnam’s new Competition Law was adopted in 2018 and established an independent commissionstyle competition agency, which followed the same change applied under Thailand’s new competition law in 2017, the actual nomination of the independent committee has been delayed. It is true that the initiatives taken by the AEC, including frameworks such as the “ASEAN Competition Action Plan (ACAP) 2025,” have been a driving force behind this series of enactment of new competition laws in the member countries, but the substantive contents of common rules have not always been clarified.22 There is an observation that the ASEAN competition laws are characterized by both the conversion to the universal design models and the diversion to regional needs.23 For example, many ASEAN countries’ competition laws contain strict structural regulations based on certain market share thresholds, even in the monopolization and merger regulations, which might invite discretionary regulation based on the manipulation of market decisions. Also, ASEAN’s competition laws usually include the regulation of unfair trade practices that follows Japan’s Anti-Monopoly Act, which is expected to function by preventing anti-competitive conduct at an early stage without having to establish an effect on the market, as well as extending the role of the competition agencies to wider regulatory roles, such as the protection of small-medium enterprises against the abuse of superior positions in trade, in order to realize economic justice beyond the role of supervisor of price mechanisms in the market. But if these regional characteristics of Asian competition laws invite an overuse of the wider regulatory roles, it may result in impediments to foreign investment. (3) Consumer Protection Law and ADR The AEC’s CSAP (section 34) provides for consumer protection in the context of strengthening competitiveness, which implies a consideration of the enhancement of trade through increased predictability of the scope of responsibilities to be assumed by producers and vendors. The ASEAN Strategic Action Plan on Consumer Protection (ASAPCP) 2021–2025 issued in 2021 envisages a review of the progress in each country by the year 2025 based on the Self-Assessment Toolkit on Consumer Protection (section 1.2), but the substantive rules are no more detailed than a series of policy documents issued by the AEC secretariat, such as the Consumer Protection 22

The “ASEAN Self-Assessment Toolkit” ASEAN Expert Group on Competition [2, 3] is a product of German assistance, which emphasizes the need of an “ASEAN Approach” that reflects the variety in the economic status of the members countries, without establishing a definite standard. 23 Kurita [23, 24].

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Digest and Case Studies: A Policy Guide, Volume I and II which was a product of Australian support, with certain implications for contractual interpretation and the systematization of alternative dispute resolution (ADR). From a comparative perspective, consumer protection law in the ASEAN countries is characterized by a remarkable diversity that reflects the legal history of the reception of different colonial laws from suzerain countries, which causes difficulty when seeking common rulemaking. There seems to be at least three different directions which they are hesitating to choose from. One is the Anglo-American approach that maximizes contractual freedom, which has been taken for granted as the model by institutional economists and law & economics experts at the World Bank and other international donors, such as Shihata [32], Posner [31], UNDP/De Soto [27], and La Porta et al. [35], based on the logic that freedom of contract, backed by judicial reform to realize the immediate enforcement of such contracts without state intervention, can realize the most efficient renegotiation of contracts in every situation. The extreme opposite to this is socialist contract law, which is characterized by the dualism of the “economic contract” as the basis of production relationships between state enterprises and the “civil contract” as the law for private transactions in daily life, with both subject to compulsory regulations for the protection of the original intention of the parties,this is a remnant from the tradition of binding state planning and operates in the contemporary context for state intervention in contractual relationships for the protection of consumers.24 The traditional continental civil codes, which may be placed between these two extremes, have developed a series of specific theories intended to protect consumers under the guidance of EU directives, such as adhesion contracts, seller’s warranty against defects and product liability. But there are remarkable variations between the civil law jurisdictions on the treatment of consumer protection law, such as French law which separately places consumer law outside of the traditional bipolar system of the Civil Code and Commercial Code, German law which has incorporated consumer protection law into the Civil Code since its amendment in 2000 while maintaining the bipolar system of civil and commercial codes, and the Netherlands which has abandoned the separation between civil, commercial and consumer laws with the establishment of its integrated 1992 Civil Code, which influenced the socialist market law reforms including the Russian 1995 Civil Code and the China’s 1997 integrated Contract Law.25 It should be noted that Japan has extended civil code drafting support to the ASEAN late developing countries, including the 2005 Civil Code in Vietnam and its amendment in 2014, Cambodia’s 2007 Civil Code which has been in force since 2011, and Laos’ 2018 Civil Code which has been in force since 2020. Japan’s own law is based on a system of separation of the Civil Code and Commercial Code, while the 2000 Consumer Contract Law has been placed outside of this bipolar system and provides special rules for contract rescission (e.g. misrepresentation and unfair solicitation) and avoidance (e.g. infringement of good faith principle). Even 24

As for the characteristics of the code reforms of socialist transition economies, including the Russian 1995 Civil Code, see Kaneko [18]. 25 See Kaneko ibid at p. 23.

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the revision of the Civil Code’s chapter on the law of obligations in 2020, the first major revision in more than a century, did not make any changes to this structure. It is said that the stance of Japanese law has been to maintain the Civil Code as the basic law meant for the promotion of free trade between equal parties, while separately providing for the consumers who are placed in disparity of contractual relationships, and the courts are expected to develop case law to fill the gaps between these laws. It was therefore a natural result of Japanese code-drafting support to the Asian socialist reform countries that their Civil Codes are centered on the promotion of free trade, such as the inclusion of the doctrine of apparent representations, while entrusting the consumer protection to the judicial interpretation within the range of general principles such as the good faith principle placed at the beginning of the Code. However, given the limitations on the formation of judicial case law under the constraints of socialist legality, there is not much expectation that judicial case law will be formed under the Civil Code, but rather, there seems to be a trend of more mandates being given to administrative regulations to detail consumer protection outside of the Civil Code regime. Such an administrative approach to consumer protection is, however, difficult to implement when the administration is inactive, when compared to the judicial approach under the Civil Code which can be raised by the initiative of an injured party in court. In Myanmar as well, where the 1892 Contract Act and 1930 Sales of Goods Act continue to be applied in the civil and commercial spheres unchanged since the British colonial era, an administrative approach to consumer protection is more evident, such as the 2014 Law of Consumer Protection.26 AEC’s CSAP, on the other hand, emphasizes the promotion of various forums for consumer dispute resolution, such as the small-claims court and various types of alternative dispute resolution or ADR (sections 34–38). ADR can include courtbased types of ADR such as settlement in the course of litigation and court-attached mediation, administrative types of ADR such as those organized by consumer agencies, and private ADR which may include mediation and arbitration provided by bar associations and other non-governmental institutions. The system structure of such ADR is divided between leading models, such as the World Bank-led projects often promoting ADR which is controlled by detailed procedural requirements as a substitute for judicial forums,27 while the EU has issued a series of directives aiming at coordination with the judicial systems.28 The details of procedural cultures also differ a lot, such that the donors from Anglo-American legal origins aim at mediation by certified mediators being prioritized over litigation, while there are donors such

26

See Kaneko [19]. See e.g., Djankov et al. [4]. 28 AFTER the introduction of the 2008 EU Directive on Mediation and the 2013 Directive on ADR, member countries have pursued their own paths, varying from the establishment of court-annexed mediation, a system of transfer from litigation to private mediation, and the certification of private mediation forums, etc. See e.g. Espluges & Marquis, eds. [7], and [34]. 27

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as Japan that promote a court-annexed conciliation system presided by a judge but separate from litigation.29 The institutional development of ADR in ASEAN countries has displayed uniqueness as a reflection of this diversity of ADR models. Myanmar, for example, has introduced an experimental court-based mediation system, which depends on the discretion of the trial judge to transfer a case to mediation to be presided by another judge.30 Laos has a long tradition of a village-based mediation system (Neoy Gai Geer) which is considered to be an effective forum for closer fact-finding and a flexible resolution based on customary rules. But a question remains of how to bridge the two systems of formal litigation and village-level mediation, not only in terms of the technical sense, such as adequacy of utilization of the facts found in the mediation in the succeeding litigation, but also in the more theoretical sense of how the normative gap between the formal law and customary regime will be handled in the succeeding stages such as the appeal process and the procedures for the recognition and enforcement of mediation agreements. (4) SME Law AEC’s CSAP repeatedly refers to the need for the promotion of small and medium enterprises (SMEs),31 in particular, in the context of adjusting the developmental gaps between the ASEAN member economies (sections 140–144). The issues covered include the branding of intellectual property owned by SMEs (sections 42, 125), secured transactions and insolvency procedures in SME finance (section 126), relationships with large companies, local financers and industrial organizations (section 127), and adequate regulation across various laws related to SMEs (section 128). Among these issues, relational transactions with large brand companies through the”regional supply chains” brings about an argument on the modification of contract law traditions. Usually, the jurisdictions that belong to the continental law family have often developed various legal doctrines to restrict the immediate cancellation of a contract based on the good faith principle, such as the doctrine of clausula rebus sic stantibus, which may work for the protection of SMEs in long-term relationships through a supply chain, while the Anglo-American jurisdictions have been known for the freedom to unilaterally cancel a contract subject to the payment of compensation. However, some empirical studies have identified real contractual practices between the parties in a long-term relationship, known as a “relational contract,” which are bound by unwritten promises stemming from good faith that go beyond the literal wording in the contract.32 Japan is also known as a country where long-term relational contracts inside business groups prevail, but administrative regulation has been central to SME protection in Japan, through a series of laws for the protection 29

FOR the model conflict between Japan and Australian support, see [26]. See Nakajima [29]. 31 Its implementation plan is envisaged in the ASEAN Strategic Action Plan for SME Development 2016–2025. 32 SEE [28], Uchida [36], Kato & Fujiwara [22], [6], etc. 30

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of sub-contractors and the regulation of the abuse of superior positions under the Anti-Monopoly Act. In sum, there is a certain variation in the choice of regulations in regard to SMEs: first is the contractual freedom-centered approach, including the freedom of cancellation as a principle, but allowing certain room for modifications through the accumulation of case law on contractual interpretation; second is an approach through the compulsory provisions under the fundamental law, such as restrictions on the unilateral cancellation of contracts in certain relationships with a disparity in the bargaining powers, or the control of abuse of superior position under competition law implemented by an independent commission; third is an administrative approach through laws for the protection of sub-contractors and the regulation of the abuse of superior positions implemented by the line ministries. Vietnamese law seems to take the third approach by applying rigorous administrative regulation bundled with the 2005 Commercial Law, even though the need for increased provisions to restrict the economic practice of easily cancelling contracts was discussed in the drafting process of the 2014 Civil Code, as an attempt at the aforementioned second approach. Myanmar is another example of the third approach, based on the 2014 Law on Consumer Protection which features a variety of administrative controls, probably because of the practical difficulties of amending the more than a century old 1872 Contract Law that stems from the British colonial era. Laws for secured transactions by and insolvency of SMEs have been one of the central targets in the post-Asian Currency Crisis legal reforms led by the international donor agencies since the 1990s. Among them, the World Bank’s Principles for Effective Insolvency and Creditor Rights Systems (1999, revised in 2004 and 2015) has guided the law-making efforts in many Asian countries. The CLMV countries have also followed this trend, including Vietnam’s 2012 Decree No.11 on secured transactions and 2014 Insolvency Law, Laos’ 2005 Law on Secured Transactions, as well as Laos’ amendment of particular sections relating to secured transactions in the 2018 Civil Code just before its implementation in 2020, Laos’ 2017 Insolvency Law, and Myanmar’s 2019 Insolvency Law.33 The question is the adaptability of the donors’ model to the SME sector in ASEAN economies. The World Bank’s Principles are obviously designed for the needs of large-scale project finance, as a secured transaction law modeled after the U.S. Uniform Commercial Code (UCC) section 9 that enables the creation of a blanket security over the entire corporate assets,34 while the insolvency law follows the essential designs of the US Federal Bankruptcy Act Chapter 11 that realizes the super priority of new money providers over the entire corporate assets at the sacrifice of existing creditors.35 Such legal designs may facilitate a large-scale “project 33

FOR details see [15]. A secured transaction law model based on the US UCC s.9, which facilitates project finance via a comprehensive security interest created over the entire corporate assets, including both fixed and fluctuating assets at present and in the future, via a simple filing, but could go against the needs of SME finance. 35 Modeled after the US Federal Bankruptcy Act Chapter 11, featuring a set of legal designs for the protection of corporate managers, including the automatic stay, DIP (Debtor-in-Possession), super 34

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finance” as campaigned for the promotion of public–private partnership by enabling the enforcement of a comprehensive mortgage over the entire value of an infrastructure development project, but may hinder the traditional needs of debt collection in SME finance. Professor Thomas Jackson once warned against the overuse of the US Federal Bankruptcy Act Chapter 11, and contended the “creditors’ bargain” theory that insolvency law should maintain its fundamental function as the procedural law that offers a forum for reasonable negotiation between the parties, instead of overwriting the substantive law.36 Particularly in the context of the financing of SME startups in Asian developing countries, which usually evolve from an individual partnership with unlimited liability based on the private assets of the general partners and are converted into a limited liability corporate form with the aim of accessing finance, insolvency law as well as secured transaction law are the basic legal infrastructure that needs to be designed to facilitate indirect finance to minimize the risk of the moral hazard of abusing the corporate forms with limited liability. A Chapter 11style legal design which enables the corporate managers to maintain control of the insolvent corporation at the sacrifice of existing creditors seems to be the opposite of what is required for the promotion of startup SME finance.37 Japanese ODA has extended support to ASEAN late developing countries in the areas of secured transactions and insolvency law. These Japanese projects have often encountered a model conflict with other donors, such as pressure from the World Bank group compelling the modification of the Japan-supported provisions regarding the secured transactions over movables in the 2005 Vietnam Civil Code, the 2007 Cambodia Civil Code and the 2018 Lao Civil Code. Also, in the drafting process of Vietnam’s 2004 decree on insolvency, and also the 2020 Insolvency Law of Myanmar, the Japanese teams were obliged to step back due to conflict with the Asian Development Bank, despite their highly practical support ranging from mechanisms for creditors’ mutual equality, a detailed avoidance system to prevent the moral hazard by corporate managers, the priority of secured credits, through to the training of trustees. As a result, most of the recent law making in these recipient countries tends to result in the acceptance of the World Bank model, including the so-called “SME insolvency procedure” featuring the super priority given to a new money provider at the sacrifice of existing creditors without even going through the decision-making process at a creditors’ meeting.38 Whether such a legal design that hinders the interests of existing creditors in the name of rescuing an SME in difficulty can truly be beneficial for SME finance should be tested in the real economy.

priority of new money, and the control of decision-making at the creditors’ meeting through the cram-down mechanisms based on the classification of creditors, as well as the eased judicial review. 36 [9]. 37 SEE [15] for the post-Asian Currency Crisis conflict of policy choice between the International Monetary Fund (IMF) and the World Bank, which resulted in the centralization of the World Bank-led “rescue” model. 38 There is a risk of abuse of such relaxed insolvency procedures when the definition of an “SME” is manipulated. See Kaneko ibid.

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2.5 Conclusion This chapter gave an overview of the trends in economic laws in the ASEAN late developing countries, along their path of foreign investment promotion policy through to WTO accession, and also described the tendencies of recent law making in the third stage of the trend, under the common law-making initiative by the AEC. The first stage of law making after the collapse of the COMECON regime was characterized by the direct influence of the foreign investment laws from the ASEAN core countries, which featured the utilization of foreign investors for domestic industrial policy through the use of a combination of sticks (entry restrictions and performance requirements) and carrots (abundant investment incentives such as tax holidays). The second stage was characterized by the promotion of the easement of such restrictions, in the attempt to accede to the WTO, and to conclude the FTAs and BITs with leading international decision-makers which were considered necessary for the progress towards WTO accession, while such treaties usually included ISDS clauses as a guarantee of enforceability of commitments. Now, the third stage of law making seems to take a unique path to newly emphasize environmental and social considerations as goals in parallel with economic growth and reinstate the restrictive legal framework from the first stage as a means to realize such newly added goals. After the quarter-century long pursuit of economic growth through foreign investment promotion, these countries have increasingly come to realize the need for policy balance with other aspects of the nation’s goals. Then, what exact design choices should be appropriate for such third-stage law making in the ASEAN late developing countries? There seems to be no clearly established model for them, given the failure of multilateral rule making at the WTO regarding the “Singapore Issues,” and the diffusion of environmental and social clauses in the BITs and FTAs that are trapped in the overly technical manipulation of wording incorporated through the negotiation tactics of international lawyers who expect larger compensation through ISDS. In this deadlock, there is an expectation that the CSAP can guide the new era of law making towards the realization of AEC 2025. Indeed, the CSAP reaches towards various policy goals including the environment, labor, land, and disaster management, together with emphasis on competition law, consumer protection and SME promotion. However, such goals are still only declared in general terms without identifying the exact contents of common rules. It seems that the ASEAN common rules are expected to be gradually formulated in a perpetual process of mutual adjustment of legal designs through periodical peer reviews, while progress is seen only in particular areas such as competition law through a rigorous implementation of peer reviews using the so-called Toolkit. In a sense, this ASEAN Way is an attempt at incremental harmonization between the domestic laws of member countries, with due deference to the legislative sovereignty of member countries. The ASEAN Way seems to be an opposite model to the EU’s approach of common law making, which concentrates on rule making for

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the EU-level market, without directly penetrating into the jurisdiction of member countries. In this sense, the guidance shown in the AEC 2025 is worthy of further analysis in order to comprehend the direction of domestic law making in each of the member countries. A common tendency that this chapter has identified through a review of recent law making in ASEAN emerging economies is an inclination towards re-regulation or increasing emphasis on the administrative approach to intervene in contractual relations, rather than the market-based approach enforced at the parties’ initiative. This approach includes governmental redress mechanisms for consumer dispute resolution instead of aiming at new contract doctrines beneficial for consumers; the regulation of unfair trade practices which can invite an early stage intervention by the competition agencies; and governmental intervention to prevent the abuse of superior positions, instead of pursuing modification within the range of contract law doctrines beneficial for SMEs. Such legal designs that offer more mandates for governmental intervention into economic relations may be a natural choice for these Asian late developing countries succeeding the socialist legal culture, but retains both the risk of discretionary application which may harm predictability for investors, and also the risk of a laissez-faire economy where the government seldom employs its regulatory power while the parties lack meaningful channels for enforcement. To realize the newly added goals of environmental and social considerations, the third stage of law making in the ASEAN countries is expected to overcome the weaknesses of the former government-centered resource allocation during the period of socialism and authoritarian regimes, instead of simply reviving the former discretionary apparatus in the new name of environmental and social considerations. It is true that liberalization simply aimed at economic growth (see the left column in Table 2.3) has been met with social protests, to the point of jeopardizing political stability, and it has been a hard-learned lesson during this quarter of a century that a balanced policy is necessary. But such a policy balance is something difficult to be attained through a simple throwback to government regulation (see the right column in Table 2.3). Between the extreme choices of libertarianism and the revival of authoritarianism, there seems to be a third path which facilitates formal procedural frameworks for materializing participatory decision making based on disclosure (see the center column in Table 2.3). Instead of the nominal implementation of social and environmental assessments which has merely invited disappointment, formal legal procedures for early participation in the planning stage of development projects as well as ex post facto review via administrative lawsuits should be well established in the third stage of law making in the CLMV countries. Lastly, the involvement of Japanese legal assistance in the lawmaking in these CLMV countries during these decades has focused on the clarification of substantive rules in the civil sphere, especially through the drafting support for the establishment of a fundamental code system (the center column in Table 2.3), and has not directly intervened in the field of administrative law. However, if the special importance of the code system in these Asian socialist-oriented countries is reconsidered, we can notice that they are a bundle of compulsory provisions meant for the basic principles of not

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Table 2.3 Choices in the law making in ASEAN late developing countries Law areas

Private autonomy (Judiciary-based) Anglo-American law

Rule-based (legislation-centered) Continental law

Interventionist (Administration-led) Asian socialist tradition

Investment Law

US Model BIT: WTO-TRIM: – Broad interpretation of fair – National Treatment – Restriction of and equitable treatment – “Sole Effect” approach to performance requirements indirect expropriation – ISDS as BIT’s enforcement mechanism

ASEAN-style investment policy: – Entry restriction; foreign shareholding restriction; joint venture requirements – Performance requirements – Investment incentives in exchange

Environmental Law / Social Law

Freedom in principle → minimum intervention: – Environmental/social impact assessment as minimum procedural step – Freedom of dismissal – Freedom of land transaction/construction

Compulsory provisions: – Detailed environmental/labor standards, stricter penalties/higher threshold of economic methods – Spatial planning to regulate the urban-rural intersection

Administrative regulations: – Discretionary implementation of environmental/labor standards – Discretionary planning for land use

Competition Law & Policy

– Judicial enforcement

– Administrative enforcement by independent commission

Administrative enforcement by the agency attached to the line ministry – Structural restriction based on market share as basis of discretionary regulation

Consumer Protection Law/ADR

– Consumer protection law outside of normal contract law – Judicial ADR

– Centralization of consumer law through integration into the contract law – Judicial reform as the basis of activism

– Administrative regulation – Administrative ADR

SME Protection Law

-Informal mortgage practices – Formalization of informal – Administrative workout – Insolvency law as a mortgage finance for SME bailout -DIP-led insolvency law – Administrative regulations negotiation forum – SME protection within the such as the protection of framework of competition sub-contractors law (abuse of superior position)

(Compilation by the author)

only civil relations but also administrative regulations, often functioning through the commercial code which stems from the “economic contract” in the socialist era. If the third stage of law making in these countries is expected to proceed towards increased direct democracy in the course of administrative decision-making, then the function of the code system established through the Japanese involvement will increase as the fundamental principles for the entirety of the integrated law making in the public and private legal spheres, as a guiding light for achieving a policy balance.

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References 1. ASEAN. (2014). Consumer protection digest and case studies: A policy guide (Volume I and II). 2. ASEAN Expert Group on Competition. (2017). ASEAN self-assessment toolkit on competition enforcement and advocacy. ASEAN. 3. ASEAN Expert Group on Competition. (2020). Competition enforcement strategy toolkit for ASEAN competition agencies. ASEAN. 4. Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2003). Courts. Quarterly Journal of Economics, 118(2), 453–517. 5. Djankov, S., La Porta, R., Lopez-de-Silanes, F., Shleifer, A.& Botero, J. (2003) “The Regulation of Labor,” NBER Working Paper No.9756 6. Eisenberg, M. A. (2005) “Actual and Virtual Specific Performance, the Theory of Efficient Breach, and Indifference Principle in Contract Law,” 93 California Law Review, p.975 7. Espluges, C. & Marquis, L. eds. (2015) New Developments in Civil and Commercial Mediation: Global Comparative Perspectives, Springer 8. Ishikawa, K., Shimizu, K., & Sukegawa, N. (Eds.). (2017). The initiation of ASEAN economic community and Japan. Bunshindo (in Japanese). 9. Jackson, T. (1986). The logic and limits of Bankruptcy Law. Harvard University Press. 10. Japan External Trade Organization: JETRO. (2020). Questionnaire survey on the overseas investment activities of Japanese Companies in fiscal year 2019, retrieved at JETRO homepage https://www.jetro.go.jp (in Japanese). 11. Kagawa, K. (2019). Doctrine of dismissal restriction in four ASEAN late developing countries. In Y. Kaneko (Ed.), Market reform and civil law (p. 2019). Kobe University Press. 12. Kagawa, K., & Kaneko, Y. (2007). A research of legal technical assistance, Shinzansya Co. (in Japanese) 13. Kaneko, Y. (2012). Reevaluating Model Laws: Transplant and Change of Financial Law in Vietnam. Journal of International Cooperation Studies, Kobe University, 19(2–3), 1–37. 14. Kaneko, Y. (2016). Issues of independent accounting mechanisms (IAM) of international development agencies: A procedural comparison. Journal of International Cooperation Studies, Kobe University, 24(2), 1–14. (in Japanese). 15. Kaneko, Y. (2022). Insolvency law reforms in the ASEAN emerging economies: Consequences of the donor model designed for economic crises. Springer. 16. Kaneko, Y., & Ye, N.L. (2016). Issues in Myanmar investment law: Towards better policy balancing. Journal of International Cooperation Studies, Kobe University, 24(1), 67–85. 17. Kaneko, Y. (2009). A Review of model law in the context of financial crisis: Implications for procedural legitimacy and substantial fairness of soft laws. Journal of International Cooperation Studies, 17(3), 1–16. 18. Kaneko, Y. (2019a). Japan’s civil code-centered legal assistance to Asian market reform countries: Normative choice of reforms. In: Y. Kaneko (Eds.), Civil law reforms in post-colonial Asia: Beyond Western Capitalism. Springer. 19. Kaneko, Y. (2019b). Contract law in Myanmar: An outcome of British Colonial Law. In: Y. Kaneko (eds.), Civil law reforms in post-colonial Asia: Beyond western capitalism. Springer 20. Kaneko, Y., Kadomatsu, N., & Tamanaha, B. Z. (Eds.). (2021). Land law and disputes in Asia. Routledge. 41 Kaneko, Y. (2010). Asian legal reform and the development of law. Daigaku-kyoiku-shuppan Co. (in Japanese) 22. Kato, M., & Fujiwara, R. (2000). Japanese perception of contract: Minds that keep and infringe contracts. Sanseido (in Japanese). 23. Kurita, M. (2017). Changing law and economy in contemporary Asia reevaluating competition law assistance, proceedings at the Symposium on Legal Reform in ASEAN Emerging Economies. In Proceedings of the Symposium on A Historical Perspective and the Challenges for the Future, Kobe University Center for Social System Innovation, October 27, 2017.

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24. Kurita, M. (2019). Assistance for the competition law and its evaluation: From the perspective of the universality and the locality of competition law. In Y. Kaneko (Eds.), Market reform and civil law: The search for legal systematization and issues in legal development support. Kobe University Press, 2019 (in Japanese). 25. Kurita, M. (2020). Procedural fairness and enforcement system under the antimonopoly act of Japan. Hakuo Hogaku, l27(1), 15–31. 26. Kusano, Y. (2020). An attempt of systematization of mediation. In Y. Shimada (Eds.), Asian legal assistance series: Indonesia: a challenge for the democratization and globalization, Jyunposya 2020 (in Japanese). 27. La Porta, R., Florencio, L. S., & Andrei, S. (2008). The economic consequences of legal origins. Journal of Economic Literature, 46(2):285–332. 28. Macneil, I. (2000). Relational contract theory: Challenges and queries. Northwestern University Law Review, 94, 877. 29. Nakajima, T. (2020) Introduction of the court-led mediation system in Myanmar. ICD News (Ministry of Justice of Japan), No. 79, pp. 71–84 (in Japanese). 30. Sakumoto, N. (2011). Changes of Asian environmental law and enforcement. Houritsu Ronsou, 83(2–3), 205–223. (in Japanese). 31. Posner, R. (1998). Creating a legal framework for economic development. In World Bank Research Observer, vol. 13, issue (1) February, pp. 1–11. 32. Shihata, I. (1991). World Bank and ‘Governance’ Issues in Borrowing Members. In World Bank in a changing world, vol. 53. 33. Trubek, D. M. (2006). The rule of law in development assistance: Past, present, and future. In Trubek, D. M. & Santos, A. (Eds.), The new law and development: A critical appraisal. 34. Tymowski, J. (2016). Directive 2008/52/EU on certain aspects of mediation in civil and commercial matters European Implementation Assessment In-depth Analysis. European Parliament Research Service 35. UNDP/De Soto, Fernando. (2008). Making the law work for everyone, Vol. II. UNDP 36. Uchida, T. (2000). Era of contract: Japanese society ad contract law. Iwanami-Shoten (in Japanese). 37. World Bank. (2006). Report of the observation of standards and codes corporate governance country assessment: Vietnam. World Bank. 38. World Bank. (2013). Report of the observation of standards and codes corporate governance country assessment: Vietnam. World Bank. 39. World Bank. (2016). Report of the observation of standards and codes accounting and auditing module: Vietnam. World Bank.

Chapter 3

Comparative Approach to ASEAN Competition Policy and Law Makoto Kurita

Abstract This chapter will review competition policy and law (CPL) in ASEAN and provide some lessons for improving legal technical assistance (LTA) on CPL to ASEAN and intensifying intra-ASEAN cooperation in competition law enforcement. In 2021 Cambodia finally enacted its competition law and all ASEAN Member States have established respective competition law regimes. While they share various common features in the texts of the laws, the degree of implementation varies. The independence of competition authorities is one of the underlying causes of this difference and the lack of enforcement resources and expertise is crucial, particularly for CLMV Countries. The chapter will propose Japan Fair Trade Commission to extend LTA based on its experiences of the Antimonopoly Act enforcement for 75 years. Intra-ASEAN cooperation on CPL could support the efforts by young competition authorities in CLMV Countries to implement respective competition laws and coordinate enforcement activities to address anticompetitive mergers and other practices with regional dimension. In this context, the chapter will also examine the future developments of ASEAN-wide CPL, comparing with EU competition law and its institution.

M. Kurita (B) Faculty of Law, Hakuoh University, Oyama, Japan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_3

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3.1 Introduction This essay aims at overviewing competition laws in the Association of Southeast Asian Nations (ASEAN) and observing the future developments thereof.1 Competition law is an area of laws and regulations to address anticompetitive practices to restrict or distort market competition. During the last 20 years most of the Asian economies have promulgated respective competition laws, in tandem with market liberalization, privatization, and deregulation. There have been various reasons for these economies to introduce competition law regime; some jurisdictions might have domestic reasons, but most, if not all, jurisdictions came under external pressures from trading partners to enact competition law and enforce it. Developed countries, including Japan, have provided legal technical assistance on competition law and policy. In this essay, I would like to compare competition laws in ASEAN Region and characterize common features, to examine merits and demerits of legal technical assistance on competition law, and to identify challenges and issues for ASEAN competition laws to be further examined. The essay particularly focuses on emerging Members of ASEAN, that is, Cambodia, Lao DPR, Myanmar, and Vietnam (collectively referred to as “CLMV Countries”). Among 4 countries, Vietnam is the first to have competition law in 2004 and recently amended the Law significantly. Laos and Myanmar enacted respective competition laws in several years ago but have rarely enforced them. Cambodia is the last country in ASEAN to have competition law, enacted October 2021. The essay consists of six parts. After this Introduction, Parts II. and III. overview ASEAN competition laws and legal technical assistances on competition laws to ASEAN respectively. After these preparatory works, Part IV. examines challenges of ASEAN competition laws, and Part V. identifies issues to be further examined. Brief concluding remarks will be added in Part VI. Before moving on to the main subjects, let me explain usage of several terms for those who are not so familiar with this area of laws. “Competition law” is a common noun of laws and regulations which address market-distorting practices, such as price-fixing and other agreements, abuses of dominance or monopolization, and anticompetitive mergers. “Antimonopoly Act” (AMA) of Japan is the competition law of Japan. Competition law in the United States (US) is usually called as “antitrust law,” which is a set of Sharman Act, Clayton Act, and Federal Trade Commission 1

This essay is based on the text of my presentation at Session on “Competition Law Reforms in Asian Emerging Economies,” Asia Law and Society Association (ALSA) Osaka Annual Meeting 2019, held on December 14, 2019, at Osaka University, Osaka, Japan. I served as a chair at the Session and co-presenters are Mr. Osamu Igarashi, JFTC official and former long-term resident adviser to competition authorities in Indonesia and Vietnam; Ms. Yuzana Myint Aung, a graduate student at Graduate School of International Cooperation Studies, Kobe University, coming from Myanmar Ministry of Commerce; and Professor Shuya Hayashi, Nagoya University Graduate School of Law.

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Act. In the European Union (EU) and its Member States and many other jurisdictions around the world, “competition law” is widely used. “Competition policy” refers to a set of various policies to utilize market mechanism and promote competition, by such means as liberalization, privatization, and deregulation as well as promotion of innovation and creation of markets. Enforcement of competition law and promotion of competition policy are in tandem, and the former is one of the main pillars for the latter. Particularly in Emerging Economies, where strict governmental interventions and dominant state-owned enterprises (SOEs) remain extensively, competition policy measures have to be taken prior to or in parallel with the enforcement of competition law. We usually say “competition law and policy (CLP)”,2 but in ASEAN “competition policy and law (CPL)” is a normal usage.3 This terminology indicates that particularly in developing Economies competition policy measures should be implemented first and then competition law should be enforced effectively in order to maintain competitive market created by competition policy measures.4 Competition law is mainly enforced by “competition authorities (CA)”, usually administrative organizations, and Japan Fair Trade Commission (JFTC) is in charge in case of Japan. Most of the CAs in Asia are commission-type collegial body. In addition to administrative enforcement, injured parties may file private suits under competition law or general civil law in most jurisdictions. Some competition laws also have criminal provisions.

3.2 Competition Laws in ASEAN Part II. overviews competition laws in ASEAN Member States (AMSs), putting emphasis on CLMV Countries. At this moment, there is no ASEAN-wide competition law. 1. Competition Laws in East Asia Competition laws and competition authorities in ASEAN and North East Asia are listed in Tables 3.1 and 3.2 respectively.5

2

See, e.g., OECD Journal of Competition Law and Policy, published by the OECD Committee on Competition Law and Policy (now Competition Committee) (The Journal was discontinued). 3 See, e.g., [1]. 4 Two examples in Japan are suggestive. One is the economic democratization policy as an important pillar of the post-war reforms in Japan. During the Allied Occupation dissolution of “zaibatsu” (conglomerates controlled by owner families) and dismantle of huge concentrated companies were implemented and the AMA was promulgated in 1947 to prevent the revival of economic concentration and maintain competitive markets. See e.g., [2]. The other is the deregulation and regulatory reforms in regulated sectors such as telecommunications, energy, transportation, and finance, in 1990s and 2000s in tandem with the strengthening of the AMA and its enforcement. 5 See, e.g., [3]. See also [4].

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Table 3.1 Competition laws and competition authorities in ASEAN Country

Competition law

Competition authorities

Brunei

Competition Order 2015 (fully effective 2019)

Competition Commission of Brunei

Cambodia

Law on Competition (2021)

Cambodia Competition Commission

Indonesia

Law No. 5 of 1999 concerning the Prohibition of Monopoly and Unfair Business Competition (1999, effective 2000)

Commission for the Supervision of Business Competition (KPPU)

Laos

Business Competition Law (No. 60/NA, 2015) (effective 2016)

Lao Competition Commission

Malaysia

Competition Act, Competition Commission Act (both 2010, effective 2012)

Malaysia Competition Commission

Myanmar

Competition Law No. 9/2015 (effective 2017)

Myanmar Competition Commission

Philippines

Competition Act (2015, fully effective 2017)

Philippines Competition Commission

Singapore

Competition Act (2004)

Competition and Consumer Commission of Singapore

Thailand

Trade Competition Act BE 2542 (1999, repealed 2017) Trade Competition Act BE 2560 (2017, effective 2018)

Trade Competition Commission of Thailand (TCCT)

Vietnam

Competition Act (2004, effective 2005) Vietnam Competition and Consumer New Competition Act (2018, effective Authority (VCCA) + Competition Council (VCC) July 2019) – > National Competition Commission (NCC) under the New Competition Act

Table 3.2 Competition laws and competition authorities in North East Asia Country

Competition law

Competition authorities

Japan

Antimonopoly Act (1947)

Fair Trade Commission (JFTC)

Korea

Monopoly Regulation and Fair Trade Act (1980)

Fair Trade Commission (KFTC) Fair Trade Commission (TFTC)

Taiwan

Fair Trade Law (1991)

China

Anti-Monopoly Law (2007, effective Anti-Monopoly Commission 2008) State Administration for Market Law on Anti-Unfair Competition (1993) Regulation (SAMR)

Mongolia

Law on Competition (2010)

Hong Kong

Competition Ordinance (2012, effective HK Competition Commission 2015) Competition Tribunal

Authority for Fair Competition and Consumer Protection

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Among CLMV Countries, Cambodia enacted its competition law in October 2021 after a long legislative process. Laos and Myanmar established competition regimes in 2015 so as to be in time for the target year,6 but still remain at the initial stage to prepare guidelines and other internal rules and to train staff. Vietnam has some experiences in enforcing its Competition Law enacted in 2004, and 2018 Amendment of the Law significantly improved effectiveness of substantive provisions as well as institution of competition authorities.7 On the other hand, Singapore is the most advanced jurisdiction, modeled after the UK and Australia competition laws and institutions. Thailand and Indonesia, promulgated respective competition laws in 1999, took different paths. In Indonesia, independent Commission for the Supervision of Business Competition (KPPU) made significant efforts to enforce its competition law and in recent years the Supreme Court has supported KPPU’s enforcement activities. On the other hand, Thailand Trade Competition Commission (TCC), composed by many ex-officio members from governmental ministries and business circle and its Office belonging to the Ministry of Commerce, might have lacked intention to enforce the Trade Competition Law, and there were many deficiencies in the Law. As a result, there has been almost no enforcement action. New Trade Competition Law, promulgated in 2018, may provide impetus for the independent TCC to enforce it effectively.8 2. Competition Laws in CLMV Countries Table 3.3 summarizes substantive provisions of competition laws in CLMV Countries.9 CLMV competition laws have similar substantive provisions and prohibit anticompetitive agreements, abuse of dominant position and monopoly position, and anticompetitive combination (mergers and acquisitions). Laos, Myanmar, and Vietnam competition laws also have unfair competition provisions, but only Cambodia competition law does not have. More minute comparison of substantive provisions of competition laws of CLMV Countries is provided for at Attached Table.

6

ASEAN Economic Community Blueprint, January 2008, identified the action to be pursued by the ASEAN Member States to “endeavor to introduce competition policy in all ASEAN Member Countries by 2015”. 7 As of the end of June 2022, the new National Competition Commission under the new Law has not yet established. 8 As from January 2022, Thailand competition authority is known as Trade Competition Commission of Thailand (TCCT). 9 Vietnam Competition Law 2004, which might affect competition laws in 3 other jurisdictions, is also compared with other competition laws.

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Table 3.3 Comparison of substantive provisions among CLMV competition laws Vietnam Competition Law 2018

Vietnam Competition Law 2004

Laos Competition Law 2015

Myanmar Competition Law 2015

Cambodia Competition Law 2021 – Horizontal: per se illegal – Vertical: – RPM: per se illegal – Others: rule of reason

Agreement

– Hardcore: per se – Entry illegal restriction, – Non-hardcore and market vertical: rule of exclusion and reason collusion in tender: per se illegal – Others: more than 30% market share required

– 8 types of agreements considered as those aimed at restraint of competition

– Act of restraint on competition: may include both agreement and abuse of dominance

Abuse of Dominance

– Dominance: market share test – Monopoly position – Abuse

– Dominance: market share test – Monopoly position – Abuse

– Dominance and monopoly: market share threshold defined by Competition Commission

(Abuse of – Dominance – Abuse dominance) – Monopolization on market

M&A

– Categories of concentration – Substantial anti-competitive effects required

– Categories of concentration – Illegal in case of 50% or more combined market share

– Categories of combination – Market share threshold defined by Competition Commission

– Categories of – Definition of collaboration business – Prohibition combination based on effects – Significant adverse effects or market share required threshold specified by Competition Commission

Unfair Business Practices

– 6 types of practices are enumerated

– 9 types of practices are enumerated

– 8 types of practices are enumerated

– 9 types of practices are enumerated

(No relevant provision)

Agreement

Anti-competitive Practices

Chapter III Anti-competitive Agreements Article 11 Anti-competitive agreements 1. Price-fixing 2. Market sharing 3. Output restriction 4. Bid-rigging 5. Entry restriction 6. Market exclusion 7. Technical restriction 8. Imposition of obligations 9. Boycott 10. Restriction on distribution 11. Other agreements Article 12 Prohibited agreements [Prohibited per se] 1. Horizontal agreements stipulated in clauses 1–3 of Article 11 2. Agreements in clauses 4–6 [Prohibited if it causes substantial anti-competitive effects] 3. Horizontal agreements in clauses 7–11 4. Vertical agreements in clauses 1–3 and 7–11 Article 14 Exemption for agreements in clauses 1–3 and 7–11

Vietnam law on competition 2018 (effective 1 July 2019)

Substantive Provisions of Competition Laws in CLMV Countries

Section 1 Agreements in Restraint of Competition Article 8 Agreements in restraint of competition 1. Price-fixing 2. Market sharing 3. Output restriction 4. Technical restriction 5. Imposition of obligations 6. Entry restriction 7. Market exclusion 8. Collusion in tender Article 9 Prohibited Agreements 1. [Prohibited per se] Agreements stipulated in clauses 6–8 of Article 8 2. [Prohibited if the combined market share of parties exceeds 30%] Agreements in clauses 1–5 Article 10 Exemption for agreements in clauses 1–5

Chapter II Practices in Restraint of Competition (defined in Article 3.3)

Vietnam law on competition 2004 (effective 1 July 2005)

Section 1 Agreement aimed at Restraint of Competition Article 21 Practices considered as the agreement aimed at restraint of competition 1. Price-fixing (Article 22) 2. Market allocation (23) 3. Quantity restriction (24) 4. Technology and quality restriction (25) 5. Imposition of conditions (26) 6. Prevention of market entry (27) 7. Driving business out of market (28) 8. Bid rigging (29) 9. Other practices stipulated in relevant laws and regulations Article 45 Exemption for clauses 1–6 of Article 21 by the Competition Commission

Part III Restraint of Competition Article 18 Types of restraint of competition 1. Agreement 2. Abuse of dominant market position and market monopoly 3. Combination

Laos law on competition (2015, effective 8 January 2016)

Chapter VII Act of Restraint on Competition Section 13 Prohibition of the following acts which cause act of restraint on competition* (a) Price-fixing (b) Agreement on restraint on competition (c) Abuse of dominance* (d) Conducting restraint on market (e) Restraining or preventing to share market (f) Restraining or controlling production, technology and investment (g) Collusion in tender or auction * There are ambiguous provisions Section 14 Exemption in respect of agreement on restraint on competition

Chapter VII Act of Restraint on Competition (defined in section 2(g) as “the act which reduces or hinders the competition among businesses in the market”)*

Myanmar competition law (2015, effective 24 February 2017)

(continued)

Section 1 Agreement Which Prevent, Restrict or Distort Competition Article 7 (Unlawful horizontal agreements) 1. Price-fixing 2. Restriction of quantity, types, and products 3. Territorial market allocation 4. Customer allocation 5. Bid rigging Article 8 (Unlawful vertical agreements) – Minimum resale price maintenance – Vertical agreements significantly distorting competition 1. Territorial restriction 2. Customer restriction 3. Exclusive dealing 4. Indirect refusal to deal 5. Tying Section 4 Exemptions Article 12 (Exemption) Article 13 (Individual exemption) Article 14 (Collective exemption)

Chapter III Unlawful Activities Which Prevent, Restrict or Distort Competition

Cambodia Law on Competition (5 October 2021)

3 Comparative Approach to ASEAN Competition Policy and Law 59

Abuse of Dominance

Vietnam law on competition 2004 (effective 1 July 2005) Section 2 Abuse of Dominant Market Position and Monopoly Position Article 11 Dominant market position 1 has 30% or more 2 have 50% or more 3 have 65% or more 4 have 75% or more Article 12 Monopoly position Article 13 Abuse of dominant market position 1. Below cost selling 2. Unreasonable price or minimum resale price 3. Restriction of production or distribution, etc 4. Discriminatory conditions 5. Imposition of obligations 6. Prevention of new entry Article 14 Abuse of monopoly position 1. Practices in Article 13 2. Disadvantageous conditions 3. Unilateral change or cancel

Vietnam law on competition 2018 (effective 1 July 2019)

Chapter IV Abuse of Dominant Position and Monopoly Position Article 24 Dominant market position – Substantial market power or – market share test 1 has 30% or more market share 2 have 50% or more 3 have 65% or more 4 have 75% or more 5 have 85% or more *An enterprise with less than 10% excluded Article 25 Monopoly position Article 26 Substantial market power Article 27 Prohibited abuse 1. Abuse of Dominant position (a) Below cost selling (b) Unreasonable price or minimum resale price (c) Restriction of production or distribution, etc (d) Discriminatory conditions (e) Imposition of exclusionary conditions (f) Prevention of new entry (g) Other abuse in other law 2. Abuse of monopoly position (a) Practices of (b)–(f) in Clause 1 (b) Disadvantageous conditions (c) Unilateral change or cancel

Substantive Provisions of Competition Laws in CLMV Countries

(continued)

Section 2 Abuse of Dominant Market Position and Market Monopoly Article 30 Dominant market position and market monopoly Market share over the threshold defined by the Competition Commission Article 31 Practices of abuse 1. Unfair price (Article 32) 2. Below cost selling (33) 3. Refusal to sell (34) 4. Tying (35) 5. Discrimination (36) 6. Other practices stipulated in relevant laws and regulations Article 46 Exemption by the Government

Laos law on competition (2015, effective 8 January 2016) Chapter VIII Monopolization on Market in Competition (No specific definition on “monopolization”) Section 15 Prohibition of the following acts which cause monopolization on market (a) Controlling price (b) Restraining services or production, etc. for the purpose of price controlling (c) Suspending, reducing or restraining services, production, etc (d) Controlling and restraining the trading area (e) Interfering other business

Myanmar competition law (2015, effective 24 February 2017)

(continued)

Section 2 Abuse of a Dominant Market Position (Dominant market position is defined in Article 3.6 as “a situation in which a Person has the power to act in a Market significantly without any effective constraint from other competitors”) Article 9 (Unlawful activities by a person with a dominant market position) 1. Exclusive dealing 2. Refusal to deal 3. Tying 4. Below cost selling 5. Refusal to access to an Essential Facility (defined in Article 3.7) Article 10 (Reasonable reasons determined by the CCC) Section 4 Exemptions Article 12 (Exemption) Article 13 (Individual exemption) Article 14 (Collective exemption)

Cambodia Law on Competition (5 October 2021)

60 M. Kurita

M&A

Vietnam law on competition 2004 (effective 1 July 2005) Section 3 Economic Concentration Article 16 Economic concentration 1. Merger 2. Consolidation 3. Acquisition 4. Joint venture 5. Other forms stipulated by law Article 18 Prohibited cases of economic concentration −50% or more combined market share Article 19 Exemption

Vietnam law on competition 2018 (effective 1 July 2019)

Chapter V Economic Concentration Article 29 Economic concentration 1. Categories of concentration a) Merger (defined in clause 2) b) Consolidation (defined in clause 3) c) Acquisition (defined in clause 4) d) Joint venture (defined in clause 5) e) Other forms stipulated by law Article 30 Prohibited concentration If it causes or probably cause substantial anti-competitive effects on Vietnamese market Article 31 Assessment of substantial anti-competitive effects Article 32 Assessment of positive effects

Substantive Provisions of Competition Laws in CLMV Countries

(continued)

Section 3 Combination aimed at Restraint of Competition Article 37 Combination (merger, acquisition or transfer of enterprises, and joint venture) Article 38 Combination aimed at Restraint of Competition 1. Holding market share over the threshold defined by the Competition Commission 2. Restraining market access and technological development 3. Creating negative impact on consumer, business operator, and national socio-economic development Article 47 Exemption

Laos law on competition (2015, effective 8 January 2016) Chapter X Collaboration among Business Section 30 Collaboration includes (a) Merger (b) Consolidation (c) Acquisition (d) Joint venture (e) Other means of collaboration stipulated by the Commission section 31 Prohibited collaboration (a) Collaboration to raise extremely market dominance (b) Collaboration to decrease competition section 32 Prohibited collaboration Exceeding the market share specified by the Commission Section 33 Exemption

Myanmar competition law (2015, effective 24 February 2017)

(continued)

Section 3 Business Combinations (Business combination is defined in Article 3.3) – Acquisition of the right of control, voting rights, shares or assets – Combination of 2 or more Persons to acquire joint ownership of an existing legal Person or a new legal Person Article 11 (Unlawful business combination) – Significantly preventing, restricting or distorting competition in a Market Section 4 Exemptions Article 12 (Exemption) Article 13 (Individual exemption) Article 14 (Collective exemption)

Cambodia Law on Competition (5 October 2021)

3 Comparative Approach to ASEAN Competition Policy and Law 61

Unfair Competition

Vietnam law on competition 2004 (effective 1 July 2005) Chapter III Unfair Competitive Practices Article 39 Unfair competitive practices 1. Misleading instructions (40) 2. Business secrets (41) 3. Coercion (42) 4. Defamation (43) 5. Disruption (44) 6. Unfair advertisement (45) 7. Unfair promotion (46) 8. Discrimination by Association (47) 9. Multi-level selling (48) 10. Other practices stipulated by the Government

Vietnam law on competition 2018 (effective 1 July 2019)

Chapter VI Unfair Competition Practices Article 45 Prohibited unfair competition practices 1. Trade secret infringement 2. Coercion 3. Defamation 4. Disruption 5. Customer inducement 6. Below cost selling 7. Other prohibited unfair competition practices prescribed in other law

Substantive Provisions of Competition Laws in CLMV Countries

(continued)

Part II Unfair Competition Article 9 Unfair competitive practices 1. Misleading conduct (Article 10) 2. Business secrets (11) 3. Coercion (12) 4. Defamation (13) 5. Imposing obligations (14) 6. False advertisement (15) 7. Unfair sales promotion (16) 8. Discrimination (17) 9. Other practices stipulated in relevant laws and regulations

Laos law on competition (2015, effective 8 January 2016)

Cambodia Law on Competition (5 October 2021)

Chapter IX Unfair Competition (No relevant provision) (defined in section 2(h)) Section 17 Unfair competition acts include (a) Misleading consumers (section 18) (b) Business secrets (19) (c) Coercion (20) (d) Defamation (21) (e) Disturbance (22) (f) Unfair advertisements and sale promotion (23–24) (g)Discrimination (25) (h) Below cost selling (26, 29) (i) Abuse of influence and inducement to breach contract (27–28) (j) unfair competitive act stipulated by the Commission

Myanmar competition law (2015, effective 24 February 2017)

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CLMV competition laws also have similar institutional arrangements and all competition authorities are commission-type. Full Commission renders final decisions based on the reports from Investigation Committee. Many members of the Commissions are ex-officio and most of them are representatives from economic ministries and the Chairperson is usually served by the Minister or Vice-Minister in charge of trade and commerce, and it may indicate that they may be vulnerable to political and business influences.

3.3 Legal Technical Assistance on Competition Law to ASEAN Part III. examines legal technical assistance (LTA) on competition policy and law (CPL), focusing on the JFTC’s activities in this Region. In addition, intra-ASEAN cooperation will also be analyzed. 1. Legal Technical Assistance on Competition Policy and Law to ASEAN The JFTC, in cooperation with the JICA (Japan International Cooperation Agency), has extensively provided LTA on CPL to ASEAN Member States. In September 2016, the JFTC started the technical assistance project for ASEAN Member States under the JAIF, Japan-ASEAN Integration Funds. The JAIF is the fund, based on donation from Japanese Government, established in ASEAN Secretariat for supporting ASEAN in 2006. In recent years Australia has been very active in providing LTA to ASEAN by means of Competition Law Implementation Program (CLIP) under ASEANAustralia/New Zealand FTA (AANZFTA) Economic Cooperation Support Program (AECSP), started in 2014. Australian Competition and Consumer Commission (ACCC) is a driving force in these efforts. Germany, via Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), has also provided LTA on CPL, particularly focusing on preparing various guidelines and other documents for competition authorities and businesses. Table 3.4 provides a list of LTA programs on CPL extended to ASEAN in 2019 and these LTA programs have been extended up to now. Many LTA programs on CPL have been planned and implemented by ACCC and other donor institutions. The programs are 2 types: One is those for all ASEAN Members and the other is those for CLMV Countries. Many programs have been extended to CLMV Countries by various donors. 2. Legal Technical Assistance on Competition Policy and Law to ASEAN by Japan The JFTC has a long history of providing LTA on CPL since mid-1990s and dispatched its officials to Indonesia and Vietnam as a resident adviser for nearly 10 years respectively. I feel that these long-term assistances have contributed to the developments of CPL in both countries. The JFTC recently dispatched its officials to Malaysia and Thailand.

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Table 3.4 Legal technical assistance programs on competition policy and law to ASEAN in 2019 Date in 2019

Venue

Type of activity

Participating AMSs

Support

Feb. 20–22

Bangkok

Cartel investigation workshop

Thai, Malaysia, Cambodia

Au/NZ CLIP ACCC

Feb. 26–28

Nay Pyi Taw

Workshop on drafting regulations and guidelines

Cambodia, Laos, Myanmar, Vietnam

Au/NZ CLIP ACCC

Mar. 4–7

Tokyo

Training course on AMSs (except planning and Brunei) management of enforcement activities

JAIF JFTC KPPU

Jun. 11–13

Vietnam

Workshop on Vietnam, Thai effective remedies

Au/NZ CLIP ACCC

Jun. 18

Bali

Brainstorming on ASEAN peer review

JAIF JFTC KPPU

Jun. 24–28

Kuala Lumpur

1st ASEAN-EU AMSs Competition Week

EU DG Comp

Jul. 2–4

Brisbane

Commissioners’ Retreat (Forum to exchange views and information among top enforcers)

AMSs

Au/NZ CLIP ACCC

Jul. 12

Bruges (Belgium)

2nd Competition Summer School

AMSs

EU DG Comp

Sep.-Oct

Competition law course (5 days) On-the-job training at ACCC/NZCC (6–10 weeks)

Malaysia, Philippines, Thai, Vietnam

Au/NZ CLIP ACCC, NZCC

Sep. 27–28

Manila

Workshop on competition and intellectual property rights

AMSs

JAIF KPPU, PCC

Oct. 28–30

Philippines

Workshop on market studies

Philippines, Vietnam

Au/NZ CLIP ACCC, OECD

Nov. 14–15

Phnom Penh

8th ASEAN Competition Conference

AMSs

GIZ (Germany) AECSP

Dec. 4–5

Jakarta

Workshop on competition in energy sector

AMSs (competition and energy regulators)

Au/NZ CLIP ACCC, Au. Energy Regulator

AMSs (except Singapore)

Source Compiled by the author based on the information on AEGC website

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I believe that the JFTC has some advantages in providing LTA on CPL. Firstly, Japan’s AMA has various similarities with ASEAN competition laws. For example, both the AMA and most, if not all, ASEAN competition laws share the ultimate goal to promote the development of the national economy. Unfair trade practices regulation under the AMA has been a model for many ASEAN competition laws. In both Japan and ASEAN Economies the government and businesses maintain close relationships with each other. The JFTC’s experiences on government and private-mixed restraints of competition may provide useful lessons for newly established competition authorities in ASEAN. Secondly, Japan has the third longest history in enforcing competition law only after Canada and the US. During the first 30 years of its history, the JFTC had much difficulties in procuring supports to the AMA and the JFTC from businesses and other parties concerned and such experiences may provide lessons for ASEAN competition authorities. Thirdly, the JFTC employs various measures to realize the goals of AMA. Not only legal enforcement measures but also informal measures, such as promulgation of guidelines, prior consultation from businesses, and market surveys and guidance to businesses, are effective tools to prevent and rectify allegedly anticompetitive practices without resorting to legal measures. Newly established competition authorities can learn and utilize these various tools to effectively and efficiently address competitive concerns in respective markets.10 At the same time, the JFTC has serious disadvantages in providing LTA. Firstly, working language in ASEAN is English and competition communities around the world extensively use English. The Japanese are notorious for their proficiency in English. The JFTC, for example, appears to have rarely accepted internship at its office, probably because working divisions at the JFTC refrain from accepting foreign trainees who do not understand Japanese. It is quite difficult for foreign trainees to receive on-the-job training at the JFTC’s office.11 Secondly, administrative (bureaucratic) practices in Japan may be different from those of other countries. Informal communications among parties concerned and administrative guidance are typical examples. The JFTC frequently employs informal measures, such as warnings and case closing after voluntary remedial measures by respondents, and these informal measures may be effective under the Japanese circumstances but not so much under different situations and circumstances. In addition, these informal measures may lack transparency and effectiveness and the JFTC should change its enforcement activities so as to take formal actions more vigorously, instead of informal measures,12 and it is not always appropriate for the JFTC to advise newly established competition authorities to employ informal measures. 3. Intra-ASEAN Cooperation on Competition Policy and Law ASEAN Economic Ministers established ASEAN Expert Group on Competition (AEGC) in 2007, as a forum for discussing and coordinating competition policy and law. At this moment AEGC is a regional forum for exchanging information, sharing 10

At the same time these informal measures may have demerits, mentioned in the next paragraph. The ACCC has provided on-the-job training in its office. See supra Table 3.4. 12 [5]. 11

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experiences, and drafting common goals and guidelines. AEGC promulgated various documents on competition policy and law but they appear to be drafted at first by outside consultants or practitioners under LTA programs extended by donors, such as GIZ, Au/NZ CLIP, and JAIF.13 In the future AEGC is expected to develop its roles as thinktank and research organ and further as enforcement authorities. For example, the following activities may be useful and necessary in the long run: sector surveys across borders, economic analysis on specific cases in response to requests from national competition authorities, and one-stop filing windows for cross-border mergers and acquisitions. ASEAN Economic Ministers agreed ASEAN Economic Community Blueprint 2025 and AEGC adopted ASEAN Competition Action Plan 2025 (2016–2025) based on AEC Blueprint 2025. ACAP 2025 contains 5 strategic goals: – Effective competition regimes are established in all ASEAN Member States (AMSs) – The capacities of competition-related agencies in AMSs are strengthened to effectively implement CPL – Regional cooperation arrangements on CPL in place – Fostering a competition-aware ASEAN region – Moving towards greater harmonization of competition policy and law in ASEAN Among these strategic goals, the first goal (all have effective competition laws) has already been attained in 2021, when Cambodia enacted its competition law. To implement the second and the fourth goals (capacity-building and competition culture), intra-ASEAN cooperation as well as LTA should be intensified, particularly to CLMV Countries. As to the third goal (regional cooperation arrangements), ASEAN and each AMS have concluded bilateral and regional free trade agreements (FTAs) or economic partnership agreements (EPAs) with various countries outside the Region, including Japan, which have competition chapter, under which signatory countries have obligations to establish and enforce effective competition law regime and to make cooperation, notification, and consultation to resolve competition cases.14 It is natural for ASEAN to establish intra-regional arrangement to cooperate and resolve regional competition cases and competition policy issues with cross-border dimension. Several competition authorities in advanced jurisdictions such as Singapore, 13

See ASEAN Regional Guidelines on Competition Policy (2010), Guidelines on Developing Core Competencies in Competition Policy and Law for ASEAN (2012), Handbook on Competition Policy and Law in ASEAN for Business (2013, 5th edition in 2020), Toolkit for Competition Advocacy in ASEAN (2016), ASEAN Self-Assessment Toolkit on Competition Enforcement and Advocacy (2017), Competition Compliance Toolkit for Businesses in ASEAN (2018), and Toolkit for Senior Competition Investigators (2019), ASEAN Competition Law and Policy Peer Review: Guidance Document (2020), Trainers’ Guide to Market Studies (2020), Competition Enforcement Strategy Toolkit for ASEAN Competition Agencies (2020), ASEAN Regional Guidelines on Competition Policy and Law 2020 (2021). 14 Competition chapters in EPAs concluded by Japan are compiled at the JFTC website at https:// www.jftc.go.jp/en/int_relations/agreements.html.

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Indonesia and the Philippine, have concluded Memorandums of Understanding (MoU) on enforcement cooperation of competition law with each other and with competition authorities outside the Region. Concerning the fifth goal (harmonization), roughly speaking, substantive provisions of competition laws in ASEAN are not so much different each other, and I feel that it is not necessary nor productive to forcibly harmonize them. Substantive provisions under competition laws usually provide much discretion to competition authorities, and during the process of promulgating specific rules and guidelines and applying them vis-à-vis specific cases, differences among competition laws or practices at competition authorities will become narrower and narrower by means of employing more reliable and reasonable interpretations and enforcement practices. As mentioned above, the JFTC has advantages in providing LTA based on its experiences during the early days of its history. As is the case with the JFTC, advanced jurisdictions of competition law in ASEAN, such as Singapore and Indonesia, are capable of and suitable for providing advices and assistance based on their experiences to less developed jurisdictions, such as CLMV Countries. It is also useful for less developed jurisdictions to share information and experiences among them. ASEAN has actually implemented these various activities to nurture competition culture and improve enforcement activities. Since 2011 annual ASEAN Competition Conference (ACC) has been hosted by competition authorities in turn, and Cambodia hosted 8th ACC in 2019.15 ACC has contributed to improve public awareness of and support to competition policy and law in host country. In October 2021, the first ASEAN Heads of Competition Agencies Meeting (online) was convened to discuss the progress and developments of regional cooperation on CLP in ASEAN. The second meeting was held online in March 2022. In 2019 intra-ASEAN cooperation on competition law has entered new phase, that is, enforcement phase. AEGC established ASEAN Competition Enforcers’ Network (ACEN), which is envisaged to serve as a platform to handle cross-border cases. At this moment it is not clear what kind of roles ACEN has in detecting and investigating anticompetitive conduct with cross-border dimension. It is necessary for ASEAN to have resources to engage in enforcement-related activities. International enforcement cooperation among competition authorities in developed jurisdictions started in merger regulation in early 1990s. Some ASEAN competition authorities have already exchanged information and analyses on Uber/Grab merger case16 and accumulation of such experiences may contribute to establishing effective cooperation mechanism among competition authorities in ASEAN. EU Merger Working Group, for example, adopted in November 2011 Best Practices on Cooperation of EU National Competition Authorities in Merger Review and the Best Practices provide cooperation framework on multi-jurisdictional merger cases.17 ASEAN should examine EU

15

Under the Covid-19 Pandemic, 9th ACC (online) was hosted by Vietnam in November 2021. [6]. See also [7]. 17 Under EU Merger Regulation, mergers involving companies active in several Member States and reaching certain turnover thresholds are examined at European level by the European Commission. 16

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Best Practices and other practices exercised in various regional arrangements18 and establish ASEAN best practices in merger review. Although ASEAN has no regional competition law nor supra-national competition authorities, activities of European Competition Network (ECN) may provide various suggestions to ACEN. ASEAN Heads of Competition Agencies Meeting, mentioned-above, has already discussed on information-sharing on cross-border merger cases. According to the press release, the AEGC Chairperson (Chair of KPPU) highlighted the importance of developing the Guidelines for Sharing Merger Cases and the subsequent setting-up of the ASEAN Information Portal on Merger Cases. OECD has a long history of peer review on competition law and policy of member countries as well as non-member countries. Vietnam competition law and policy were reviewed in 2017 and the report was published in 2018.19 Peer review is an acceptable and effective tool to improve competition regime under review in such voluntary-based organizations such as OECD and ASEAN. It is valuable opportunities for other ASEAN Member States to apply with OECD for peer-review of respective competition law regimes. OECD has also published its report on competition law enforcement trend in Asia–Pacific, including Brunei, Indonesia, Malaysia, the Philippine, Singapore, Thailand, and Vietnam.20

3.4 Challenges of ASEAN Competition Policy and Law Part IV. identifies unique features of ASEAN competition policy and law and examines challenges for ASEAN competition policy and law. 1. ASEAN Diversity: Advantages and Disadvantages ASEAN and each AMS must endeavor to improve effectiveness of respective competition law regimes and strengthen enforcement activities as well as to foster cooperation among competition authorities in the Region and with outside jurisdictions. During the process of such endeavors, ASEAN may face various challenges ahead. This Part explores challenges of ASEAN competition policy and law (CPL). Compared with, e.g., EU, ASEAN has diversity in various aspects: – Land area and population, and geographical conditions, such as islands country like Indonesia and the Philippines, and inland country like Laos. – Rich country like Brunei, advanced country like Singapore, and less developed countries like Cambodia, Laos, and Myanmar.

18

G. Denis Both, Models of Regional Cooperation in Competition Law and Policy from Around the World: Lessons for the ASEAN Region, in The Regionalisation of Competition Law and Policy within the ASEAN Economic Community, 165–209 (Burton Ong, ed., Cambridge University Press, 2018). 19 [8]. 20 [9].

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– Kingdom like Thailand, socialist country like Vietnam and Laos; commonlaw jurisdiction like Indonesia and Thailand, and Anglo-Saxon jurisdiction like Singapore, Malaysia, the Philippines, and Myanmar. – Advanced capitalism country like Singapore, and indigenous economy like Laos and Cambodia. These differences and diversities may hinder the development of common CPL in ASEAN. From a viewpoint of developing harmonized CPL in the Region, it is desirable and even necessary to assist less developed Member Economies (that is, CLMV Countries) to catch up with advanced Member Economies. At the same time, we must bear in mind that competition law has 2 aspects: One is “universalism” and the other is “localism.” Universalism requests respective competition laws universal and harmonized in order to be effective and transparent, but localism requests them local and indigenous in order to effectively address local competitive concerns. Diversity is not necessarily disadvantageous to the development of local competition laws in AMSs, and external pressures on national competition laws to request harmonization and uniform enforcement practices may discourage healthy developments of respective competition laws.21 2. CLMV: Catching Up with ASEAN 6 As is indicated in Table 3.4, ASEAN has provided CLMV Countries various programs to disseminate competition policy and law and to train enforcement officials. These efforts have been funded by various donors, particularly Australia. ACCC has been very active in organizing these programs and accepting internship at its office. These collective programs may be effective and efficient, but at the same time may not be responsive to local conditions and specific needs. There are differences and diversities among CLMV Countries, and legal technical assistance (LTA) on competition policy and law should be tailor-made, taking account of indigeneity. In this sense countryspecific LTA is necessary. For this purpose, intra-ASEAN cooperation should be encouraged. 3. Governmental and Private-Mixed Restraints of Competition Traditional competition law and policy divide their roles in the following manner: On the one hand, governmental restraints of competition, such as entry restrictions, import quota and price control shall be addressed by competition policy. On the other hand, private restraints of competition, such as cartels, abuse of dominance and anticompetitive mergers, shall be addressed by competition law. Restraints of competition by businesses in ASEAN, however, are closely related to government and other public organizations. There exist many state-owned enterprises (SOE) and remain heavy regulations in many industries. There flourishes cronyism 21

Makoto Kurita, Reevaluating Competition Law Assistance: Not Universalism versus Localism, But Universalism and Localism, presented at Part 2: Changing Law and Economy in Contemporary Asia, Legal Reform in ASEAN Emerging Economies–A Historical Perspective and the Challenges for the Future, Center for Social System Innovation, Kobe University, October, 27, 2017 (unpublished manuscript, on file with the author).

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and nepotism and government-related business groups dominate various local markets. Traditional competition law cannot adequately address such government and private-mixed restraints of competition.22 EU competition law exceptionally employ unified approach in the following manner: Firstly, EU competition law has general exemption system for agreements based on public policy reasons (Article 101(3) of TFEU). Secondly, EU competition law has special provision to address public undertakings and undertakings with privileges and exclusive rights (Article 106 of TFEU). Thirdly, EU competition law also regulates state aid (Article 107 of TFEU). These provisions are essential for creating and maintaining European single market and they are enforced by the European Commission uniformly. Orthodox competition law is not enough to maintain effective competition in ASEAN, and additional endeavors may be necessary. 4. ASEAN Way versus Legalization Decision-making in ASEAN is called as “ASEAN Way”,23 emphasizing on consultation, coordination, compromise, and consensus among AMSs. ASEAN Way has been and continues to be employed during the process of developing competition policy and law, by means of gradual and phased approach, soft law approach, and intra-ASEAN cooperation approach. AEGC produced various policy documents, such as action plan and guidelines, but these are not legally-binding and dependent on voluntary efforts by AMSs to implement and accomplish. On the other hand, the donors to provide LTA appear to be more legally-oriented and tend to employ legal-transplant and model law approach. Typical example is Cambodia Law on Competition, which has refined substantive provisions, compared to competition laws in other CLMV Countries. Donors also appear to employ collective approach to organize and implement LTA programs and may plan to assist in establishing common and harmonized competition policy and law around ASEAN Region. AEGC prepared various documents and they are informative and useful for competition authorities in AMSs. These documents, however, are very sophisticated and may be too advanced for newly established competition authorities and their officials to employ and implement.24 5. Possibility of Establishing Common Competition Law and Competition Authorities At this moment ASEAN has common and unified policy in very limited areas and ASEAN Secretariat cannot be characterized as executive organ like the European Commission of EU. Contrary to EU, where common competition law has been 22

See e.g., [10]. See e.g., [11]. 24 This problem has been pointed out also inside the ICN (International Competition Network), whose activities have been led by experts from major competition authorities and private practitioners in developed jurisdictions. 23

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established and enforced by the European Commission, ASEAN has no common competition law nor unified competition authorities. To say more accurately, ASEAN has no plan to establish common competition law at this moment. That is the reflection of ASEAN’s reality, and it is not practical for ASEAN to envisage common competition law and supra-national competition authorities for the time being.25 ASEAN Member States (AMSs), however, share the common problems in the field of competition policy and law and ASEAN has its own roles and duties to address them. First of all, ASEAN has to make best efforts to enhance institutional capabilities and increase resources of competition authorities in AMSs, particularly in CLMV Countries. ASEAN also has to promote intra-ASEAN enforcement cooperation, by means of regional cooperation arrangement. In 2018, the AMSs endorsed the ASEAN Regional Cooperation Framework (ARCF) which sets out high level principles for cooperation between the competition authorities, but the ARCF is non-binding. AMSs have already concluded FTAs/EPAs with various trading partners, which include competition chapter. For example, CPTPP Agreement (Brunei, Malaysia, Singapore, and Vietnam are signatories) and RCEP Agreement (ASEAN + Australia, New Zealand, China, Korea, and Japan) include competition chapter. I wonder why ASEAN has not yet set up ASEAN-wide cooperation arrangement, although AMSs have already concluded and implemented similar cooperation arrangements with other trading partners, including Japan. Even though common competition law in ASEAN is not practical at this moment, limited common procedural frameworks may be possible and would be effective. One is case handling procedures for cross-border competition cases, particularly hard-core cartels with international dimensions. The other is to devise one-stop filing window at ASEAN Secretariat for cross-border mergers cases. While filing requirements under competition laws in AMSs may be different, minimum filing system may be convenient for both competition authorities and merging parties around the world. Respective competition authorities may require the merging parties which filed with the ASEAN window, to submit additional information on the merger.

3.5 Important Issues on ASEAN Competition Policy and Law Part V. presents important issues on ASEAN competition policy and law for the purpose of harmonizing competition policy and law in ASEAN, particularly paying attention to CLMV Countries. 25

Eleanor M. Fox, Can ASEAN Achieve a Single Market with National-Only Competition Law? in Ong, ed., supra note 18, 140–164, and Josef Drexl, The Transplantability of the EU’s Competition Law Framework into the ASEAN Region, in Ong, ed., supra note 18, 210–235.

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1. Substantive Provisions of Competition Laws among CLMV Countries, focusing on Unfair Competition Practices First of all, differences in substantive provisions among competition laws in ASEAN and particularly in CLMV Countries should be examined.26 Importance of unfair competition regulation under Asian competition laws has been emphasized. Among ASEAN competition laws, however, 5 jurisdictions (Thailand, Indonesia, Vietnam, Myanmar, and Laos) have unfair competition provisions in their competition laws, but other 5 jurisdictions, including Cambodia, do not have. What makes the difference? Unfair competition regulation under competition laws may vary among jurisdictions. In some jurisdictions, unfair competition law, different from competition law and usually enforced by injured private parties, addresses unfair competition practices, although it is enforced by administrative agencies in some jurisdictions like China. In other jurisdictions, consumer protection law addresses some types of unfair competition practices. In this sense competition law, unfair competition law, and consumer protection law share the role to regulate unfair competition practices, although enforcement system of respective laws may differ. It is quite interesting why only Cambodia Law on Competition does not have unfair competition regulation among CLMV Countries. Vietnamese Competition and Consumer Authority (VCCA) have investigated more unfair competition cases rather than competition cases. What kind of unfair competition practices have been investigated by the VCCA? Why is unfair competition regulation important in Vietnam? What kind of unfair competition practices are prohibited under Myanmar and Laos competition laws? How do you expect the role of unfair competition regulation under Myanmar and Laos competition laws? Which areas of laws do address unfair competition practices in Cambodia?27 How do we evaluate the differences in unfair competition regulation among 10 jurisdictions? Is it advisable for 5 jurisdictions with no unfair competition provision under competition laws to add relevant provisions to address unfair competition practices? Or is there no need to add the provision to competition laws if unfair competition practices are effectively addressed under unfair competition law or consumer protection law? I believe that it would be desirable for Lao and Myanmar Competition Commissions to address unfair competition cases as a priority in the initial phase. Unfair competition cases are usually easy to detect and prove and it is a good training for new staff to investigate unfair competition cases in preparation for competition cases which need more resources and expertise. 26

See, e.g., [12]. The comprehensive report on ASEAN competition laws cited in supra note 26, does not examine these issues on unfair competition practices. This omission coincides with the fact that the author of the report, Ms. Rachel Burgess, lecturer in competition and consumer law at the University of Southern Queensland, is a scholar from Australia.

27

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2. Institutions of Competition Authorities in CLMV Countries: Lack of Independence All competition authorities (CA) in ASEAN are commission-type but institutional structure and functions of these commissions are different. In recent years international comparative research and analysis on the design of competition law institutions have been intensively conducted28 and based on these results institutional structure of ASEAN competition laws has been examined.29 According to one research,30 there are three types of institutional models, which is as follows: – The bifurcated judicial model, under which investigative and enforcement authorities are separated and formal complaints are filed with the court. The typical example of this model is the United States Department of Justice Antitrust Division. – The bifurcated agency model, under which investigative and enforcement functions are separated form adjudicative function and investigative and enforcement agencies bring competition cases with specialized adjudicative tribunals. United Kingdom, Canada and Australia employ this model, and Singapore in ASEAN does. – The integrated agency model, under which a single agency incorporates all the functions of investigation, enforcement, and adjudication. The United States Federal Trade Commission and the European Commission are typical examples.31 Most of the CAs in ASEAN employ this model.32 Competition commissions in ASEAN are attached to a line ministry in charge of trade and commerce, except for those of Indonesia and the Philippine, which are directly attached to the Office of the President. Practically speaking, the composition of commissions is much more important from a viewpoint of securing the independence of law enforcement activities. Most of the chairperson of the Commissions in ASEAN are the Minister or Vice-Minister in charge of trade or commerce. Furthermore, many members of the Commissions are ex-officio senior officials of various ministries and agencies and in some jurisdictions representatives from business circle. KPPU, Philippine Competition Commission (PCC), and CCCS are exceptional and commissioners with expertise on law, economics, or management are appointed. The composition of the Commissions appears to be relevant to the enforcement records of respective Commissions, and further examination has to be explored. 28

See, e.g., [13]; [14]. See [15]. 30 Id, in Chapter 5. See also [16]. 31 There have been controversies on due process in competition proceedings before the European Commission and the Court. More extensive examination might be required. See, e.g., [17]. 32 ASEAN Guidelines on Developing Core Competencies, supra note 13, at 32–33, explains that “In principle, this model seems to be suitable for new CAs, as it is relatively easy to set up and develops an adequate level of specialisation and expertise within a reasonable time-frame. In practice, this model has been chosen by most of the AMSs that have established a competition enforcement system.”. 29

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3. Developmental Path after the Promulgations of Competition Laws in ASEAN Among jurisdictions which enacted competition laws at around the same time, developmental stages of competition law enforcement may differ. For example, both Thailand and Indonesia promulgated respective competition laws just after the Asian Financial Crisis in late 1990s, but post-promulgation developments of competition law enforcement in two countries significantly differ. We have witnessed the developments of competition law enforcement by KPPU in Indonesia. What are important factors to boost active enforcement activities by KPPU? What makes the difference between Indonesia and Thailand?33 Thailand Trade Competition Law was amended recently and independence of the Trade Competition Commission of Thailand (TCCT) appears to be more firmly secured than before. We might expect changes in future enforcement activities by the TCCT.34 Vietnam is the first country to enact competition law among CLMV Countries, and Vietnamese experiences in enforcing competition law may provide lessons for other 3 countries. The promulgation of competition law is one thing and the enforcement of the competition law is totally different. ASEAN may obtain some lessons by examining the history of initial stage of the Antimonopoly Act enforcement in Japan in 1950s and 1960s. 4. Regional Cooperation on Competition Law Enforcement in ASEAN ASEAN (AEGC) has been very active in preparing guidelines and organizing seminars and workshops to improve institutional capabilities of competition authorities in AMSs. From now on ASEAN is expected to move on to the next stage of regional cooperation, that is, enforcement cooperation between or among competition authorities. At this moment, AMSs only endorsed non-binding ASEAN Regional Cooperation Framework (ARCF) and there are only a few cooperation arrangements among ASEAN competition authorities,35 for the purpose of notification, coordination and consultation concerning cross-border competition cases. Recently ASEAN Competition Enforcers’ Network (ACEN) was established. Some competition authorities, such as Competition and Consumer Commission of Singapore (CCCS), have already taken measures against international cartel cases, and Uber/Grab merger case has been investigated by various competition authorities in AMSs. ASEAN needs a step forward to strengthen regional enforcement cooperation to address cross-border competition cases.36 33

See, e.g., [18]. The JFTC’s dispatch of its official as a resident adviser (2 years from November 2021) to the TCCT in response to Thai Government’s request may be a bright sign to reinvigorate competition law enforcement. 35 Memorandum of Understanding (MoU) between CCCS and KPPU (signed August 30, 2018) and MoU between CCCS and Philippine Competition Commission (signed November 29,2021). 36 [19]. 34

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5. Possibility of Regional Competition Law and Unified Competition Authorities ASEAN has been making efforts to disseminate competition culture and establish effective competition law regime in all AMSs. At this moment ASEAN has no plan to establish common competition law and unified competition authorities. It might be necessary in the future, however, to establish regional competition law for the purpose of creating and maintaining a truly single market across ASEAN. Even if ASEAN could establish intra-ASEAN cooperation framework, cross-border and regional or global restraints of competition might not be adequately addressed by national competition laws and national competition authorities. In this sense it is an important subject to examine whether EU competition law regime should be a model for ASEAN in the long run.37 Australia and New Zealand concluded the Closer Economic Partnership Agreement, and under the Agreement ACCC and NZ Commerce Commission have much closer relationship in competition law enforcement, such as collection of evidences, mutual appointment of commissioners, recognition of investigation results, no application of anti-dumping law. ASEAN has maintained close cooperative relationship with ACCC and NZCC, and AU/NZ cooperation mechanism may be a good model for ASEAN for future cooperation in the Region. 6. Legal Technical Assistance on Competition Policy and Law to ASEAN As I said, many donors have provided legal technical assistance (LTA) on competition policy and law (CPL) to ASEAN for more than 20 years and these efforts have been useful for the developments of CPL in ASEAN. Donors may have implemented evaluations of each LTA program, but holistic and overall evaluations of LTA on CPL by each donor and across donors have been rarely implemented, as far as I know. Based on the evaluations for the last 20 years, we have to examine what are expected in LTA on CPL. I believe that such endeavors also contribute to the reevaluations of our own competition law and policy. There are various types of LTA on CPL, such as seminar/workshop and conference, internship, and long-term adviser; country-specific and collective training; cooperation during legislative stage, initial stage (preparing guidelines and internal rules), and enforcement stage (investigative skills and case management). It is useful or even necessary to examine what types of LTA be effective for ASEAN or for respective recipient countries, particularly for CLMV Countries.

37

See Fox, supra note 25, and Drexl, supra note 25.

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3.6 Concluding Remarks In concluding this essay, two points are emphasized: one is the role of academics and the other is the legal technical assistance unique to Japan. 1. Contributions by Academics Many practitioners, such as enforcement officials at competition authorities and private bar in donor countries, have engaged in legal technical assistance (LTA) on competition policy and law (CPL). Their practical contributions are valuable and effective for improving investigation skills and case handling. Practitioners who are familiar with their own competition laws and current practices, may adhere to them. On the other hand, academics who are relatively free from specific competition law and its practices, may contribute to legal technical assistance by means of providing analysis and advices based on comparative and historical perspectives. Academic research and contributions based thereon have their own merits. 2. Contributions unique to Japan Legal technical assistance (LTA) on competition policy and law (CPL) is not an easy task for Japan (for the JFTC, Japanese practitioners, and Japanese scholars). It is indispensable for Japan to extend LTA programs unique to Japan. LTA programs “unique to Japan” does not necessarily mean those on the AMA and the JFTC’s practices. Two types of programs might be useful and effective. One is a program on historical developments of the AMA and competition policy in Japan, particularly during the high economic growth period in 1950s and 1960s. Such a program may include relationship with industrial policy and exemption cartel system such as export cartel. The other is a program on CPL from a viewpoint of fostering smalland-medium-sized enterprises. Such a program may cover cooperative system and regulation of sub-contracting.

References 1. ASEAN Secretariat. (December 2012). Guidelines on Developing Core Competencies in Competition Policy and Law for ASEAN. 2. Hadley, E. M. (1970). Antitrust in Japan. Princeton University Press. 3. Van Uytsel, S., Hayashi, S., & Haley, J. O. (Eds.). (2020). Research handbook on Asian competition law. Edward Elgar. 4. Ng, W. (2022). From Diversity to Convergence: The Role of Intermediaries in Developing Competition Laws in ASEAN. Journal of Antitrust Enforcement, 10(1), 162–193. 5. Kurita, M. (2020). Procedural Fairness and Enforcement System under the Antimonopoly Act of Japan. Hakuoh Hougaku, 28(1), 15–31. 6. Ramaiah, A. K., Sirait, N. N., & Smith, N. N. (2019). Competition in Digital Economy: The State of Merger Control on Consumer Transportation in ASEAN. International Journal of Modern Trends in Business Research (IJMTBR), 2(7), 66–82.

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7. Healey, D. (2020). Grab-Uber merger in Southeast Asia: The Singapore approach. Journal of Antitrust Enforcement, 8(3), 638–648. 8. OECD. (2018). OECD peer review of competition law and policy: Viet Nam. 9. OECD/OECD-Korea Policy Centre. (December 2021). OECD Asia-Pacific competition law enforcement trends. 10. Dowdle, M. W., Gillespie, J., & Maher, I. (Eds.) (2013). Asian capitalism and the regulation of competition: Towards a regulatory geography of global competition law. Cambridge University Press. 11. Desierto, D. A., & Cohen, D. (Eds.). (2021). ASEAN law and regional integration: Governance and the rule of law in Southeast Asia’s single market. Routledge. 12. ASEAN. (April 2020). Commonalities and differences across competition legislation in ASEAN and areas feasible for regional convergence: A study and strategy paper prepared for the AEGC by Rachel Burgess, Jakarta. ASEAN Secretariat. 13. Crane, D. A. (2011). The institutional structure of antitrust enforcement. Oxford University Press. 14. Fox, E. M., & Trebilcock, M. J. (Eds.). (2013). The design of competition law institutions: Global norms. Oxford University Press. 15. Porananond, P. (2018). Competition law in the ASEAN countries: Regional law and national systems. Wolters Kluwer. 16. ASEAN Secretariat. (December 2012). ASEAN guidelines on developing core competencies in competition policy and law for ASEAN (pp. 31–33). 17. Teleki, C. (2021). Due process and fair trial in EU competition law: The impact of article 6 of the European convention on human rights. Brill/Nijhoff. 18. Ian McEwin, R. (2014). Designing competition law under financial crisis—Indonesia and Thailand compared. Competition Policy International, 10(1). 19. Siadari, D. L. Y., & Arai, K. (2018). International enforcement of ASEAN competition law. Journal of European Competition Law & Practices, 9(5), 328–335.

Chapter 4

Characteristics of Labour Disputes Resolution in the Four ASEAN Least Developed Countries Kozo Kagawa

Abstract This paper aims to analyse the characteristics of labour disputes resolution in Vietnam, Laos, Cambodia and Myanmar. The first stage of labour dispute resolution is to discuss disputes through collective bargaining. If collective bargaining fails to resolve disputes, one option is to resolve them through grievance procedure. The next option is labour disputes resolution procedure conducted by public institutions. Labour disputes are divided into interest disputes and right disputes or into collective disputes and individual disputes. Right disputes are handled by an ordinary court or a special court, where labour and management representatives and a judge participate to resolve disputes in a simplified and expedited procedure. Interest disputes are resolved through special administrative institutions because they are not suitable for resolution in a court. These administrative institutions are situated as alternative dispute resolution. One type uses only government officials to handle disputes, while another type uses a committee comprised of members from the ministry, trade unions and employer associations. Two means are established: mediation and arbitration. Mediation involves hearing the argument of both parties, drawing up a proposal and recommendation to resolve the disputes. It is up to the parties whether they accept or reject the proposal. On the other hand, under arbitration process the arguments of both parties are heard and an arbitration award is issued. This award is, in general, binding on both parties. But an arbitration award is not binding in some Asian countries.

4.1 Introduction This report aims to analyse the characteristics of labour disputes resolution in the four ASEAN least developed countries, namely Vietnam, Laos, Cambodia and Myanmar. In any country, labour laws set out procedures for resolving labour disputes. Prolonged labour disputes hinder the productivity of enterprises and have a negative impact on sustainable economic growth. Disputes must therefore be dealt K. Kagawa (B) Kobe University, Kobe, Japan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_4

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with as quickly as possible. It is therefore necessary to consider what labour dispute procedures are defined in labour laws, their characteristics and how they are used in practice. Furthermore, it is also necessary to consider whether there are other mechanisms for handling labour disputes other than the procedures defined in labour laws. It is inevitable that grievances and conflicts of interest will arise between labour and management. The first stage of dealing with a dispute is to discuss labour conditions between the parties. This is collective bargaining or negotiations between an employer or group of employers and a trade union. If a dispute can be resolved through collective bargaining, the costs in terms of time and money required to deal with the dispute can be saved. Furthermore, there may be cases where a grievance procedure has been established in advance and is utilised. In this case also, the law may require the establishment of a grievance handling body, or a grievance handling procedure may be established by prior agreement between the parties (in a collective agreement). In the latter case, an arbitrator is selected in advance and the decision is left to the arbitrator when a grievance is arises, whose decision will be binding on the parties and can bring the dispute to an end. If collective bargaining fails to reach a resolution, the trade union may resort to strikes or other disruptive acts to put pressure on the employer and give their assertions the upper hand. In addition, the employer may resist this by imposing a lockout. In this situation, the parties will negotiate and try to resolve the dispute. If collective bargaining fails to resolve the issue, one more option is a labour dispute resolution procedure conducted by a public institution. There are several types of such procedures. Labour disputes are often divided into interest disputes and rights disputes, or into collective disputes and individual disputes, and the procedures for dealing with these are often different. Rights disputes, whether collective or individual disputes, are handled by a court as they involve the determination of rights. The court may deal with it in an ordinary civil court or in a special court such as a labour court, where labour and management representatives and a judge participate to resolve the matter in a simplified and expedited procedure. In contrast, interest disputes are matters to be settled through discussion, so they are not suitable for resolution in court. Therefore, special administrative institutions are often established, which are positioned as alternative dispute resolution. Some such institutions use only government officials to handle disputes, while others use a committee comprised of members from the ministry, unions and employer associations. In such cases, two means are established: mediation and arbitration (conciliation is also used in Japan). Mediation involves hearing the arguments of both parties, drawing up a proposal and recommending that it be accepted to resolve the dispute. It is up to the parties whether they accept or reject the proposal; if it is rejected, the mediation is unsuccessful. On the other hand, in arbitration process the arguments of both parties are heard and an arbitration award is issued, which resolves the dispute because the arbitration award is binding on both parties. However, arbitration award is not binding in some Asian countries, which makes it practically the same as mediation and leaves the question as to why it is called arbitration.

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Furthermore, special labour dispute resolution procedures are sometimes defined for businesses that are important for maintaining the country’s economy and daily life, as the prolonging of such labour disputes may cause chaos. Systems that impose compulsory arbitration in the case of public utilities are an example of this. It is necessary to analyse not only how the ASEAN least developed countries are using the labour dispute resolution procedures described above, but also whether they are using any other frameworks, for example police, public security officers or NGOs.

4.2 Vietnam Vietnam’s current statute is the Labour Code 2019, which defines procedures for handling labour disputes. Its contents are summarised below. Vietnam’s law defines dispute resolution procedures by classifying labour disputes as individual or collective disputes, and further dividing collective disputes into rights disputes and interest disputes. One procedure is defined for individual disputes, without division into rights disputes or interest disputes, and handles disputes in three stages via labour mediators, Labour Arbitration Councils and courts. However, disciplinary dismissals, unilateral termination of labour contracts, compensation claims resulting from the termination of labour contracts, domestic workers, social insurance, health insurance, unemployment insurance, workplace accident insurance, compensation claims between workers and employers and problems between temporary workers and employers are dealt with directly by courts. Excluding some exceptions, other disputes must be mediated by a labour mediator under a mediation-first principle. The labour mediator must conclude the mediation within five working days of the dispute being referred. If this is not possible, a petition is filed with the Labour Arbitration Council. An arbitration panel is appointed within seven working days from the date of the petition and delivers an arbitration award within 30 days from the date of appointment. If a party does not comply with the arbitration award or if the arbitration award is not made within 30 days, the dispute may be submitted to a court for resolution. Therefore, the arbitration award is not binding on the parties. Although the expression ‘arbitration’ is used, it is treated no differently from mediation. It is therefore ultimately left to the courts to handle disputes. The procedure for resolving collective disputes about rights are as follows. First, the dispute is referred to mediation by a labour mediator. The mediation is to be completed within five working days and, if it is unsuccessful, the matter is referred to the Labour Arbitration Council or a court for resolution. The Labour Arbitration Council appoints a panel within seven working days from the date of the petition and issues an arbitration award within 30 days. A petition may be filed in court if a panel is not appointed within seven working days, if the arbitration award is not issued within 30 days, or if a party does not comply with the arbitration award.

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However, disputes concerning the interpretation and implementation of labour legislation and the protection of organisations that represent workers are transferred to the competent authorities for handling. The procedure for resolving collective interest disputes is as follows. First, collective bargaining takes place between the organisation representing the workers and the employer. If either party requests collective bargaining, the place, date and time of the negotiations are decided within seven working days. Collective bargaining is to be held within 30 days from the date of the request and concluded within 90 days. If collective bargaining is refused or no agreement is reached within the prescribed period, it means that a labour dispute has arisen and must be referred to mediation by a labour mediator. If mediation is successful, the minutes of the proceedings are signed by both parties and the mediator and recognised as having the same effect as a collective agreement. If the mediation is not concluded within five days of its commencement, if it is unsuccessful, or if an agreement is reached but a party fails to implement it, a petition for resolution may be submitted to the Labour Arbitration Council. The Labour Arbitration Council appoints a panel within seven working days of the filing of the petition and an arbitration award is issued within 30 days of the date of appointment. However, the arbitration award cannot bind the parties. Therefore, a dispute cannot be concluded by the issue of an arbitration award; although it is called arbitration, in substance it does differ from mediation. If a Labour Arbitration Council panel is not appointed within seven working days, if an arbitration award is not issued within 30 days, or if a party does not comply with the arbitration award, the organization representing the workers may initiate proceedings to conduct a strike. To summarize the distinctive points of the above procedures, the first point is that a short period of time is set during which mediation and arbitration proceedings are to be conducted. It is assumed that the reason for the short period is an intent to handle disputes promptly. However, it is doubtful whether mediation and arbitration are possible in this short period of time, and it is thought that they take longer in practice. The second point is that, as mentioned above, arbitration proceedings have no substantive differences from mediation. The word arbitration is used in a different sense from that used in Japan, but it is not clear why this is the case. The third point is that there are issues regarding the extent to which trade unions respond to the grievances and complaints of their members. This is because unions affiliated to the Vietnam General Confederation of Labour are often on the side of the company. Union membership includes management-level employees other than the top executives of the company, and union officials are often elected from the management-level members. In addition, companies provide financial support to unions, with companies giving twice the total amount of union dues. This financial support makes it easier for the unions to be controlled by the companies, and they can even be called company-dominated unions. This means the unions cannot develop strategies to confront the companies. Therefore, there is a strong trend of union officials not addressing members’ grievances and complaints. As a result, union activities become centred on recreation and welfare activities for members,

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and avoid the most important issues concerning wages and dismissals. In order to break this deadlock, some union members have been forced to ignore the wishes of union officials, conduct protests against the employer and carry out wildcat strikes in defiance of the procedures. The fourth point is that there are no examples where strikes have been conducted under the procedures described above. Strikes have been carried out by some workers forming a strike group, which are not strikes based on a resolution passed by the union. Therefore, the strikes are considered to be doubly illegal, as they are a wildcat strike and at the same time not following the procedure. However, criminal penalties based on this reason have never been imposed on strike leaders or participants. This is a curious aspect of socialist countries. Socialist countries are countries where the workers are the central figures, so the police and public prosecutors’ offices believe that the workers cannot be punished since they are striking due to the unavoidable reason of hardship in their lives; therefore, the situation is handled in a compassionate manner from the perspective of being on the side of the workers in a socialist country. This was confirmed with Vietnam’s Prosecutor General, who was attending a symposium organised by the Ministry of Justice, Legal Training and Research Institute. The fifth point is whether the police (public security) ever intervene in the handling of labour disputes? As far as the procedure is concerned, there is no room for the police to intervene. However, there have been cases of wildcat strikes, and the police are expected to intervene if they consider that there is a risk of causing unrest in the area. In China, another socialist market economy, the police may intervene in labour disputes and arrest the disputing parties for disturbing public order. It is thought to be the same in Vietnam, as labour disputes tend to be judged as acts of disturbing public order or causing social unrest. The sixth point is the problem arising from allowing independent unions to be organised separately from the basic trade unions affiliated to the Vietnam General Confederation of Labour, in order for Vietnam to comply with the ILO’s Freedom of Association Convention. Compliance with core labour standards is a condition for ratifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) and the Free Trade Agreement between the EU and Vietnam. This has resulted in the need to ratify ILO Convention Numbers 87 and 98, which provide for freedom of association. They require that the freedom of workers to form or join unions of their own choice is ensured. In Vietnam, however, only basic trade unions affiliated to the Vietnam General Confederation of Labour are recognised. The Vietnam General Confederation of Labour is a powerful member of the Fatherland Front and an important organisation for supporting the work of the Communist Party of Vietnam, and is also positioned as a quasi-state organ as it is authorised to submit bills to the National Assembly. Allowing the existence of independent unions that do not join it could jeopardise the socialist system. Therefore, the act of forming or attempting to form an independent union had traditionally been considered a political offence as an act that endangers the socialist system. Independent union is now permitted under the revised Labour Code. This could lead to a competitive relationship between the basic trade unions affiliated with the Vietnam General

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Confederation of Labour and independent unions. There is a risk that there could be a situation where several unions coexist in an enterprise. Would the basic trade unions affiliated to the Vietnam General Confederation of Labour accept this? Will the organization of independent unions be obstructed? Therefore, independent unions may be organised in enterprises where there is no basic trade union affiliated to the Vietnam General Confederation of Labour. However, in workplaces where there is no basic trade union, the upper-level union in the relevant district is supposed to directly represent the workers of such workplaces. Therefore, the Vietnam General Confederation of Labour would probably also quash that possibility. The author had the opportunity to listen to a report by Vietnam’s delegation at the ASEAN economic legislation study group on 2 August 2021, but their report was based on the presumption that there was no possibility of independent unions being organised. Is there really zero possibility of independent unions being organised at all? Perhaps there is a possibility of independent unions being organised under the guidance of human rights lawyers and activists at workplaces where basic trade unions affiliated to the Vietnam General Confederation of Labour are not organised. Future developments regarding this are a point of interest. Although it is not clear what the estimated organisation rate of basic trade unions is, it is thought that the organisation rate is high in state-owned enterprises, but low in private and foreignowned enterprises. It will therefore be necessary to pay attention to labour unions in private and foreign-owned enterprises. The seventh point is how cases filed with the courts are handled. In Vietnam, judgments are gradually being made public. This is a change from the situation where no judgments were published. In 2004, while the author was working at the Japanese Embassy in Vietnam, two volumes of judgments were published with the support of USAID. They contained 72 supervisory court decisions, including some labour-related decisions. One of the cases has been reported on in Japanese (Saito, Yoshihisa, “Foreign Judgment Report No. 87, Redundancy of a Manager of a Restaurant Directly Operated by a Joint Venture Company”, Labour Cases, No 850, pp. 96–97). Furthermore, a supervisory court model judgment for cases of dismissal on the grounds of corporate restructuring was included in the Vietnam-Japan Joint Study on the Development of Precedents in Vietnam (pp. 170–175, Japanese edition, 2008), which was a product of Japan’s legal development support. A judicial precedents system was launched in Vietnam in December 2015 and work is being performed to select precedents for the resolution of similar cases (Sakai, Naoki and Sakiko Kamata, “Status and Outlook of Vietnam’s Precedent System”, ICD NEWS No. 73, pp. 29–40, 2017). As of May 2021, 43 civil, criminal and other judgments and decisions have been selected and published as precedents (Kono, Ryuzo, “Assistance to Vietnam”, ICD NEWS No. 87, p. 30, 2021). Among these, one labour case is included (Edagawa, Mitsushi and Kouta Kuroki, “Memorandum on Vietnamese Precedents (1)”, ICD NEWS No. 88, p. 11). Furthermore, the Supreme People’s Court launched a dedicated website for precedents in October 2016, where it is said that “news regarding precedents, events, judgments and decisions that are candidates to become precedents, draft precedents and published precedents” are posted (Edagawa and Kuroki, ibid, p. 11).

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The author has heard that training for judges on how to write judgments has been conducted as one of the aspects of Japan’s legal technical assistance, and that judgments that can stand up to public scrutiny are now being written. There were reports that some judgments contained a conclusion but did not state which laws or regulations were applied to reach the conclusion, and it is hoped that this is being improved. In labour civil cases, for example in dismissal cases, it is often unclear how proceedings are conducted, how the Civil Procedure Code is utilised and whether settlement procedures are used.

4.3 Laos In Laos, labour dispute resolution procedures are defined in the 2013 amendments to the Labour Law and the Prime Minister’s Decree on Labour Dispute Resolution that came into force on 29 March 2018. The following is a summary of the content of those procedures. First, there is resolution via negotiation between the parties. The issue will be resolved if an agreement is reached within 15 days of a proposed negotiation between the employer and the worker or group of workers. Where a trade union has been formed, the issue will be resolved if collective bargaining between the employer and the trade union leads to the conclusion of a collective agreement within 30 days and the collective agreement is registered. If this does not resolve the issue, mediation by an administrative institution will take place. As will be explained below, this is divided into four levels: village level, district and city level, province and municipal level, and the central level. At the village level, a village labour and social welfare officer attempts to mediate disputes involving unregistered workers who work outside of a labour unit, domestic workers, contract workers and freelancers. If the mediation is unsuccessful, a dispute investigation report is sent to the district level. At the district level, the district labour and social welfare office attempts to mediate cases coming up from the village level and disputes involving labour units of less than 10 workers. If it is unsuccessful, a dispute investigation report is sent to the province or municipal level, and the dispute may also be brought before the Lao People’s Court. The Labour Dispute Resolution Committee under the province or municipal-level Labour and Social Welfare Bureau attempts to mediate cases coming up from the district level and disputes involving labour units of between 10 and 99 workers. If it is unsuccessful, a dispute investigation report is sent to the Ministry of Labour and Social Welfare, or the case may be brought before the Lao People’s Court. The Labour Dispute Resolution Committee under the Ministry of Labour and Social Welfare attempts to mediate cases that come up from the province and municipal level and disputes involving labour units of more than 100 workers. If it is unsuccessful, the case may be brought before the Lao People’s Court. Disputes are divided into interest disputes and rights disputes. In the case of interest disputes, tripartite (i.e., ministry, union and employer association members)

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Labour Dispute Resolution Committees are established at the central level and in provinces and municipalities, and the worker and employer sides must each pay 10,000 kip to refer a dispute to the Committee. Workers must continue to provide labour during the mediation proceedings. However, as an exception, if the employer is not complying with occupational safety standards, workers can refuse to provide labour and must inform the Labour Dispute Resolution Committee of this. During the mediation procedure, the employer cannot lock workers out of the workplace without the permission of the Labour Dispute Resolution Committee. The employer is obliged to pay wages to workers who are locked out without permission and thereby unable to provide labour. If a worker interferes with the employer’s business during the mediation proceedings, the employer may restrict or prohibit the worker from approaching the workplace after consultation with the trade union or workers’ representatives. This must be reported to the Labour Dispute Resolution Committee. In the case of rights disputes, a suit may be filed in the Lao People’s Court. Claims for less than 300 million kip are heard in the district people’s court and claims for 300 million kip or more are heard in the provincial or municipal people’s court. Disputes relating to labour contracts, termination payments, workplace accident compensation and wages are dealt with (Civil Procedure Code, Article 34). Court hearings must commence within 20 days and conclude within nine months (Civil Procedure Code, Article 30). The court’s decision becomes enforceable within 15 days after it is made and is a final resolution. According to the Ministry of Labour and Social Welfare, there were 254 labour dispute cases in the five years of 2009–2014, of which 55% were resolved through mediation, 25% were taken up, 19% were referred to a court and the remainder were unresolved. This shows that the labour dispute resolution procedures are being used. In Laos, one aspect of Japan’s legal technical assistance was to support the preparation of a labour law handbook. Until then, there had been no proactive activities to disseminate the labour law. Workers were left lacking in knowledge of labour law, so a labour law handbook was produced in order to make some small improvement to the situation. The commentary on the 2013 Labour Law was completed and published in April 2018. Activities to disseminate the handbook are currently being conducted and discussion groups are being conducted with practitioners in various places to ensure that the labour law is understood. Chapter 6 of the handbook explains the labour dispute procedures and Chap. 7 explains the prohibition of abstaining from work during the resolution of disputes, and it is hoped that workers will become aware of the labour dispute procedures. However, the handbook does not include the Trade Union Law passed in March 2018 or the Prime Minister’s Decree on labour dispute resolution passed in April 2018, so preparation of a revised version of the handbook that includes them is required. As Japanese support has not been provided for this, it is hoped that Laos will perform the work independently. It is said that seven Supreme Court decisions are currently available on the website of the Lao Supreme People’s Court. These are decisions that were already published in a booklet of Supreme Court decisions in 2012. Cases are classified into seven categories of civil, commercial, labour, administrative, family, juvenile and criminal law. Although there do not appear to be any labour cases among the seven published

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cases, it is evident that labour cases are recognised as a type of dispute. It is to be hoped that future decisions on labour cases will be published. There is currently very little information how to handle labour cases in the court.

4.4 Cambodia Labour Law of 1997 and Trade Union Law of 2016 are the basic laws governing collective labour relations law in Cambodia, and labour dispute resolution procedures are set out in the 1997 Labour Law. The following will summarise its contents. Labour disputes are divided into individual and collective disputes. An individual dispute is a dispute between an employer and a worker over the application of a labour contract, collective agreement or the labour laws. A collective dispute is a dispute between an employer and multiple workers concerning working conditions, the exercise of union rights, recognition of a union or labour-management relations. This distinction is drawn in the dispute resolution procedures, and the Labour Inspection Department of the Ministry of Labour and Vocational Training decides which procedure is to be used. In an individual dispute, one party applies to a labour inspector for mediation. The labour inspector who receives the application hears both parties within three weeks and attempts to mediate the dispute. If an agreement is reached it is legally binding, but if mediation is unsuccessful a petition can be filed in court within two months. As labour courts have currently not been established, cases are handled by general courts. Collective disputes are handled in two stages of mediation and arbitration, adopting the principle of meditation first. Both parties notify the labour inspector of the dispute, or a labour inspector may ex officio commence the mediation procedure without notification from the parties. The Minister of Labour and Vocational Training appoints a mediator within 48 hours of the notification being received. The mediator conducts the mediation within 15 days of being appointed, but this period may be extended by agreement between the parties. If an agreement is reached in the mediation, it is put in writing, signed by both parties and the mediator, and has the same effect as a collective agreement. In the event of unsuccessful mediation, the mediator sends a report to the Ministry of Labour and Vocational Training, stating the issues in dispute and the reasons that an agreement could not be reached. If unsuccessful, the next step is the arbitration procedure. The arbitration procedure is commenced by the Ministry of Labour and Vocational Training referring the case to the Arbitration Council within three days of receiving the mediator’s report. Upon receiving the referral, the Arbitration Council commences proceedings within three days. Three members, consisting of one person nominated by each of the Ministry, unions and employer associations, hear from the parties and may also call witnesses to testify. When commencing the arbitration, the parties are asked to decide between a ‘binding award’ and a ‘non-binding award’.

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In the former case, once an award is issued it is a final and binding resolution. In the latter case, the award is binding if an objection to the contents of the award is not made within eight days. If a party is dissatisfied with the award, the case is referred to a court or goes into a labour dispute in the case of a rights dispute. In the case of an interests dispute, it cannot be referred to a court, but becomes a labour dispute and the parties may commence a strike or lockout. Cambodia has not introduced a compulsory arbitration system. Awards are posted at the labour inspector’s office and registered in the same way as collective agreements, so that anyone can access them. It should be noted that proceedings conducted by the Arbitration Council have received a reputation for being conducted fairly. The Arbitration Council focuses on maintaining its independence from government institutions. In order to increase transparency, the contents of arbitration awards are published in Khmer and English in order to act as precedents in the event of similar disputes. It is the quality of the members that ensures fairness. To this end, attention is paid to the appointment of members. The conditions for appointment are set out in a ministerial ordinance, and include being at least 25 years old, possessing a high moral character and having at least three years’ relevant work experience. Members consist of lawyers, university professors and academics, many of whom have studied in the USA, France and Japan. Those who have been judges are ineligible, which is probably a result of concern about corruption in the judiciary. Union-nominated members are ineligible if they have been union officials within the past year. Employers’ association-nominated members are also ineligible if they have been an officer of an employers’ association within the past year. Ministry-nominated members are selected from among retired officials. Staff members of human rights NGOs are also included. There are several problems with the Arbitration Council. The first is that the operating costs have been provided by foreign development aid agencies, which has also helped to ensure the Council’s independence. However, there is no guarantee that this aid will continue forever. If the aid was to cease, what would happen to the operation of the Arbitration Council? The second is that in the National Assembly elections held on 29 July 2018, the Cambodian People’s Party won all of the seats, establishing a dictatorship under Prime Minister Hun Sen. Because the Cambodia National Rescue Party, which was the largest opposition party, performed well in the 2017 regional elections, which raised the possibility of a change of government, the governing regime arrested the National Rescue Party’s leader and forced the party to be dissolved. In response to the West’s harsh criticism of this situation, the regime moved closer to China and has become authoritarian, setting back the movement towards democracy. It raises the question whether the authoritarian politics has had some sort of effect on the labour dispute resolution process. In particular, it is doubted whether the impartiality of the Arbitration Council can be maintained. The third is that companies in Cambodia have also been affected by the Covid-19 pandemic and have been forced to cease operations or stop production, resulting in loss-making operations and the non-payment of wages to workers. There is the

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possibility of labour disputes intensifying, and it is questionable how labour dispute resolution institutions will fulfil their functions. The fourth is that there are examples where labour disputes have been resolved by NGOs. Cases have been reported where a trade union was established, but the union officials were fired and could no longer perform their activities, so an NGO became involved and negotiated with the company instead of the union and was able to resolve the issue. The fifth is that there are cases where an influential person (i.e., a people of good repute) in the locality in which an enterprise is located has intervened in a labour dispute and handled the dispute. In cases where a locality is actively trying to attract companies in order to increase employment opportunities, influential local people may step in to mediate, on the grounds that long-term disputes may damage the enterprise’s image.

4.5 Myanmar The Settlement of Labour Disputes Law that was enacted in 2012 is the basic law for handling labour disputes. The following will summarise its contents. Workplace Coordinating Committees are established in enterprises employing 30 or more workers. Committees consist of four people, two each representing workers and the enterprise. Regarding the selection of the two worker representatives, if there is a trade union that represents more than 50% of the workers then the union will select the representatives; if the union represents less than 50% of workers then the union will select one representative and the other will be selected in an election; if there is no union then both worker representatives will be selected in an election. Committees are expected to discuss matters such as working conditions, work environment, benefits and productivity improvements within the enterprise. A Conciliation Body is established in each township as the institution above the workplace coordinating committees. It consists of 11 members: one government representative appointed by the state or region as chairperson of the body, three members each from trade unions and employers’ organisations, one from the township, two experts and a secretary from the Ministry of Labour. The Conciliation Body determines whether a dispute is an individual or collective dispute. In the case of an individual dispute, the Conciliation Body attempts to mediate the dispute, and if it cannot resolve it, a suit can be filed before a court. In the case of a collective dispute, the Ministry of Labour and the state or region are notified, and the Conciliation Body must attempt to mediate within three days of receipt. If an agreement can be reached a memorandum of agreement is concluded. If an agreement cannot be reached, the case is referred to the Arbitration Body. The Arbitration Body consists of 11 members in the state or region. The chairperson is appointed by the state or region, three members each from trade unions and employers’ organisations, one person elected from the state or region, two experts and a secretary. The term of office is two years and members must be at least 25 years

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old. The Arbitration Body must deliver a decision within seven days of a case being referred. The decision is notified to the relevant parties within two days and if a party objects, they have seven days to appeal to the Arbitration Council or implement a strike or lockout. The Arbitration Council consists of 15 experts in labour matters. It consists of five members nominated by the Ministry of Labour, five nominated by trade unions and five nominated by employers’ organisations. The term of office is two years and members must be at least 25 years old. The Arbitration Council is an independent body and makes decisions in accordance with the principles of social justice, equity and the notion of decent work. It delivers its decision within seven days of receiving a referral and the decision is notified to the parties concerned within two days. A copy is sent to the Ministry of Labour and the state or region. The decisions of Conciliation Bodies, Arbitration Bodies and Arbitration Councils become effective from the prescribed date. They can be changed by agreement of the parties after three months from the effective date, and such a change becomes a new collective agreement. The decisions are effective to all persons related to the dispute, including the legal heirs of the employer involved in the dispute, and not only workers who were employed at the time of the dispute but also those who are employed after the decision. Strikes and lockouts that demand changes to matters determined in a decision are prohibited during the validity period of the decision. This establishes a peace obligation. Furthermore, the matters determined in a decision must be implemented and a fine is imposed for any breach. However, imprisonment is not imposed. Even if a dispute has been referred to a Conciliation Body or Arbitration Body, the parties are not prevented from applying to a court for a resolution. There are plans to establish a labour court in the future for this purpose. It is thought that the military coup on 1 February 2021 has suspended the labour dispute resolution procedures. Many citizens are confronting the national army in a civil disobedience movement, and trade unions and their members are probably participating. If government officials involved in labour dispute resolution are also participating in the civil disobedience movement, then the labour dispute resolution bodies have probably been suspended. Let us look at the distinctive points from the above. The first point is that the Indian Trade Disputes Act 1929, which was applicable during the British colonial period, was substantially amended to become the Indian Labour Disputes Act 1949. It remained in force under the Ne Win government established in 1962 but was amended in 1963 to introduce a system of handling labour disputes that differed from the British system. That system remained in force under the military government from 1988 and became the basis for the establishment of the Settlement of Labour Disputes Law 2012. Therefore, this shows that it was not possible to depart significantly from the labour dispute settlement procedures introduced during the military regime. The second point is that amendments to the Settlement of Labour Disputes Law were being discussed, but it is assumed that the discussions have been stalled as a result of the coup d’état by the national military. The following will summarise what types of issues have become problems. It has been about nine years since the

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Settlement of Labour Disputes Law came into force, and these are the issues that have emerged during that time. (a) Blurred distinction between individual disputes and collective disputes A distinction is made between individual disputes and collective disputes in the resolution procedures, but problems have arisen where the distinction between the two is not clear. For example, in a case of dismissal on the grounds of union activity, it is an individual dispute if the focus is on the dismissal, but it can also be treated as a collective dispute if it is seen as a dispute between the union and the employer because the dismissal is on the grounds of union activity. In fact, there are examples of cases that have been handled by Arbitration Councils rather than the courts. Regarding the courts, it has been identified that judges who were appointed under military regimes are not interested in protecting workers’ rights and tend to curtail workers’ rights. In contrast, Arbitration Bodies are made up of members from ministry, labour and employer backgrounds, and the members from labour backgrounds are interested in defending workers’ rights and are more likely to work in favour of the workers. (b) Performance of the arbitration award is not guaranteed To ensure the implementation of the Arbitration Bodies’ decisions, employers who breach a decision are subject to penalties of up to one million kyat. Even if a decision is made to reinstate a worker, the time it takes for a court to impose a fine is such that employers take the strategy of stalling for time without complying and wait for the worker to give up on reinstatement. As the amount of the fine is low, it makes it difficult to restrict this strategy. Some employers will choose to pay the fine rather than reinstate the worker. This creates the problem of non-compliance with the decisions of the Arbitration Bodies. (c) Necessity of a fair appointment procedure for members of bodies The method of appointing the ministry, labour and employer members of Conciliation Bodies and Arbitration Bodies has become problematic. The members nominated by employers’ organisations are selected after consultation with the Union of Myanmar Federation of Chambers of Commerce and Industry. The problem is the members nominated by trade unions. That is because the rate of union organisation is low and the labour movement is still in its initial stage, with trade unions being organised for 10 years or less. This means that the organisational base is weak. The registration of the Confederation of Trade Unions in Myanmar (CTUM) is recognized as a national union, but there are basic trade unions that are not members of the CTUM. There exists a problem that workers’ representatives can only be selected from the CTUM. Ministry-nominated members are probably selected from within the Ministry of Labour, but it is likely that they are high-ranking officials. Since many high-ranking positions in the executive branch have a military background, it is likely that people from the national military will be selected as members. It is assumed that they are former military personnel rather than active military personnel. How do such ministry members conduct conciliations and arbitrations? Will they take an impartial position?

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The ministry-nominated member is expected to exercise leadership among the three members, so their disposition will be important. It will be important how to train the ministry and union-nominated members to handle labour disputes. ILO has a role to play and Japan can contribute in thus field. (d) Efficient dispute resolution The Settlement of Labour Disputes Law requires that labour disputes be dealt with in an unrealistically short number of days. While prompt resolution is undoubtedly desirable, the time frame is too short. While some disputes may be resolved promptly depending on the nature of the dispute, this may not be so in most cases. Therefore, a resolution should be sought regardless of the number of days. The reality is that, especially in areas like Yangon where there are many cases, the number of members is limited, and it takes several days to resolve disputes. The disparity between the system and the reality is clearly shown by the short period for handling disputes. (e) Establishment of a secretariat structure Secretariats have been set up in the labour dispute bodies to assist the members in their work. As members are engaged on a part-time basis, they cannot fulfil their duties without the support of the secretariat. It is essential to improve the quality of the secretariat as well as the number of staff. (f) Publication of labour dispute resolution results The awards of the Arbitration Bodies are published on the secretariat’s website in Burmese. This publication provides the advantage of making it easier to predict how similar disputes will be dealt with if they arise. However, there is the problem that it may not be possible to publish all awards.

4.6 Conclusion This paper has described the handling of labour disputes in the four ASEAN least developed countries. It has analysed dispute resolution by administrative bodies, which is one type of out-of-court dispute resolution. However, the courts are also involved in the processing of labour disputes, especially in rights disputes, where they are the final means of resolution, but we have not been able to grasp the reality of their handling process. Judgments are written in Vietnamese, Lao, Khmer and Burmese, so they cannot be analysed by those who do not understand the languages. Furthermore, it is difficult to access judgments as even their publication is inadequate, so foreigners cannot apprehend how court proceedings are conducted. Therefore, it is being considered whether it is possible to somehow cut into the reality of how labour cases are handled in the courts under the civil procedure laws. Normally, case law should be formed in the courts through the interpretation and application of labour laws, and this should serve as a guideline for dispute resolution, but the process of selecting case law in Vietnam has only just begun. Will this process also start in

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Laos, another socialist market economy? Furthermore, it is unclear how labour law litigation is developing in Cambodia and Myanmar. The global Covid-19 pandemic began in 2020 and has been a factor in increasing labour disputes. In Southeast Asia in particular, the spread of the disease was relatively low in 2020, but the number of cases increased rapidly in 2021 with the rapid spread of the Delta variant of the virus. The pandemic broke out and urban lockdowns were imposed. As a result, many people were absent from work and operations had to be suspended, leading to closures and bankruptcies. Even when operations were able to continue, the increase in losses led to layoffs, redundancies, unemployment and non-payment of wages. It will be necessary to examine how this will affect the handling of labour disputes. These issues remain as they could not be examined in the three-year period covered by the scientific research grant. The labour dispute resolution procedures discussed in this paper are designed to be available to workers and trade unions engaged in the formal sector. That raises the question of what dispute resolution procedures are available to workers engaged in the informal sector. It is possible that they could bring claims for damages or injunctions against certain actions before the courts, but is it possible to handle disputes outside of court? It is conceivable that victims in the informal sector could negotiate with the perpetrators, for example with the help of NGOs. Among ASEAN’s four least developed countries, Vietnam, Cambodia and Laos were French colonies, while Myanmar was a British colony. To what extent has the influence of the former colonial powers remained? The labour dispute settlement systems in Vietnam, Cambodia and Laos were formed after independence, and there appears to be little French influence. The British influence in Myanmar cannot be totally ruled out as the country inherited the Indian system of labour dispute resolution, but the influence seems to have waned during the long period of military rule (1962–2011). As Vietnam and Laos were socialist countries following their independence, do they display any influence from China or the Soviet Union? Cambodia also aimed to be a socialist country at one time, so does any of the influence of China and the Soviet Union remain in its labour dispute settlement system? Furthermore, it is not clear whether the dispute handling in the four countries is based on customs and legal awareness that derives from by traditional culture, religion and values. For example, in village communities, elders and authority figures have customarily been involved in dispute resolution to maintain peace in the village. This is an example of local community pressure leading to dispute resolution, but has this been utilised in the mediation and arbitration procedures used in labour dispute resolution?

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References 1. Saito, Y. (2011). Treatment of workers’ representative entities under Vietnamese labour law. Social System and Law, (12), 43–55. 2. Japan Institute for Labour Policy and Training (ed.). (2019). (Inagawa, Fumio, Wataru Kamihigashi, Koji Kawabata, Yoshihisa Saito and Kazuhiro Ishii auth.), Current Situation Surrounding Labour in Vietnam. Japan Institute for Labour Policy and Training. 3. Kagawa, K. (2019). Labour dispute resolution in countries under regime transition. ICCLC NEWS (International Civil and Commercial Law Center), (60), 49–63. https://www.icclc.or. jp/icclc-news/news_60.pdf. 4. Kagawa, K. (2021). The right to organise labour unions in Vietnam. Labour Law Junpo, 1977, 4–5. 5. Japan Institute for Labour Policy and Training (ed.). (2020). (Suruga, Terukazu, Kozo Kagawa and Kenichi Kitazawa auth.), Labour, Employment and Society in Laos. Japan Institute for Labour Policy and Training. 6. Irie, K. (2019). Supporting the Preparation of the Laos Labour Law Handbook. Labour Law Quarterly, 265, 158–169. 7. Japan Institute for Labour Policy and Training (ed.). (2019). (Kitazawa, Kenichi, Kozo Kagawa and Kenichi Kumagai auth.), Labour, Employment and Society in Cambodia. Japan Institute for Labour Policy and Training. 8. Kimura, M. (2014). Alternative dispute resolution in Cambodia: labour dispute resolution by Arbitration Councils. Kansai University Law Review, 63(5). 9. Tamagaki, S. (2019). Current status of arbitration councils in Cambodia - focus on the Impact of the 2016 trade union law and the 2018 ministry of labour and vocational training decree. ICD News, 80, 56–77. 10. Japan Institute for Labour Policy and Training (ed.). (2017). (Nishizawa, Nobuyoshi, Kozo Kagawa, Yuji Tsutsumi and Kenichi Kitazawa auth.), Labour, Employment and Society in Myanmar. Japan Institute for Labour Policy and Training. 11. Kagawa, K. (2014). Contents of Myanmar’s settlement of labour disputes law. Labour Law Quarterly, 244, 150–161. 12. Kagawa, K. (2017). Amendments to Myanmar’s 2021 settlement of labour disputes law. Legal Policy and Strategy Study, 18, 3–23.

Chapter 5

Development of Consensual Dispute Resolution Procedures in Vietnam: An Aspect of Legal Development Support and the Development of ADR Shiro Kawashima Abstract Historically, consensual dispute resolution systems predate the emergence of formal court systems. It is true in Vietnam, and long before Japan began supporting the enactment of a full-fledged Code of Civil Procedure through technical legal support, mediation at the village level was actively working. Since Doi Moi, Vietnam has been developing and reforming the modern civil procedure system, and reforms have also focused on ADR. This shows a remarkable feature of legal development through the division of roles between litigation and ADR.

Beginning with Ho Chi Minh’s critique of the French colonial judicial system, I will outline the development of global “access to justice” theory and give an overview of the Vietnamese Code of Civil Procedure and the settlement in litigation therein. In addition, the grassroots settlement that has traditionally existed in Vietnam and its recent codification will be introduced. At the same time, it shows that it is developing into a desirable dispute resolution procedure that has value as an autonomous dispute resolution procedure and seems to ensure fairness. I will also discuss the recently enacted Law on Mediation and Dialogue at Court. Finally, I will present future prospects for “rule of law” and consensual dispute resolution in Vietnam.

5.1 Introduction—Development of Consensual Dispute Resolution Procedures Justice is symbolized by a dignified lady with scales in one hand and a sword in the other. The road from France to Indochina is extremely long. So long is the road, that by the time she reaches Indochina, her scales have lost their balance, and the scales’ trays have melted and turned into opium pipes or bottles of disgusting government-produced alcohol. So, the S. Kawashima (B) Professor, Doctor of Law, Doshisha University School of Law, Kamigyo Ward, Kyoto 602-0898, Japan © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_5

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This striking passage is found in the chapter titled ‘Justice’ in The Prosecution of French Colonialism by Ho Chi Minh (Nguyen Ai Quoc), published in French in 1925.1 These words are a scathing criticism of the colonialism and imperialism practiced by France, the country that had ‘declared the rights of man’ which were achieved during the French Revolution, and “denounced how far the colonies had strayed from this under the Declaration of the Rights of Man, and gave a clear picture of the reality of the French colonies at that time”.2 This metaphor for a wretched and merciless figure of the ‘goddess of justice’ gives us living in the modern era cause to contemplate many things. For example, contemporary Japanese legal development support as the technical legal support to various countries, especially in South-East Asia, could be metaphorically described as supporting the process of the recipient country in regaining, so to speak, the balance of the melted scales for the benefit of the country’s people. Alternatively, it could be seen as legal development support that jointly considers a ‘form of justice’ that is appropriate for the diverse and individualistic countries of Southeast Asia to replace the image of lady justice introduced from western Europe. It can also be seen as Japan using the knowledge and experience it has cultivated over the course of its history to provide sincere and sympathetic assistance to the people of the target countries in their law-making process, through close communication with the target countries while respecting their intentions that are based in fundamental reason. Vietnam, which is the subject of this paper, has embraced the market economy since Doi Moi in 1986 and became a full member of the World Trade Organization (WTO) in 2007. In the Socialist Republic of Vietnam, the aim has been to build the fundamental system for the ‘rule of law’ in a country that pursues ‘independence, freedom and happiness’, and to develop human resources who are capable of implementing it appropriately and operating it fairly.3 The Sustainable Development Goals (SDGs) were unanimously adopted by Member States at the UN Summit in September 2015. In Japan, the SDGs finally became frequently mentioned shortly before the 2020s. The SDGs are also taught in primary and secondary education, and the 16th goal is “Peace, Justice and Strong Institutions”. The literal translation of the Japanese version of the goal is the exquisite phrase “peace and fairness for all”. Goal 16 means to ‘promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels. ‘Access to justice’ will be materially realized through the provision of fair dispute resolution processes by independent judicial institutions, which is premised upon the development of substantive and procedural law and bringing legal redress to its users. However, this theory of access to justice is not necessarily a new idea. When viewed from the perspective of the history of the global theory of justice and access to justice in civil procedural law, its significance is no more than confirmatory. In general, when looked at globally, the history of the theory of justice and access to justice is already close to half a century long,4 and its realization has become

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a major issue in contemporary international society, including in Japan and in the countries where legal development support is provided by Japan. The global and general development process of that access theory can be said to have gone through three stages of recognition and development, as will be described below, and is now reaching the fourth stage. The first stage is the stage that aims for legal aid to be guaranteed, so that those whose rights have been violated are financially guaranteed the right to receive a trial, even if they are poor (‘the stage of securing and expanding legal aid for the poor’). The second stage is the stage of devising how to relieve people from proliferate damage, such as consumer and environmental damage (‘the stage of collective relief for proliferated victims’); issues in this stage are the effectiveness and spread of systems such as the Verbandsklage (collective litigation) system in Germany and the class action system in the United States. The third stage is the stage which aims to establish a comprehensive justice and judicial system that also includes alternative dispute resolution (ADR), in addition to expanding and ensuring the effectiveness of the existing litigation remedies (‘the stage of establishing a comprehensive justice and judicial system including ADR’), and is now becoming generally recognized. This is the consideration of the comprehensive enhancement from an access theory centered on litigation to broader civil dispute resolution procedures, including ADR. Subsequently, recently in Japan civil justice is thought of finally evolving and systematically developing towards the stage that aims for ‘ubiquitous access to justice’ as the fourth stage, by implementing information and communication technology (ICT) in all civil dispute resolution systems, with civil litigation at its core.5 This development process has been both the details of the diverse answers to the question of what functions civil litigation must effectively fulfil in the context of social progress, and is also the history of such development. In general, the means of access to justice are diverse, as are the degrees of progress in access to justice in the countries that are the recipients of legal development support. In the past, the author has outlined the enactment of Vietnam’s 2004 Civil Procedure Law and the process of its amendment.6 In this paper, therefore, the author will focus on the positioning and development of consensual dispute resolution procedures, which function as civil dispute resolution procedures together with the basic adjudicative dispute resolution procedure called civil litigation. This is, so to speak, an overview of the ‘the stage of establishing a comprehensive justice and judicial system including ADR’ (stage 3 described above) in Vietnam’s ‘access to justice’; setting aside the issues from stage 1 and stage 2, it will ascertain the current status of the comprehensive development of adjudicative procedures (procedures that resolve a dispute through a decision by a third party, such as a judgment) and consensual procedures (procedures that resolve a dispute by agreement through a third-party intermediary) in civil dispute resolution procedures.7 It will then introduce the incorporation of consensual procedures into the formal civil dispute resolution procedures in Vietnam following the development of the Civil Procedure Code’s adjudicative procedure, and explore the significance and value of Vietnam’s efforts, mainly by its own hands, to expand access to justice in terms of procedure through expanding its judicial base.

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It can be seen that the background to this is not only due to the recognition of the value of procedures for determining conceptual rights and obligations, but also the awareness of the appropriate procedural division of roles that accompanies the increase in the number of cases, and the importance of procedures for the compulsory realization of the results obtained in the substantive procedures, namely the existence of the development of procedures such as compulsory execution (enforcement of judgment).8 Regarding the right to demand payment, this concerns the issues in the processes of forming and realizing the writ of execution. Vietnam is examined in this paper because the author is, to a certain extent, aware of the history of its development and because reviewing Vietnam’s development process can be thought of as, in a sense, presenting a rational development process for civil dispute resolution procedures in a modern state. In the following sections, an overview of Vietnam’s Civil Procedure Code and procedures for settlement during litigation will first be provided in Sect. 5.2, followed by an overview of so-called ‘grassroots settlement’ (village settlement) in Sect. 5.3. In particular, ‘grassroots settlement’ has a history of the procedure itself being legislated and its conversion to a writ of execution (a title of obligation) being officially recognized recently in order to ensure its effectiveness. The form of development of this dispute resolution is itself considered to represent a desirable development of a dispute resolution procedure which, although it involves challenges, respects the value of autonomous dispute resolution and ensures fairness. Furthermore, the recently enacted Law on Mediation and Dialogue at Court will also be discussed in Sect. 5.4. When looked at from the Japanese perspective of civil justice, this is the creation of a system that includes ‘judicial mediation (civil mediation and family law mediation), the future utilization of which will be of interest. Based on the above, this paper will conclude with a brief evaluation and outlook on the ‘rule of law’, ADR and consensual dispute resolution procedures in Sect. 5.5.

5.2 Vietnam’s Civil Procedure Code and Settlement 5.2.1 History Prior to the 2004 Civil Procedure Code: Settlements Under the Ordinance on Procedures for Settlement of Civil Cases and Other Laws Even before the 2004 enactment of Vietnam’s Civil Procedure Code, there were legal norms governing civil court proceedings. The Standing Committee of the National Assembly established the Ordinance on Procedures for Settlement of Civil Cases in 1989, the Ordinance on Procedures for Settlement of Economic Cases in 1992 and the Ordinance on Procedures for Settlement of Labor Cases in 1996. From the outset, these ordinances were intended to be amended in the form of legislation enacted by the National Assembly at a later date and were therefore provisional regulations.

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These ordinances had features that were almost entirely in common.9 That is, they had, for example, a wide range of subjects that could be litigated (there was no principle that bound petitions in the disposition maxim), adopted the principle of ex officio examination of evidence (the parties could leave the collection of evidence to the court), and had a procedural process where, in principle, oral arguments were completed and judgment was delivered in one hearing, based on the results of detailed examination of the evidence in the preparatory proceedings before the oral argument. The procedure was aimed at the intensive and expeditious hearing of oral arguments. The effect of the judgment in civil proceedings was intended to extend widely beyond the plaintiff and the defendant, thereby functioning as a one-time, unified settlement of disputes. Both the Ordinance on Procedures for Settlement of Civil Cases and the Ordinance on Procedures for Settlement of Economic Cases had procedural provisions for settlement during litigation.10 The settlement during litigation in Vietnam was conducted in court by a judge only, and as a rule, people’s jurors were not present. This basic procedural structure is maintained in the current law. In both civil and economic cases, the ordinance relating to each adopted a settlement-first principle, whereby, as a rule, settlement procedures had to be performed in order for hearing proceedings to be conducted in court. However, in civil cases, certain cases were excluded from being subject to the settlement procedure, such as disputes arising from illegal transactions or the annulment of illegal marriages.11 In actual litigation practice, three settlement hearings had to be set before a case could be heard, and it was said that in some cases the hearings were repeated in vain despite there being no prospect of settlement. In addition, at the larger courts in Hanoi and Ho Chi Minh City, the judge in charge of settlement proceedings was in principle a different judge from the judge in charge of litigation, but this was not always guaranteed under the procedural law, and the same judge was sometimes in charge of both. Depending upon the case, settlement was often attempted by the court even after the preparatory proceedings for oral argument had been concluded and the case had entered the procedure for hearing oral argument. The settlement procedure was, according to the court, conducted in the presence of the parties (sitting face-toface), but lawyers have said that it is usual for individual interviews to be conducted with each party. If settlement of the litigation was reached between the parties through the settlement procedure, the court prepared a settlement statement. In civil cases, the court would issue a decision approving the settlement if the parties did not file a motion to change the contents of the settlement within 15 days. This settlement approval decision became a final decision of the court and could be enforced in accordance with the procedures of the Ordinance on Enforcement of Civil Judgment if it contained wording regarding payment (there was no definition of such a time limit for economic cases, and it seems that the parties could not file a motion to change the settlement in the first place). If a party sought to change the contents of the settlement, or if the Procurator’s Office or others filed an objection to the settlement, the case was transferred to the procedure for delivery of judgment. Or, if no settlement was reached

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after the settlement procedure, the case was also transferred to the hearing procedure in civil procedure. Thus, the settlement of litigation has been conducted for a long time and the system of “grassroots settlement” that will be discussed below in Sect. 5.3 had already existed for a long time. However, there was no system equivalent to settlement prior to the filing of an action as seen in Japan (Article 275 of Japan’s Code of Civil Procedure).

5.2.2 The 2004 Civil Procedure Code and Settlement The United States initially exerted strong influence on the enactment of a new, unified civil procedure law in Vietnam. It is also said that the United States presented a draft adapted from its own laws, which cannot be said to have been systematically developed. Ultimately, however, the draft of the new Civil Procedure Code was drafted solely by the Vietnamese, with Japanese and other legal experts providing support in the form of examining and commenting on each article, which resulted in the enactment of the new law.12 The general Civil Procedure Code that led to the present law was enacted in 2004 (hereinafter referred to as the “2004 Civil Procedure Code”).13 That law was legislation in a form that maintained the basic features as a socialist law14 while also basically reflecting the principle of private autonomy of the parties in litigation. In this respect, although the basic legal form differed from United States law, it also incorporated the requirements of the adversarial system15 that underlies US civil procedure law and had elements in common with the basic elements of the civil procedure laws of WTO member states, including Japan. Civil litigation cases are generally concerned with disputes over property rights and are fundamentally compatible with the resolution of disputes by agreement between the parties. If the party-led principle is thoroughly enforced and the principle of self-determination of litigants is fundamentally recognized in the new Vietnamese legislation, then the “termination of litigation by the will of the parties”,16 which is an aspect of the disposition maxim in Japan, will also be brought into focus as a natural procedural consequence. The fact that “settlement during litigation” is a proactive, consensual form of dispute resolution between the parties not only has important significance as a manifestation of private autonomy, but also leads to a reduction of the burden on the courts due to the reduction of the number of cases requiring a judgment. The 2004 Civil Procedure Code had a system for settlement during litigation. Moreover, the promotion of settlement was essentially encouraged. First, in Chap. 1 ‘Task and Effect of the Civil Procedure Code’ within Part 1 ‘General Provisions’, with regard to settlement during civil proceedings, it provided that “The courts have the responsibility to conduct conciliation and create favorable conditions for the involved parties to reach agreement with one another on the resolution of civil cases or matters under the provisions of this Code” (Article 10) and also prescribes the court’s responsibility for the parties to reach a settlement

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(Article 41(4)). This is also confirmed in Article 41, which prescribes the duties and powers of judges, and further empowers judges to issue decisions approving the parties’ agreement (‘agreement approval decision’) (Article 41(4)). The parties and their lawyers are also guaranteed the right to participate in the settlement procedure and the right to make a settlement (Articles 58(2)(e) and 64(3). If a settlement is reached, the parties are only required to pay 50% of the court costs that should be paid, see Article 131(3)). Secondly, settlement during litigation is scheduled to occur by the deadline for the preparation of oral arguments (i.e. conducted during the preparation period for the first-instance trial, Article 180 (1)), and if a settlement is reached between the parties, the court shall issue an agreement approval decision by that deadline (Article 179 (2)(a)). There are provisions on types of cases that are not subject-matters to settlement (Articles 181 and 182), as well as provisions on the notification of settlement session dates (Article 184) and the participants (Article 185). People’s jurors and prosecutors are not included as participants. The requirements and procedures for settlement between multiple parties are also stipulated (see Article 185 (3)). Notably, rules which may be called ‘settlement principles’ are prescribed (Article 180 (2)). These include ‘respecting the voluntary agreement of the parties and not using coercive force or threatening to use coercive force to force the parties to reach an agreement against their will’ (subparagraph (a)) and ‘the content of the parties’ agreement must not violate the law or social ethics’ (subparagraph (b)). Also, regarding the content of the settlement, it is prescribed that “when conducting settlement, the judge shall provide the parties with an overview of the provisions of the law relevant to the resolution of the case so that the parties relate the provisions of the law to their own rights and obligations, and shall analyze the legal consequences of reaching a settlement so that the parties voluntarily reach an agreement on the resolution of the case” (Article 185). The court clerk prepares a record of settlement for settlement that is reached during the litigation (Article 186). If, after the record of settlement has been prepared, the seven-day deadline has expired and neither party has sought to change the agreement, the judge in charge of the settlement or another judge appointed by the chief judge shall issue an agreement approval decision (Article 187 (1), first paragraph). It is a distinctive point that the effectiveness of the agreement is not finalized by the preparation of the settlement record, but instead a period for deliberation (or in other words, a reconsideration period or grace period) is established. The court must send this decision to the parties and to the procurator’s office of the same level within five days of the decision (Article 187 (1), second paragraph). If there is no appeal or objection in accordance with appellate procedures, this agreement approval decision enters into force immediately after being issued (Article 188 (1)). In addition, the agreement approval decision “can be challenged in accordance with cassation procedures only if there are grounds for believing that the agreement was reached as a result of a mistake, deception or intimidation, or if it violates the law or social ethics.” It should be noted that settlement during litigation is also possible in appellate courts (see Article 271 (1)).

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Thus, Vietnam’s 2004 Civil Procedure Code revised the Ordinance on Procedures for Settlement of Civil Cases, which allowed for settlement at any time during litigation, by imposing the completion of preparation for oral arguments as the deadline, and reduced the deliberation period from 15 days under the Ordinance to seven days under the Code. Although the draft proposed its abolition, the reason for the National Assembly maintained the deliberation period was based on the consideration of the need for a period of time to, for example, take the agreed details back to the company or other parties for a final review .17 For Vietnamese judges, a high rate of successful settlements leads to a positive personnel evaluation, and they gather respect as socially competent judge, and studies have been seen to report that “it is quite understandable why young judges with strong career aspirations insist on settlements”.18 Although there are various background factors, it has also been identified as a result of fieldwork that in real civil litigation hearings too, ‘conciliatory judgments’ are delivered in practice, even when no settlement is reached. Seeing judges enthusiastically recommend settlements was also memorable when the author observed a number of civil cases.19 However, there was no system of ‘mediation’ (so-called ‘judicial mediation’) in Vietnam at that time, such as there is in Japan’s summary and family courts.

5.2.3 Settlements Under the 2011 Amended Code Subsequently, continuous movement towards the amendment of the Code was seen in Vietnam, based on the practical experience gained after the 2004 Civil Procedure Code came into force, and also to reflect the demands of society. Because the first drafting of the Code was done by the Vietnamese themselves, it can be said that their moves to improve the law were basically performed in a smooth manner. The act of drafting the law itself formed the basis for the subsequent gradual development of the law.20 Japan also provided continuous legal development support in the process of the amendment too.21 The main portions of the draft “2011 Revised Civil Procedure Code” were examined at a conference called the “Japan Training Course” held in Japan as part of the legal development support. It is interesting to note, however, that the meeting did not stop at those matters, but also considered matters that had been postponed for inclusion in subsequent amendments.22 The “2011 Civil Procedure Code” contains a wide range of amendments, but with regard to settlement during litigation, new provisions were established on settlement methods and procedures. As mentioned earlier, the 2004 Civil Procedure Code only provided some guidelines as the principles of settlement (Article 180 (2)), and there were cases where the judge in charge of the settlement proceedings did not follow the procedures, and in some cases the settlement proceedings were carried out by a court clerk rather than a judge. Therefore, Article 184 of the Code was amended and

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Article 185a was added regarding the settlement method and procedures, based on the aim of ensuring uniform operation and increasing the conclusion of settlements.23 Namely, first, clauses were added which provided that, where a settlement session is postponed because a party requests the presence of all parties to the case, “the judge shall inform the parties that the settlement session has been postponed and of the re-opening of another session.” (Article 184 (3)), and that “if necessary, the judge may request relevant individuals, institutions and organizations to participate in the settlement session.” (Article 184 (4)). Further, the new Article 185a contained the following provisions added as a “settlement procedure”: (1) “Before conducting the settlement, the court clerk shall report to the judge on the presence or absence of persons already notified by the court to participate in the settlement session. The judge presiding over the settlement session shall re-check the presence and identity cards of the participants in the settlement session”; (2) “The presiding judge shall conduct the settlement session according to details on settlement prescribed in Article 185 of this Code”; (3) “The involved parties or their lawful representatives shall present their opinions on the disputed contents and propose matters to be settled”; (4) “The judge shall identify matters on which the parties have reached agreement and have not yet reached agreement, and request the parties to additionally explain unclear contents and their disagreements”; and (5) “The judge shall make conclusions on matters on which the parties have successfully settled and matters on which they have not yet reached agreement”. It can be thought that through this amendment, as well as the settlement procedure being clarified, the judges’ relatively proactive attitude towards reaching settlement also became justified by statute. The “2011 Revised Civil Procedure Code” also amended the provisions regarding appeals concerning settlements during litigation. Where the original text said, “In a case where an involved party still upholds its appeal or the procuracy maintains its objection, while the involved parties cannot reach mutual agreement on the resolution of the cases” (Article 271 (1)), the second half of the phrase clause (beginning from the word ‘while’) was deleted. This amendment has been explained as being “for ease of understanding”, and it is assumed to be an attempt to eliminate misunderstanding arising from the fact that, unlike in the first instance, there is no obligation to conduct settlement proceedings in appellate proceedings, but the pre-amendment wording that placed settlement proceedings as a condition for the hearing of oral argument could also be read as making it a condition for the hearing of oral argument in the appellate proceedings.24 In the discussions during the enactment process of the “2011 Revised Civil Procedure Code”, a proposal was also considered to make the details of an agreement reached in a “grass-roots settlement” (see Sect. 5.3) into a writ of execution via the court issuing an approval decision, similar to settlements during litigation. However, the introduction of such a system was postponed due to the hinderance caused by Article 187 of Civil Procedure Code, which stipulates that a court cannot make an approval decision unless a seven-day deliberation period has elapsed after the agreement is reached, which is a requirement for settlements during litigation. The reasons for this are due to (i) the deliberation period and (ii) the nature of the approval decision.

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Regarding the former, it must be premised on a system in which, after a settlement during litigation is reached, the court’s approval decision is based on whether or not the agreement is maintained after the deliberation period, rather than on the validity of the agreement as of the time of its conclusion. Regarding the latter, it is thought that because the act of asking the court to make an approval decision for an agreement reached in a “grassroots settlement” itself would be due to the agreement not being performed voluntarily, and going against the agreement by failing to perform it is in itself evidence that the details of the agreement are not maintained, therefore the requirements to make an approval decision are not satisfied and approval cannot be granted.25

5.2.4 Settlements Under the 2015 Amended Code Following the new Constitution being enacted in 2013, the Civil Procedure Code experienced significant amendments in 2015. Various amendments can be seen,26 but noteworthy amendments in relation to this paper are the elaboration of the ‘settlement procedure’ in the courts (Article 210 (4) of the ‘2015 Revised Civil Procedure Code’) and the creation of an ‘out-of-court settlement approval procedure’ (Article 416 onwards).27 First, the ‘settlement procedure’ is generally as follows (the following refers to the sub-paragraphs of Article 210 (4)). Initially, (a) the judge explains the provisions of the laws relevant to the settlement of the case to the parties so that they can relate the provisions of the laws to their own rights and obligations, and analyze the legal consequences of reaching a settlement, so that the parties may reach a voluntary agreement on the settlement of the case. (b) The plaintiff and the lawyer upholding the legitimate rights and interests of the plaintiff state the nature of the dispute, additional details to the claim petition, and the grounds that uphold the demands in the petition, and proposes their perspective (if any) on the matters to be settled and the direction of the resolution of the case. (c) The defendant and the lawyer upholding the legitimate rights and interests of the defendant states their opinion on the plaintiff’s petition and counterclaim. The grounds for defending against the plaintiff’s petition and the grounds for upholding the defendant’s counterclaim are stated, and proposes their perspective (if any) on the matters to be settled and the direction of the resolution of the case. (d) Persons with related rights and obligations, and the lawyers upholding their legitimate rights and interests, state their own opinions in response to the opinions of the plaintiff and defendant and state their independent claims (if any). The grounds for defending against the claims of the plaintiff and defendant, and the grounds for upholding their own independent claims are stated, and proposes their perspective (if any) on the matters to be settled and the direction of the resolution of the case. (dd) Other participants (if any) in the settlement session state their opinions. (e) After the parties and the lawyers defending their legitimate rights and interests have stated all their opinions, the judge confirms what the parties have agreed upon and what they have

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not yet agreed upon, and asks the parties to make additional statements on any unclear or unagreed details. (g) The judge then provides a conclusion on the matters that are agreed upon and the matters not yet agreed upon by the parties.28 Here, a procedure for an orderly settlement is prescribed, like the exchange of pleadings in a court hearing. It also prescribes the court’s decision, and although it does not specify a procedure such as a decision in lieu of settlement (Article 275–2 of Japan’s Civil Procedure Code), the law appears to encourage judges to actively present settlement proposals. Because the same judge is not prohibited from hearing the oral arguments and handing down a judgment in the event that a settlement is not reached, it can also be thought that preconceptions are formed during the settlement process, and the settlement process itself may even seem to form part of the judgment-formation process. Next, the ‘out-of-court settlement approval procedure’ is set out in Chapter 33, the contents of which are outlined as follows. The ‘out-of-court settlement outcomes’ covered by this procedure are ‘the outcomes of a settlement of a case arising between organizations, institutions or individuals that has been conducted by a body, organization or person authorized to conduct settlements in accordance with the provisions of the law on settlements’ (Article 416). The party applying for approval of the out-of-court settlement outcome must send the documents to the court within six months of the date that both parties agreed to the settlement, and submit a petition for approval of the out-of-court settlement outcome which contains the prescribed information (Article 418). The procedure for approval of the out-of-court settlement outcome is prescribed as the procedure for receiving and processing the petition, the preparatory period for consideration of the petition (15 days from receipt), the persons appointed by the judge to consider the documents, the participants in the petition review trial and the procedure for proceeding with the petition review trial (Article 419 (1)–(4)). If the court decides that the requirements for approval of the out-of-court settlement outcome are met, it will issue a decision approving the out-of-court settlement outcome (Article 419 (5)). The requirements for approval are (i) the settlement conference participants have the capacity to conduct civil acts, (ii) the settlement conference participants are persons who have rights and obligations with regard to the contents of the settlement agreement; if the contents of the settlement agreement relates to the rights and obligations of a third party, consent has been obtained from the third party, (iii) one or both parties have filed a petition for court approval; and (iv) the contents of the parties’ settlement agreement is entirely voluntary, does not violate any law, is not contrary to social morality and does not avoid obligations to the state or third parties (Article 417). If these requirements are not met, the court issues a decision not to approve the out-of-court settlement outcome, however such decision does not affect the contents or legal value of the out-of-court settlement outcome (Article 419 (6)). The decision to approve or not approve the out-of-court settlement outcome is sent to the participants of the settlement conference, persons with related rights and obligations, as well as to the Procurator’s Office of the same level as the court (Article

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419 (7)). The decision has immediate effect and cannot be appealed or challenged in accordance with appeal procedures (Article 419 (8)). The decision to approve an out-of-court settlement outcome is enforceable under the legislation related to the execution of civil judgments (Article 4199 ). Although the procedure for approval of out-of-court settlement outcomes is as described above, consideration was being given prior to the 2011 amendments regarding a method of converting settlements between parties reached out-of-court into a writ of execution, which also referenced the pre-filing settlement procedure in Japan. What was in mind here was the conversion of the traditional Vietnamese ‘grassroots settlements’ (see Sect. 5.3 below) into writs of execution. This was not included in the 2011 amendments to the Code, but with the 2015 amendments, outof-court settlements that had been concluded in accordance with legislation regarding mediation became enforceable under the Law on Enforcement of Civil Judgments, subject to the court approval procedure.29 This procedure for approval of out-of-court settlements is prescribed as a type of non-contentious case.30 Incidentally, although the Japanese pre-litigation settlement procedure (Article 275 of Japan’s Civil Procedure Code) is rarely used now, because there is an extremely small number of provisions governing the procedure, the approval procedure for outof-court settlements in Vietnam itself is also considered suggestive of this for the purpose of vitalization. This is because it is possible to check the provision of legal services by non-attorneys (violations of Article 72 of Japan’s Attorneys Act) after the fact, and moreover, the legislation is considered to fulfil procedural transparency and accountability.

5.3 ‘Grassroots Settlement’ in Vietnam 5.3.1 ‘Grassroots Settlement’ and Its Context In Vietnam, ‘settlement groups’ have long existed as ‘grassroots conflict resolution institutions’ in villages.31 These groups consisted of several members elected at the village or residential area level, and were responsible for resolving disputes such as those arising with neighbors in the daily lives of citizens and those arising from family relations. Settlements by these settlement groups are also known as ‘grassroots settlements’. They could be initiated on the application of a party or under the ex officio authority of the settlement group. However, it can also be referred to as ‘settlement group settlement’ or ‘village settlement’. Generally, even when a settlement was reached through this procedure, the realization of the settlement depended on the voluntary performance of the parties and could not be enforced. The background context for ‘grassroots settlement’ is the history of Vietnam’s villages.32

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It is presumed that a settlement system based on traditional village customary law existed in Vietnam, as it does in many traditional communities. The government attempted to revive the customary laws of these villages (as natural villages), which had been erased in the course of modernization through socialism, as codified ‘town covenants’, as one means of implementing the Doi Moi policy.33 During that process, a movement was seen to recognize and utilize traditional mediation within the framework of the modern judicial system as well. The background to this state policy was the history of the ‘cooperative society’, a system of collective management of agriculture promoted as part of socialization, which was artificially created in a way that ignored the traditional villages, thus causing the loss of the foundation of village autonomy that had traditionally existed, and which was dismantled in reflection on its corruption, disfunction and other problems. Village autonomy was once again actively incorporated into the Doi Moi policy. This is symbolized by the enactment of Article 127 (3) of the 1992 Constitution of Vietnam. This clause provided that “appropriate people’s organizations shall be established at the grassroots level to settle violations of the law and minor disputes between people in accordance with the provisions of the law”,34 and these ‘settlement groups’ were a consensual dispute resolution organization based on the Constitution.35 The following will provide an overview of the ‘grassroots settlement’ system.36

5.3.2 Overview of the ‘Grassroots Settlement’ System (1) Provisions and objectives Regarding ‘grassroots settlement’, there was the 1998 “Ordinance on Grassroots Settlement Organizations and Activities” issued as a decree of the Standing Committee of the National Assembly, and the 1999 “Government Protocol Providing for the Partial Implementation of the Ordinance on Grassroots Settlement Organizations and Activities”. The latter was based almost exclusively on the structure of the former and expanded upon its provisions. The provisions on ‘grassroots settlement’ contained in the former were elevated to law in 2013 as the Grassroots Settlements Act, which came into force on 1st January 2014.37 However, this paper will focus on the former, which will be referred to as the “Grassroots Settlements Organizations and Activities Act” for convenience. This upgrading to a law is considered to be a procedural development in preparation for the 2015 amendment of the Civil Procedure Code, which created an ‘out-of-court settlement approval procedure’. The “Grassroots Settlements Organizations and Activities Act” (referred to simply as ‘the Act’ in this subsection of this paper) states the purpose of the Act as its preamble. The purpose is to prescribe ‘grassroots settlement’ organizations and activities “in order to make full use of the traditions of unity, mutual support and affection in the residential communal society, to improve the efficiency of resolving minor violations of the law and disputes between the people at the grassroots level, to

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prevent and reduce violations of the law, to guarantee social order and security, and to contribute to reducing the number of cases brought before the courts”. The legislation aimed at minor dispute resolution and conflict prevention as a part of village autonomy. ‘Grassroots settlement’ itself is defined in Article 1 of the Act as ‘the parties to a dispute reaching a mutual voluntary settlement of minor violations of law or disputes through guidance, assistance and persuasion; maintaining the internal unity of the people, ensuring and sufficiently utilizing the sensibility and beautiful traditional principles of the family and residential communal society, preventing and reducing violations of law in the residential communal society and contributing to the guarantee of social order and security”, which further clarifies the purpose contained in the preamble. In general, ‘grassroots settlement’ is encouraged by the state (Article 2, second paragraph of the Act). (2) Composition of settlement groups, applicable cases, settlement principles, etc. ‘Grassroots settlement’ is carried out by “settlement groups or other settlement organizations in a residential communal society” (hereafter referred to as “Settlement Groups”). This means that a council is organized to conduct settlements (Article 7 (1) of the Act, see also the first paragraph of Article 2). The members of a settlement group are elected (Article 7 (2) of the Law). The role of the ‘head of the settlement group’ is defined (Article 8 of the Law) and the ‘criteria for members of a settlement group’ are that they must have ‘good dignity and morals, strictly enforce the assertions and policies of the Communist Party and the laws of the state, and have prestige among the people’, ‘have the ability to persuade and move the people towards realizing the policies and the law’; and ‘be willing to participate in the settlement organization and have a sense of responsibility and enthusiasm in settlement activities’ (Article 9 of the Law). The cases applicable for ‘grassroots settlement’ are limited to minor breaches of the law or disputes (Article 3 of the Act).38 The applicable norms for ‘grassroots settlement’ are ‘the guidelines and policies of the Communist Party, the laws of the state, social morality and the good customs of the people’ (Article 4 of the Act. See also Article 2 and the first paragraph of Article 13). As a consensual procedure and out of respect for village autonomy, the use of a wider range of sources of law is permitted than in civil litigation. The law provides that the ‘settlement principles’ are to respect the autonomy of the parties and not oblige or coerce them to accept a settlement, and that the details of the settlement must also be “objective, transparent, reasonable and in accordance with humanity, “protect the confidentiality of information concerning the private lives of the disputing parties and respect the lawful rights and interests of other persons”, “not infringe upon the interests of the state or the public interest”, and furthermore, “conduct the settlement timely, proactively and patiently in order to prevent violations of the law, limit other adverse effects that may arise and achieve the objectives of the settlement” (Article 4 (2)–(4) of the Act).

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This proactive settlement activity is also incentivized by ‘rewards’, that is, “a settlement group and members of a settlement group shall receive a reward for their achievements in settlement activities” and “an organization or individual who has achieved results in establishing and strengthening organizations, improving the effectiveness of the activities of grassroots settlement organizations and achieved results through proactively participating in settlements shall receive a reward” (Article 15 of the Act). However, it also prescribes “the roles of the Vietnamese Fatherland Front, each organization as a member of the Front, other social organizations, economic organizations, state institutions, people’s armed forces and the people in settlement activities” (Article 6 of the Act), and the settlement activities themselves are state controlled (Article 6 of the Act). (3) Settlement procedures A settlement procedure may be commenced on the application of a disputing party or under ex officio authority (Article 10 of the Act). When commenced ex officio, it shall be based upon the initiative of the head or a member of the settlement group, or a petition by an individual from any other institution or organization. Settlement proceedings may be conducted by one or more members of a settlement group and, if necessary, third parties outside the settlement group may be invited to participate in the settlement (Article 11 of the Act). The settlement process is as follows (Article 13 of the Act). Settlements proceedings are conducted orally and a settlement statement is prepared if requested by a party. Depending upon the specific circumstances, the settlement may be facilitated by interviewing the parties separately or together. The members of the settlement group shall examine the case and the causes of the conflict, refer to the opinions of relevant individuals, institutions and organizations, and after hearing the parties’ opinions, analyze these matters and persuade the parties to reach an agreement that is in line with the law, social morality and good customs of the people, and to realize this agreement voluntarily. Regarding the termination of the settlement proceedings, it is prescribed that “a settlement shall terminated when the parties have reached an agreement and have promised to fulfil that agreement voluntarily. The members of the settlement group shall arrange and persuade each party to realize the contents of the agreement” (Article 14 of the Act). In addition, regarding the handling of violations, it is also prescribed that “any person who commits a violation of this Ordinance or the provisions of any other laws regarding grassroots settlements shall be subject to disciplinary treatment and administrative penalty or be held criminally liable, according to the degree of the violation,” and also that “if damage is caused, compensation shall be made according to the provisions of the law.”

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5.3.3 The Current Situation and Outlook Regarding the system of ‘grassroots settlement’, a finding made prior to the 2015 amendments to the Civil Procedure Code was that “while it has been evaluated as functioning relatively effectively as a means of voluntary dispute resolution, particularly in rural areas, and is also contributing to the realization of access to justice, it was also found that the significance of the law is relatively declining in urban areas where the sense of community among residents is becoming weaker”.39 Prior to that, the report Access to Justice in Vietnam (year of publication unknown), published by the Vietnam Office of the United Nations Development Programme, has been introduced as follows. The following is according to an introduction by Professor Kozo Kagawa.40 The report identifies that among those surveyed, “few respondents mentioned the courts or legal aid institutions as institutions that protect their own rights, and a higher proportion mentioned administrative institutions, such as People’s Committees and the police. This is thought to be due to a distrust of the courts. Amongst this, a high proportion of urban residents mentioned lawyers, whereas a high proportion of residents of mountainous areas mentioned grassroots coordination groups [settlement groups]. This illustrates the background situation of the uneven distribution of lawyers towards urban areas and the active role of organizations supporting ethnic minorities in the mountainous areas” and presents the following results of a ‘trustworthiness survey.’ Regarding what types of institutions protect the survey respondent’s own rights, for those respondents which have used the institution in question, in order of the level of trust the responses were village and district heads (89%), grassroots coordination groups [settlement groups] (81%) and lawyers (75%). The level of trust in the people’s committees (43%) and the police (37%) is low, even though they are accessed often. For those respondents which have never used the institution in question, in order of the level of trust the responses were village and district heads (60%), lawyers (46%), grassroots coordination groups [settlement groups] (36%) and courts (36%), while trust in people’s committees (33%) and police (33%) is lower and trust in legal aid organizations is the lowest. It is interesting to note that the level of trust in settlement groups and the courts is identical. However, trends following the 2015 amendments to the Civil Procedure Code will be of interest. As mentioned earlier, since settlements during litigation can take place even after a case has been filed, it can indeed be thought that litigation and settlement procedures in the courts will lead to more rapid resolution in areas where the concept of community autonomy is weakening. However, it is thought that there are cases where the enthusiastic settlement activities of a Settlement Group itself can lead to the fostering of autonomy. In particular, the improvement of skills and the accumulation of precedents among the members of settlement groups could lead to the creation of better results.

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In addition, prior to the 2015 amendments to the Civil Procedure Code, because a procedure did not exist for converting an out-of-court settlement itself into a writ of execution, it is thought that Settlement Groups took great pains in forming the contents of an out-of-court settlement to enable voluntary performance, since compulsory enforcement proceedings could not be used. This is in itself interesting as a procedural process, since each party strives to ensure that the settlement procedures are carried out and settlement terms are formed that enable voluntary performance. Hence, the actual trends in settlements by settlement groups after the 2015 amendments to the Civil Procedure Code are interesting. This is because, when considered from the point of view of rewards, it is thought that the question of whether the assessment will differ before and after the amendments, such as whether the ‘results’ as related to “achieving results in settlement activities” (Article 15 (1) of the Act) will be assessed with a view that includes the realization of the voluntary performance of the contents of the “grassroots settlement”, or whether the assessment will be based on the criteria of merely concluding a “grassroots settlement”. In particular, if the contents of a ‘grassroots settlement’ can be converted into a writ of execution, the possibility of voluntary performance might not be factored into the contents of the settlement, and the focus will be solely on the conclusion of a ‘grassroots settlement’. That is, following the establishment of the out-of-court settlement approval procedure, because settlements may be reached relatively easily (without any view to voluntary performance), it can be thought that the realization of the contents of the settlement might more often be left to the approval of the court and subsequent compulsory enforcement. However, it is also possible that the settlement approval decision process itself may not be conducted or may be unsuccessful, and when this feedback is given to the villages, it may result in the settlement formation process in “grassroots settlements” basically being carried out with a view also to the possibility of voluntary implementation. It should be noted that a wide variety of traditional village settlement systems seem to exist in the countries of Southeast Asia.41

5.4 Vietnam’s “Law on Mediation and Dialogue at Court” 5.4.1 Background History (1) Outline of the pilot mediation The “Law on Mediation and Dialogue at Court” (hereinafter referred to as the “Mediation and Dialogue Law”, or simply the ‘Law’ in the case of references to articles of the law in this section of this paper) was enacted in 2020. This is a court-based consensual dispute resolution procedure, which also includes the mediation system in Japanese courts. First, although very little information is available, a short look will be taken at the movements prior to the enactment of the Law.42

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On 3rd October 2017, the Supreme People’s Court of Vietnam issued a “Directive on Strengthening Mediation in the People’s Courts”,43 and it presented a plan regarding a “Pilot to reform and strengthen mediation and negotiation of civil administrative dispute resolution in Haiphong” on 22nd January 2018. It is considered that ‘negotiation’ here corresponds to ‘dialogue’ as contained in the text of the law. In accordance with this plan, from March 2018 a “Mediation and Dialogue Center” was established in the Haiphong People’s Court and nine district courts and county courts in the city (“the pilot courts”) and mediation commenced on a trial basis (this mediation is hereinafter referred to as the ‘pilot mediation’). The purpose of introducing the pilot mediation was largely to reduce the burden on the courts (judges). The pilot mediation was to run for six months, after which the Supreme People’s Court was to summarize and evaluate the results of the pilot mediation and prepare a proposal regarding a mediation system, which was to be submitted to the Communist Party’s Central Steering Committee for Judicial Reform. The Mediation and Dialogue Centers were established within the pilot courts, but the procedures of the pilot mediation itself were not conducted by the judges in charge of litigation cases, but by persons appointed by the court to conduct the mediations (hereinafter referred to as ‘mediators’). These mediators were appointed from among former judges, former prosecutors, former investigators and lawyers. Unlike in Japan, mediation was not conducted in the form of a multi-person mediation committee, but instead a single mediator was in charge of each case. In addition to monthly remuneration of VND 3 million (approximately ¥15,000), mediators were paid VND 500,000 (approximately ¥2,500) for each case that was successfully mediated. Pilot mediations were conducted at the Mediation and Dialogue Centers (for the meaning of ‘dialogue’, see (2) below). The cases covered were civil, business, commercial, matrimonial, family and administrative cases. As for the procedure, when a complaint was filed in one of these cases, in principle the pilot court did not accept the case as a litigation case, but transferred it to the Mediation and Dialogue Center, where mediation was conducted. Instead of taking a procedural form of the court ex officio referring the case to mediation, the case was automatically and compulsorily referred, and the parties were not allowed to directly petition for mediation instead of litigation. In principle, the mediation procedure for one case lasted 20 days (a maximum of two months), and if the mediation was not successfully concluded within this period, the case was referred back to the court and the litigation was progressed. If the mediation was successful, unlike in Japan, simply describing the mediated terms in a document did not constitute an enforceable writ of execution, so a party was required to file a petition with the court for an out-of-court settlement result approval decision (Article 416 onwards of the 2015 Civil Procedure Code) after the mediation was concluded if they wished to obtain a writ of execution. According to a report by trainees from Vietnam who participated in training in Japan, 1077 complaints had been submitted to the pilot courts by 18th May 2018 (consisting of 121 civil disputes, 802 family disputes, 90 management or commercial disputes, 7 labor disputes and 57 administrative suits). Of these, mediation was

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conducted in 893 cases and 600 cases were successfully mediated, giving a success rate was 67.2%. According to the trainees, the introduction of a mediation system was important in Vietnam to reduce the burden on the courts, as the number of cases were increasing despite a mandate to reduce the number of judges, and it was identified that if the pilot mediation was successful, the future aim would be to have the number of agencies conducting mediation increased and a mediation law enacted (as there was no law providing a basis for mediation at the time). It was also explained that adding a curriculum on settlements and mediation to the education courses at the Judicial Academy (the training facility for courts, which also has a university law course in addition to a course for training judges, and it appears that many graduates of the law course become court officials) was also being considered.44 (2) Issues in the pilot mediation As of 2018, several problems were identified in the pilot mediation.45 (i)

Even after mediation had been successfully concluded, it was not enforceable unless an approval decision was obtained from the court. Therefore, if an approval decision was not sought and a party failed to perform its obligations defined in the terms of the mediation agreement, it was necessary to file another lawsuit, which was an impractical procedure. (ii) On the one hand, those who wished to petition for mediation had to first file a lawsuit, and on the other hand, the complaints filed with the pilot courts were always referred to the Mediation and Dialogue Center. Furthermore, because it was operated such that cases were only referred back to the court for litigation to proceed after a party failed to attend two mediation sessions, even when the party had no intention to mediate, it made the procedure impractical in all cases. (iii) Unlike in Japan, mediators were employed full-time and paid a monthly salary, which meant that personnel costs were correspondingly high and created problems in securing the necessary budget. (iv) There were problems with the methods for recruiting and training mediators (only 58 mediators had been appointed at the time). The following will provide an overview of the Mediation and Dialogue Law.46 The law is called the Mediation and Dialogue Law, and the terminology is divided such that ‘mediation’ refers to the procedures and activities that are designed to achieve a pre-litigation, conciliatory settlement within the court in civil cases, and ‘dialogue’ refers to the procedures and activities that are designed to achieve a prelitigation, conciliatory settlement within the court in administrative cases. In relation to this, a successful mediation is called an ‘agreement’ and a successful dialogue is called a ‘consensus’. The Mediation and Dialogue Law also prescribes in an integrated manner provisions on subsidiary rules which, from the perspective of Japanese law, would fall into the category of ‘subsidiary regulations’.

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5.4.2 Overview of the Mediation and Dialogue Law (1) Purpose, basic structure, principles of mediation and dialogue, rights and obligations of the parties, etc. Mediation and dialogue under the Mediation and Dialogue Law is conducted prior to the court accepting a case relating to a civil, matrimonial, family, business, commercial or labor dispute, petition for recognition of a negotiated divorce or administrative case that falls within the court’s jurisdictional authority as provided for in the Civil Procedure Code and Administrative Procedure Code (Article 1 of the Law). At first glance, it appears that the principle of pre-litigation mediation has been adopted, but according to Article 16 of the Law, the conduct of the mediation or dialogue procedure depends upon the consent of the plaintiff/petitioner and the defendant/respondent. It is apparent that the intention is to rationalize the proceedings to reduce pointless proceedings. A ‘court-based mediator’ (hereinafter simply referred to as a ‘mediator’) refers to a person who is appointed by the chief of a provincial-level people’s court to conduct the mediation of disputes in civil, matrimonial, family, management, commercial, labor and recognition of negotiated divorce cases (hereinafter ‘civil cases’), and dialogue in administrative litigation, in accordance with the Mediation and Dialogue Law (Article 2 (1) of the Law). The Law describes the definitions of ‘mediation’ and ‘dialogue’. That is, as already briefly mentioned, ‘court-based mediation’ refers to mediation activities conducted by a mediator before the court accepts a civil case in order to assist the parties participating in the mediation to agree on the resolution of the civil case (Article 2 (2) of the Law), while ‘court-based dialogue’ refers to mediation activities conducted by a mediator before the court accepts an administrative case in order to assist the parties participating in the dialogue to reach a consensus of opinions on the resolution of the administrative case (Article 2 (3) of the Law). The terms mediation and dialogue are different expressions of the conduct according to the different types of cases in Vietnam, but in essence, they can be combined as ‘mediation’ and the Mediation and Dialogue Law is, in essence, a ‘mediation law’ (however, the following basically follows the text of the legislation). This distinction in terminology used in civil and administrative litigation is thought to stem from the fact that it is understood that a settlement is reached in civil litigation through mutual concessions by the parties, whereas in administrative litigation, the notion of ‘mutual concession’ (concession) by the administrative authority is considered difficult to accept. The “Mediation and Dialogue Principles” in the courts include (i) the voluntary performance of the mediation or dialogue by the parties participating in the mediation or dialogue (hereinafter referred to as ‘the parties’), (ii) respect for the voluntary agreement or consensus of opinion of the parties (non-coercion of an agreement or consensus of opinion that is against the will of a party), (iii) guarantee of equality of rights and obligations between the parties, (iv) confidentiality of information related to the mediation or dialogue case, and (v) adoption of mediation and dialogue methods that are flexible and suitable to the case (Article 3 (1)–(3) and (5) [confirmation of

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Article 4 of the Law, which prescribes confidentiality in detail], (6) and (7) of the Law). Further, (vi) the contents of a mediation agreement or dialogue consensus of opinions shall not violate legal prohibitions, shall not be contrary to social morality, shall not be intended to avoid obligations to the State or other institutions, organizations or individuals, and shall not infringe the lawful rights or interests of other institutions, organizations or individuals” (Article 3 (4) of the Law). In addition, it mentions, in particular, (vii) “the right to use the language and script of one’s own ethnic group” and “if a party participating in a mediation or dialogue is hearing, speech or visually impaired, the right to use the specialist language, symbols and script of the impaired person” and the guarantee of an interpreter or equivalent person (Article 3 (8) of the Law). This is an extremely thorough provision. Furthermore, it also guarantees (viii) “to ensure gender equality in mediation and dialogue and to protect the lawful rights and interests of children” (Article 3 (9) of the Law). This responds precisely to contemporary demands and is in line with international conventions. They are a noteworthy set of provisions that also take into account the SDGs. It also presents a policy where the state encourages the resolution of civil and administrative cases by way of court-based mediation and dialogue, encourages persons who meet the requirements of the Law to become mediators, and develops and supports favorable conditions for court-based mediation and dialogue activities (Article 5 of the Act). The rights and obligations of the parties are as follows. First, as for the ‘rights’, the parties have the right to consent to or refuse to participate in the mediation or dialogue, and to terminate the mediation or dialogue (Article 8 (1) of the Law). Fundamentally, the right to procedural self-determination is guaranteed to the parties. In addition, the parties’ right to select the mediator (right to select from a list of mediators), the right to request a change of mediator, the right to request the arrangement of an interpreter, the right to request confidentiality, the right to submit resolution proposals, the right to request approval of the results of a successful mediation or dialogue, the right to request performance of the contents of the mediation or dialogue agreement, and the right to request the court with jurisdiction to reconsider its decision to approve the results of a successful mediation or dialogue are also recognized (see the sub-paragraphs of Article 8 (1) of the Law). Next, as for the ‘obligations’, the parties are obliged to comply with the law, participate in the mediation or dialogue in a spirit of good faith and cooperation to encourage obtaining proactive results through the process of mediation or dialogue, accurately state the facts and contents of the case, and provide information, materials and evidence relating to the case in a timely and sufficient manner upon request by the mediator (Article 8 (2) (a) and (b) of the Law). Parties are responsible for the veracity of the information, materials and evidence that they provide in the course of the mediation or dialogue.47 There are also provisions on the costs of court-based mediation and dialogue (Article 6 of the Law). There is also a provision on the costs of court-based mediation and dialogue concerning the costs to be covered by the state budget and the costs to be borne by the parties (Article 9 of the Act).

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(2) Mediators The requirements to be appointed as a mediator are a “Vietnamese citizen who is permanently resident in Vietnam, has loyalty to the fatherland and the Constitution of the Socialist Republic of Vietnam, has full civil capacity to act, has good moral qualities, is a model of strict enforcement of the law and satisfies certain requirements”48 (Article 10 of the Law). The authority and duties of a mediator are as follows. Mediators who conduct the mediation of civil cases and dialogue in administrative litigation according to the Mediation and Dialogue Law have the following ‘authority’ (Article 14 (1) of the Law). Namely, (i) the authority to request the parties to submit information, materials and evidence relating to the dispute or litigation and to submit other information and documents necessary for the mediation or dialogue; (ii) the authority to, at the request of a party, check the status of property relating to the dispute or litigation before preparing the minutes approving the results of the mediation or dialogue; (iii) the authority to urge persons of repute to participate in the mediation or dialogue and to refer to the opinions of institutions, organizations or individuals with expertise in the field of the dispute or litigation; (iv) the authority to receive professional, practical and technical training in mediation and dialogue; and (v) the authority to receive remuneration as determined by the Government and rewards as determined by law (Article 15 (1) and (6) of the Law). Mediators also have the following ‘duties’ (Article 14 (2) of the Law); (i) the duty to conduct mediation and dialogue in accordance with the ‘Law on Mediation and Dialogue’; (ii) the duty to conduct mediation and dialogue, independently, impartially, objectively and in accordance with the law; and (iii) the duty to maintain confidentiality. In addition, mediators must not (iv) force a party to participate in mediation or dialogue against their will, or (v) accept money or a benefit from a party. Furthermore, (vi) mediators must refuse the mediation or dialogue if there are circumstances that prevent fairness, and (vii) the contents of an agreement reached in mediation or a consensus reached in dialogue must comply with the law and be in accordance with social morality. Furthermore, (viii) an agreement reached in mediation or a consensus reached in dialogue must not have contents that avoid obligations to the State or other parties, and (ix) in cases where a mediation or dialogue conducted by the mediator has been unsuccessful and referred to the court, the mediator must refuse to participate in the litigation proceedings unless otherwise provided for by law. Mediators are subject to disciplinary action for any illegal behavior (Article 15 (2)–(6) of the Law). Detailed provisions are also defined regarding the appointment, reappointment and dismissal of mediators (Articles 11–13 of the Law). (3) Mediation and dialogue procedures The Mediation and Dialogue Law contains detailed provisions on mediation and dialogue procedures. In brief, they are as follows. In principle, within two business days from the date of receipt of a submitted and confirmed civil litigation complaint or administrative litigation petition, the court

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must notify the plaintiff/petitioner in writing of the option of mediation or dialogue and the right to select a mediator, as provided for in the Law49 (Article 16 (1)–(3) of the Law). The plaintiff/petitioner must reply to the court, in writing or in any other form, regarding the contents of the court’s notice within three business days from the date of receipt of the court’s notice (Article 16 (4) of the Law). If the plaintiff/petitioner submits an opinion consenting to mediation or dialogue, the court shall appoint a judge in charge of mediation or dialogue (Article 16 (4)(a)). In this case, the judge in charge of the mediation or dialogue shall designate a mediator in accordance with Article 17 of the Law within three business days (Article 16 (6)). The court notifies the mediator, plaintiff/petitioner, defendant/respondent and other persons with relevant rights or obligations in writing that the case is referred to mediation or dialogue, together with the document designating the mediator (Article 16 (7) of the Law). The defendant/respondent must reply in writing or in some other form within three business days of receiving the notice as to whether or not it agrees to the mediation or dialogue (Article 16 (8)). In addition, there are also provisions in place regarding the postponement of the expiry of the statute of limitations and observance with the time limit for filing a lawsuit (Article 16 (9)). Mediation and dialogue cases are conducted by a single mediator (Article 17 (1) of the Law). The plaintiff/petitioner must select a mediator from the list of mediators maintained by the court with jurisdiction over the case and notify the court of the name and address of the mediator (Article 17 (2)). Within three business days from the date of receipt of notice of the mediator’s selection, the mediator must send an opinion consenting or disagreeing to the selection in writing to the judge in charge of the mediation or dialogue in the court where the case is to be resolved, to the court where the mediator works and to the plaintiff/petitioner (Article 17 (3) of the Law). Within two business days from the date of receipt of the written notice of the mediator’s consenting opinion, the court where the mediator works must issue a concurring or dissenting opinion on the selection of the mediator and send it to the court with jurisdiction to resolve the case and to the mediator. The mediator is responsible for notifying the plaintiff/petitioner. The court is responsible for designating the mediator (Article 17 (4). See also paragraph (5) for cases where the court itself selects and designates the mediator). If the case concerns a person under 18 years of age, the judge shall designate a mediator who has experience and knowledge about the psychology of persons under 18 (Article 17 (6)). There are also provisions for cases where the mediator must refuse the mediation or dialogue and when the mediator is replaced (Article 18 of the Law). There are also provisions for cases where the court does not (or cannot) conduct mediation or dialogue due to the type of case (Article 19 of the Law). There are provisions on the time period for court-based mediation and dialogue, which is 20 days from the date the mediator is designated, but that period may be extended to 30 days in complex cases (Article 20 (1) of the Law). The parties may agree to extend the mediation or dialogue period, but that period must not exceed two months (Article 20 (2)).

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The ‘preparatory work’ for mediation and dialogue includes the following, namely (i) receiving the complaint and other materials sent by the court; (ii) keeping records in the case file; (iii) examining the complaint or petition and other materials sent by the court; (iv) determining the qualifications of the parties, lawyers and interpreters in the civil case or administrative litigation and informing them about the mediation or dialogue; (v) requesting the parties to supplement the information, materials and evidence and to propose measures or resolutions to resolve the civil case or administrative litigation; (vi) formulating measures or resolutions for the mediation or dialogue; (vii) when necessary in order to assist the mediation or dialogue, urging persons of repute who can have influence on each party to participate in the mediation or dialogue; (viii) when necessary for the mediation or dialogue, examining the provisions of relevant laws and regulations and examining the customs, practices and the circumstances of the parties; (ix) when necessary for the mediation or dialogue, referring to the opinions of institutions, organizations or individuals with expertise in fields related to the civil case or administrative litigation; and (x) other acts necessary for the mediation or dialogue (Article 21 of the Law). The method of court-based mediation and dialogue is as follows (Article 22 of the Act). The mediation or dialogue may take place on one or more dates, either at the court’s main building or at another location. The mediation or dialogue sessions may be conducted in person or in any other appropriate format based on the request of the parties. The mediator may interview the parties in the same room or individually and request each party to express their opinions on the issues related to the civil or administrative case and to propose measures or resolutions for the mediation or dialogue. If one of the parties has a lawyer or interpreter, the mediator must involve them in the mediation or dialogue. In the process of carrying out mediation or dialogue, the mediator has the task of informing the parties of their rights and obligations, provides explanations, providing an environment for the parties to propose and discuss measures and resolutions to resolve the civil case or administrative litigation analyzing the efficiency and feasibility of the measures and resolutions to resolve cases, and assisting the parties to reach an agreement or consensus (Article 23 of the Law). The designation and composition of mediation and dialogue sessions are prescribed in Articles 24 and 25 of the Law. The procedure for court-based mediation and dialogue sessions is as follows (Article 26 of the Act). First, the mediator introduces the members participating in the mediation or dialogue session, describes the necessary details and preparation process for the mediation or dialogue, informs participants of the legal provisions relating to the resolution of the civil case or administrative litigation and explains the legal consequences of successfully concluding the mediation or dialogue. Next, the plaintiff/petitioner or their representative describes the details of the complaint/petition, expresses their opinion on the issues that require mediation or dialogue, and proposes a direction for the resolution of the dispute or litigation. In response, the defendant or their representative expresses their own opinion on the claims made by the plaintiff/petitioner, expresses their opinion on the issues

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that require mediation or dialogue, and proposes a direction for the resolution of the dispute or litigation. In addition, any persons with relevant rights and obligations, or their representatives, express their opinions on the claims of the plaintiff/petitioner and the defendant, express their opinions on the issues that require mediation or dialogue, and propose a direction for the resolution of the dispute or litigation. If there are any other persons who have been urged to participate in the mediation or dialogue, they shall state their opinion. The mediator is to perform the tasks set out in Article 23 of the Law in order to assist the parties to exchange opinions, provide supplementary statements on uncertain details and to reach an agreement or consensus for the resolution of the dispute or petition. The mediator summarizes the matters which the parties have agreed upon and those they have not agreed upon. If the parties have reached an agreement or consensus in the court-based mediation or dialogue, the mediator will hold a conference to approve the results of the mediation or dialogue at the main building of the court with jurisdiction over the case (Article 27 of the Law. For the composition of that conference, see Article 28. For postponement and resumption of the conference, see Article 29). The procedure for the approval conference for the results of a mediation or dialogue is as follows (Article 30 of the Law). First, the mediator outlines the mediation or dialogue process and what the parties have agreed upon or reached a consensus upon. Next, the parties or their representatives express their opinions on what has agreed upon or reached a consensus upon. If the parties are unclear as to what has agreed upon or reached a consensus upon, the judge will ask the parties to provide supplementary statements. The mediator then draws up a minute approving the results of the mediation or dialogue and reads the minute to the parties, as prescribed in Article 31 of the Law. The parties, their representatives and interpreters then sign or fingerprint the minute approving the results of the mediation or dialogue. The judge that participated in the conference reviews and signs the minute approving the results of the mediation or dialogue. The contents of the mediation or dialogue provided by the parties must be kept confidential upon the request of a party. See Article 31 of the Law for more information about the minute. Furthermore, a procedure is taken for issuing a decision of approval or disapproval of the results of the concluded court-based mediation or dialogue (Article 32 of the Law). The court will issue an approval decision if the requirements for approval of the results of the concluded court-based mediation or dialogue are met (Article 33 of the Law). See Article 34 of the Law for information on the matters to be included in the approval decision document. Approval decisions have legal effect and appeals or objections in accordance with the appeal procedures prescribed in the Civil Procedure Code and Administrative Procedure Code are not permitted (Article 35 (1) of the Law). On the one hand, approval decisions for the results of a successful mediation are executed in accordance with the provisions of legislation related to compulsory execution, and on the other hand, approval decisions for the results of a successful dialogue are executed

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in accordance with the provisions of legislation related to administrative litigation (Article 35 (2) and (3)). There are also provisions regarding requests and motions for reconsideration of an approval decision for the results of a successful court-based mediation or dialogue (Article 36 of the Law; see Articles 37–39 regarding the procedure). Mediation and dialogue proceedings terminate in the following circumstances (Article 40 of the Law), namely (i) when the mediation or dialogue is successfully concluded; (ii) when the parties cannot reach agreement or consensus on the entire details of the civil case or administrative litigation, or when the parties can reach agreement or consensus on only part of the civil case or administrative litigation, but that part is related to the other parts of the civil case or administrative litigation; or (iii) if one or more of the parties does not agree to continue the mediation or dialogue, or is absent from two mediation or dialogue sessions despite having been notified in the proper form; (iv) if, in the course of the mediation or dialogue, it is found that the case falls under the cases provided for in Article 19 of the Law (provisions on cases for which the court doesn’t or cannot conduct mediation or dialogue); (v) if, in the course of the mediation or dialogue, one of the parties requests that an emergency preservation order be applied in accordance with the provisions of the Civil Procedure Code or the Administrative Procedure Code; or (vi) the complaint or petition is withdrawn by the party that submitted it. See Article 41 of the Act regarding the handling of the termination of court-based mediation and dialogue.

5.4.3 The Current Situation and Outlook The above is an overview of the Mediation and Dialogue Law that was enacted in 2020. Although a comparison with Japan’s mediation law is a subject for the future, it is interesting that the Mediation and Dialogue Law is not a single, complete procedure for forming a writ of execution in itself, as is the case in Japanese law, but is positioned merely procedure for the disputing parties to form an agreement. The conversion to a writ of execution becomes possible only by going through an approval procedure, in the same manner as for out-of-court settlements. However, this is not a problem if the agreement is voluntarily performed, and, although it depends upon the parties and the case, the existence of a procedure whereby it is converted into a writ of execution by going through that approval procedure can be considered to increase the possibility of voluntary performance even further. Interestingly, there is a procedure for the collection of information and evidence by the mediator. This can of course contribute to the successful conclusion of the mediation or dialogue, but it can also serve as useful evidentiary materials in the subsequent civil or administrative litigation even if the mediation or dialogue is unsuccessful, which may lead to the expedition of the litigation proceedings itself. In addition, the mediation and dialogue procedures provide a procedure for clarifying the points

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of contention, so even if the result of going through the procedure of confirming the points of agreement or consensus is that the mediation or dialogue ends unsuccessfully, depending upon how it is performed (i.e., whether the parties’ arguments and evidence have been accurately organized and the points of contention clarified), it can be appreciated as conducting a procedure that is, so to speak, preemptive to the oral argument preparation procedure in the litigation, which means that the oral argument hearing can be commenced relatively early. Thus, it can be considered that the Mediation and Dialogue Law’s procedures will certainly contribute to reducing the burden on the judges in charge of litigation cases. However, unlike Japan’s judicial mediation system, the procedures corresponding to so-called civil mediation and family mediation are combined in the same legislation. As the need for special procedures based on the specific characteristics of family law cases has been recognized in Vietnam in recent years,50 a consensual procedure that reflects the differences between the two types of cases may be established in the future. Although the actual status of the Mediation and Dialogue Law itself is not necessarily clear, since it has only been in force for a short period of time, according to the 9th January 2022 issue of the “Electronic People’s Court Magazine”,51 the overall assessment is that the Mediation and Dialogue Law has gained the trust and support of the people and is achieving good results. Of the cases referred to the mediation or dialogue procedure, the mediation or dialogue was performed in less than 40% of the cases, and more than 80% of these cases were concluded through the mediation or dialogue procedure. Regarding the types of cases, over 70% of the cases were matrimonial and family-related cases. Future issues which have been identified include the appointment and training of mediators, publicizing the system, developing guidelines, developing facilities for mediation and dialogue procedures, utilizing the system in the courts, support of mediators by court staff, the cooperative attitude of the respondent to the case, establishing cooperation with relevant institutions (e.g. land-related organizations), and the development of statistical practices. The actual procedural practice under the Mediation and Dialogue Law is not necessarily clear and it does not appear that all the issues that were previously identified in the pilot mediation (see Sect. 5.4.1 above) have been overcome. As mentioned above, there are aspects of the procedure that differ from Japan’s mediation law, but the experience of Japan, which saw the 100th anniversary of its mediation system in 2022, can be considered instructive for Vietnam, and the practical implementation of the Mediation and Dialogue Law will continue to be carefully observed in the future. It goes without saying that Vietnam’s Mediation and Dialogue Law has a variety of interesting rules that are not found in Japanese law. In the future, the author would like to ascertain the state of implementation of the Mediation and Dialogue Law while considering its implications for Japanese law.

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5.5 Conclusion—Outlook on the ‘Rule of Law’ and Consensual Dispute Resolution Procedures This article has reviewed the development of consensual dispute resolution procedures in Vietnam. When civil litigation judgment procedures, that is, adjudicative dispute resolution procedures that determine the existence of rights and formulate legal remedies, are established and begin to function, there are rational reasons in terms of legal development for further improvement of those procedures themselves, as well as for turning attention to consensual dispute resolution procedures, with the aim to expand their function and the division and coordination of roles with the adjudicative procedures. When looked at historically, consensual dispute resolution procedures generally emerged in most countries long before formal court procedures came into existence, and were used autonomously based on the social practices of the respective communities. In the countries of southeast Asia too, autonomous dispute resolution procedures appear to have continued to exist in each community even during the period of colonial rule by the Western powers. There must be some just rationale for their continued existence to the present day. For example, consensual dispute resolution procedures have been functioning in Asia as wisdom for autonomy in the community long before Community Boards and other dispute resolution and ADR theories were highlighted to overcome the post-war problem of community breakdown in the United States. This is the case in both Vietnam and Japan. Furthermore, in Vietnam, “grassroots settlements”, which is such a consensual dispute resolution procedure, developed independently outside the court system, and there have been periods where their organization has been given legitimization in the Constitution of Vietnam; their procedures have been standardized through legislation and their procedural validity and legitimacy have also been recognized by the state. Moreover, the general recognition of the significance and value of such consensual procedures has led to the creation of the “mediation and dialogue” procedures, which are consensual dispute resolution procedures within court proceedings. An interesting contrasting historical history can be seen, where on the one hand, the idea of creating court-based consensual procedures (e.g., recommendations, civil mediation and family law conciliation) has been strong in Japan since the early Meiji period,52 while on the other hand, the autonomous dispute resolution capacity of communities in Vietnam was high, such that it was incorporated as a subsystem of the judicial system of governance.53 It is interesting to note that in Vietnam, while respecting such autonomous community consensual dispute settlement procedures to a certain extent, a mechanism has been established to check the substantive and procedural legitimacy of ‘grassroots settlements’ through court approval procedures during the enforcement phase by the state. When looking to the future, even the “grassroots settlements” across the country will have to bear in mind the approval procedure, and the formation of settlements with procedural or substantive problems, such as coerced or illegal settlements, can

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be deterred indirectly or ex post facto, increasing the probability of the realization of the ‘rule of law’.54 The trend towards encouraging out-of-court settlements in Vietnam will also have a certain effect on judicial mediation procedures and litigation settlements under the Mediation and Dialogue Law. It can be thought that both out-of-court and court-based consensual dispute settlement procedures are essentially encouraged in Vietnam. As the Mediation and Dialogue Law incorporates a system for the appointment of mediators and even provides for rewards, the potential for improving the quality of mediators through the proper operation of the law also exists. As has been reviewed in this paper, Vietnam has been expanding ‘access to justice’ in recent years through strengthening and encouraging out-of-court and court-based consensual dispute resolution procedures. Within the developmental history and developmental items of the access theory seen earlier, the “establishment of a comprehensive justice and judicial system including ADR” has been actively promoted, which is a clear indication of the broadening of the base of the justice system. The conversion of the community consensual procedures, which are considered to have been formed autonomously, into a domestic law that has been standardized to a certain extent should lead to a more democratic ‘rule of law’ (or ‘constitutional state’), so to speak. Setting aside the core elements and minimum standards, there is no unequivocally clear, specific and uniform national model or standard for good governance and the rule of law, but can only be created by the people in an autonomous and self-determined manner. When it comes to the ‘rule of law’, from a Western perspective, it is not unusual to examine it in light of the laws of one’s own country and measure the degree of deviation from it, but the value of a so-called bottom-up dispute resolution norm such as Vietnam’s, and of a judicial system that has realized the recognition and embedding of autonomous, consensual dispute resolution procedures conducted by the people, deserve to be more highly valued. This is because, unlike the contents of a judgment in litigation, the parties are guaranteed the opportunity to proactively shape the contents of the remedies on their own initiative whether it be through ‘grassroots settlements’ or ‘judicial mediation’ under the Mediation and Dialogue Law.55 Goal 16 of the SDGs is “peace, justice and strong institutions”, which is translated into Japanese as “peace and fairness for all”. At this time, when large-scale wars are being experienced around the world “in the name of justice”, the translation of the word ‘justice’, which at times is not necessarily self-righteous, into the more universal term ‘fairness’ by focusing on its substance, is an apt translation that hits the mark.56 Not only that, but while legal ‘justice’ tends to be discussed from a national perspective, ensuring ‘fairness’ is considered to be more party-focused and user-friendly. It has an innate substance that is closer to the main purpose of the access theory. The fact that “strong institutions” is translated in Japanese as “for all” also explains the access theory more clearly. The substance, however, is to build “strong institutions” that can guarantee peace and fairness for all people, and from a judicial aspect, such institutions must be nothing other than a “broad-based justice system equipped with diverse and accessible dispute resolution procedures”. It is the people who choose the procedures.

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In this sense, the fact that Vietnam has in recent years not only incorporated consensual procedures into its litigation procedure, but has also taken its historical development into account and incorporated “grassroots settlements” and “judicial mediation” based on the Mediation and Dialogue Law, is considered to have the potential to develop into a “stronger, more democratic judicial system”. Indeed, although it may be considered as a procedure that is bypassed by parties who want a court trial (i.e., judgment) as soon as possible, it does not seem to be a futile procedure, as it incorporates procedures that function to facilitate litigation (in case of failure to reach an agreement) within the consensual procedures. Moreover, in the case of Vietnam, the Mediation and Dialogue Law has detailed procedural time limits, which also guarantees speedy conduct of the proceedings. The detailed procedural rules are significant as a framework for such an autonomous and self-determinative system for formation of conciliatory relief. This is because they are considered more user-friendly than procedural forms that lack transparency in the eyes of the general public, as is the case in Japan, where discretionary powers in procedural aspects are strengthened and room for discretion is expanded under the name of ‘non-contentious’ or ‘non-contentious proceedings’.57 Indeed, in the course of providing legal development support, it is often said that, for example, specifying the duration of proceedings and detailed regulations in the laws of the target country is necessary because the proceedings would not be conducted in accordance with their purpose without such details, unlike in Japan where the purpose will be realized even if the details are not specified. However, the provisions on the duration of proceedings and detailed regulations, although inflexible in some respects, are useful for making the proceedings more visible, which in itself fulfils the responsibility of explaining the progress of the proceedings in advance. The provisions clearly indicate the court’s responsibility to act, which has significance for so-called well-planned court hearings. This recent development of consensual civil dispute resolution procedures in the Vietnamese judiciary can be appreciated as a judicial policy that looks towards desirable democratic legal development in the future, based on the country’s history and with comparative legal considerations also conducted. Japan’s legal development support has now even come to be referred to and promoted as ‘judicial diplomacy’,58 but it is also desirable to present in a friendly manner a variety of ideas that can be chosen, while respecting the history, culture and self-determination of the countries where legal development support is provided. In retrospect, it can be thought of as also suggestive of a more democratic development of civil litigation law and civil procedural law in Japan.59, 60, 61 Endnotes (1)

(2)

This quotation is from Afro-Asian Institute of Japan (Ed.) Materials on the History of Vietnamese Liberation (Vol. 1), Rodojunposha, 1970, p. 142 (in Japanese). Aikyo, Masanori “Vietnamese Constitutional History”, in Aikyo, M., Vietnamese Constitutional History, Nihon Hyoronsha, 1993 (first published 1989), pp. 69, 72 (in Japanese).

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‘Independence—Freedom—Happiness’ referred to here could be called a formulaic letterhead that appears as a title in the top right-hand corner of Vietnam’s constitution and legislation, and symbolically represents the history and aspirations of Vietnam. For an overview, see Cappelletti, Mauro (Japanese translation by Kojima, Takeshi), Access to Justice - Legal Policy and Judicial Reform for the Effective Implementation of Rights, Yuhikaku, 1981 and Kojima, Takeshi, Civil Procedure Law, Yuhikaku, 2013, p. 13 (in Japanese). See, for example, [1] Kawashima, Shiro, “One Aspect of Civil Procedure Reform in Asia: Placing the Focus upon Vietnam”, in Kaneko, Yuka (Ed.), Civil Law Reforms in Post-Colonial Asia; Beyond Western Capitalism (Kobe University Monograph Series in Social Science Research), 101–129, (Springer, 2019); [2] Settlement and mediation procedures, as well as civil litigation procedures, have also existed in South-East Asian countries for a long time and have played an important role in the aspect of civil dispute resolution. Village mediationlike procedures exist in various countries. However, this paper will focus on Vietnam, where the author has been involved in legal development support for many years, and will introduce and discuss the country. However, this paper will exclude arbitration (e.g., international commercial arbitration and investment arbitration), which is another type of consensual procedure. The Law on Enforcement of Civil Judgments was enacted in 2008. It is detailed in Vietnam’s Six Basic Codes, March 2013: ‘Technical Assistance for the Legal and Judicial System Reform (Phase 2)’ (JICA, 2013) (in Japanese). For a Japanese translation of the law, see https://www.jica.go.jp/project/vietnam/ 021/legal/ku57pq00001j1wzj-att/legal_26_20150717.pdf. Regarding the following, see, for example, [3] The following is according to Takeuchi, Tsutomu, “Legal Dispute Resolution in Vietnam: Focusing on Civil Execution Procedures and their Actual Situation”, ICD NEWS (2002) No. 4, p. 4 (in Japanese); Sato, Yasunobu, “Dispute Resolution and Law in Vietnam’s Market Economy Transition: Focusing on Commercial Dispute Resolution Related to Foreign Investment”, in Economic Cooperation Series, Dispute Settlement Systems in Asian Countries, Institute of Developing Economies, JETRO (2003) No. 200, p. 101 (in Japanese), etc. This paper will not particularly consider labor cases. For this, see, for example, [4] Unlike Japan, litigation related to personal status in Vietnam was also regulated by the Ordinance on Procedures for Settlement of Civil Cases. For more information on the circumstances during this period, see [5] This is included in Vietnam’s Six Basic Codes as the “Civil Procedure Code (Previous Law)”. See https://www.jica.go.jp/project/vietnam/021/legal/ ku57pq00001j1wzj-att/legal_24.pdf for a Japanese translation of the law. For example, collegial bodies (a collegial system including people’s jurors), involvement of procurators and cassation trials belong to this category. Some

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of these features are also matters prescribed in Vietnam’s Constitution (e.g., the composition of cassation trials and collegial bodies). See, for example, [6] See, for example, [7] Regarding this point, see the statement by Dang Quang Phuong in the “Proceedings of the 13th Joint Study Conference on Vietnam’s Civil Procedure Code”, ICD NEWS (2005) No. 21, 106, 110 (in Japanese). Phuong was a member of the drafting team and is Deputy Chief Justice of the Supreme People’s Court of Vietnam. Regarding the maintenance of this deliberation period, he responded, “It comes from the current situation in Vietnam. The intellectual level of the people and also the capacity of the lawyers.“ However, it appears that even under the old law, there were very few applications for changes by the parties within that period. See the statement by Phuong, ibid, p. 111. Kaneko, Yuka, “Vietnamese Civil Litigation and Court Dynamics: the Search for a Normative System’, in Asian Legal Development and Legal Development, University Education Press, 2010 (first published 2009), 7, 116 (in Japanese). See Kawashima, supra note 12, p. 209. This drafting method is described in Iseki, supra note 9, p. 91, as a ‘step-by-step type’ of law-making, and is contrasted with that of the ‘immortal canon type’ in Cambodia. Regarding the basic stance of the legal development support, the former appears as an ‘advisory-type’, while the latter appears as a ‘judgment substitution-type’. Ibid, p. 92. On this, see Matsukawa, Mitsuyasu ‘The 37th Training Course for Vietnam Legal Development Support (Civil Procedure Law)’, ICD NEWS No. 47 (2011), p. 179. See Matsukawa, supra note 21, p. 183. Tatara, Shusaku, “Outline of the Revised Vietnamese Civil Procedure Code”, contained in the Civil Procedure Code volume of Vietnam’s Six Basic Codes, 1, 8 (in Japanese) (also available at https://www.jica.go.jp/project/vietnam/ 021/legal/ku57pq00001j1wzj-att/legal_23.pdf). See the same article also for the Japanese translation of the portions of the amended Code which follow. However, some of the translations have been modified. Tatara, supra note 23, p. 9. Regarding the above, see Tatara, Shusaku, “Relevant Legislation on Grassroots Settlements in Vietnam”, ICD NEWS No. 53 (2012), 14, 14 and 16 note (5) (in Japanese). Also available at https://www.jica.go.jp/project/vietnam/021/legal/ ku57pq00001j1wzj-att/legal_25.pdf According to Sakai, Naoki, “Overview of Vietnam’s 2015 Civil Procedure Code”, ICD NEWS No. 68 (2016), 43 (in Japanese). According to this, following the 2011 amendments, the 2013 amendments increased the size of the Code by approximately 100 articles compared to the 2004 Civil Procedure Code. The following is from this paper. For a Japanese translation of the 2015 Amended Civil Procedure Code, see https://www.jica.go.jp/project/vietnam/ 021/legal/ku57pq00001j1wzj-att/legal_20160531_03.pdf.

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(27) In addition to this, there are other amended provisions (including new provisions) related to settlement, for example, rules for cases where the parties have agreed to a temporary stay of the oral argument hearing for the purpose of conducting settlement (Article 259 (1)(dd)), oral argument and settlement in summary proceedings (Article 320 (3)), settlements in divorce proceedings, child support proceedings and post-divorce property division proceedings, etc. (Article 397), and external settlement in international cases (Articles 476 and 477). (28) Incidentally, paragraph (f) is omitted because (f) is not used in Vietnam’s Civil Procedure Code (that is, subparagraph (e) is generally followed by (g)). (29) In the area of Vietnamese civil dispute settlement, the promotion of settlements and the creation of writs of execution concerning the results of out-of-court settlements have been a major issue. For example, Kaneko, supra note 18 at p. 131 note (3), points out that according to documents related to Vietnam held by the University of Washington (Seattle) Law School Library (1969 Draft: Civil and Commercial Code of Procedure), such conversion of a settlement agreement into a writ of execution can be read as the remains of institutional research that focused upon Vietnam’s social customs. In addition, regarding the enactment of the 2004 Civil Procedure Code, according to Iseki, Masahiro, “Features Compared with Japanese Law (Judges, Cassation Hearings, Emergency Preservation Orders, etc.)”, ICD NEWS No. 21 (2005), p. 69 (in Japanese), the institutionalization of settlements by people’s jurors was also contemplated when the 2004 Civil Procedure Code was enacted. However, it was already pointed out that settlements during litigation in Vietnam are also used as a dispute resolution method in order to avoid evidentiary difficulties. See Kaneko, supra note 18, p. 101. (30) Sakai, supra note 26, p. 46. (31) The following is according to Takeuchi, supra note 10, p. 4. (32) The following is according to Sato, supra note 10, pp. 118–119, etc. (33) In Furuta, Motoo, Current Vietnam, pp. 150, 152 (Kodansha, 1996), assesses that Vietnamese society is “a society with a strong village community tradition”, as indicated by the legal proverb “Even the king’s law ends at the village wall”, and that villages that gained autonomy came to have ‘town covenants’ as a codification of the village’s law. It is pointed out that a ‘village code’ becomes ‘town covenants’ when “the king’s law is inferior to the village’s law”. In general, town covenants are centered around provisions relating to festivals and self-government. The former included provisions regarding annual events, religious facilities and ceremonial occasions, while the latter included regulations on the maintenance of public order and the handling of disputes, the maintenance and management of public property such as levees and roads, the payment of taxes to the state, levying of taxes, military service and other village undertakings, the distribution of public fields, and the method of electing village office holders and village finances. See ibid, pp. 152–153.

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(34) The Constitution of Vietnam is contained in the Constitutional Law volume of Vietnam’s Six Basic Codes. Note that the preamble to the Constitution mentions the realization of a ‘high spirit of self-reliance’. (35) Interestingly, Article 127 of the Constitution has provisions on ‘people’s courts’ and it was prescribed within there. The provision on ‘grassroots reconciliation’ has been removed from the current 2013 Constitution. See Aikyo, Masakuni, Yotsumoto, Kenji, Asano, Yoshiyuki (eds.), Collection of Asian Constitutions [New Edition], pp. 1133, 1162 (Akashi Shoten, 2021). However, in the section corresponding to the old law, which provided for dispute resolution at the grassroots level, there is a new section which provides that, “The people’s courts are responsible for the protection of justice, human rights, citizen’s rights, socialist regime, interests of the State, and legal rights and interests of organizations and individuals.“ (Article 102 (3)). The operation of the ‘procedure for approval of out-of-court settlements’ in the People’s Court can be thought of as the embodiment of this provision. (36) The following is from Tatara, supra note 25, p. 14 onwards. This paper is accompanied by a full translation of the relevant legislation, and the following articles are essentially based on it. (37) Sakai, supra note 26, p. 46 note (6). It should be noted that the following is only a provisional view as it is not possible to scrutinize whether the ordinance that has now been upgraded to law is exactly the same in content as the old one. (38) Tatara, supra note 23, p. 1. It appears to be positioned as a settlement procedure that should be conducted as a prerequisite for filing a divorce action (see Article 3(1)(b) of the Ordinance on Grassroots Settlement Organizations and Activities, Article 4 (1)(c) of the Government Protocol Providing for the Partial Implementation of the Ordinance on Grassroots Settlement Organizations and Activities and Article 40 of the Marriage and Family Act). Further, although labor disputes are excluded from the application of reconciliation by ‘reconciliation groups’ (see Article 4 (2)(c) of the above-mentioned Protocol), the Labor Law instead provides for a system of labor mediators, etc. and mediation by a labor mediator is a requirement for filing a labor case (see Article 201 onwards of the revised Labor Act, Article 31 (1) of the amended Civil Procedure Code). (39) Tatara, supra note 25, p. 15. (40) The following is according to Kagawa, Kozo, Vietnamese Labor, Law and Culture: Notes From Hanoi, (Shinzansha, 2006), pp. 190, 191–192 (in Japanese). (41) See, for example, Matsuo Study Group, ‘The Present Situations of Access to Justice in Southeast Asia’, Journal of Legal Studies (2019) No. 61, p. 215 (in Japanese). (42) The following is based entirely on Suzuki, Kazuko, “The 60th Training Course for Vietnam Legal Development Support”, ICD NEWS (2018) No. 76, 171, 171–172. This paper is a report of the details of the ‘The 60th Training Course for Vietnam Legal Development Support’ or the so-called Japan Training

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Course, which was held in Tokyo in June 2018 by the International Cooperation Department of the Legal Training and Research Institute of Japan and invited the Deputy Chief Justice of the Supreme People’s Court and others; it is instructive for understanding the pre-history of the Mediation and Dialogue Law. The author also participated in this training course. The term ‘mediation’ used here is the same term as ‘settlement’ that is used in the 2015 Revised Civil Procedure Code, and although Vietnam does not use a term which corresponds to ‘mediation’ in the laws of Japan and other countries, in view of its substance, it will be described hereafter as ‘mediation’. Suzuki, supra note 41, p. 174. See Suzuki, supra note 41, pp. 174–175. The Japanese translation refers to https://www.moj.go.jp/content/001349696. pdf. Note that some of the translated terms have been changed for the sake of consistency of terminology, etc. in this paper. If the information, materials or evidence provided are forged, the result of the mediation or dialogue will be invalid. If there are indications of a criminal offence, it will be dealt with in accordance with the crime-related legislation. If damage is caused to any other institution, organization or individual, they must be compensated in accordance with the provisions of legislation (Article 8 (2)(c) of the Act). There are obligations to respect the mediator and the related parties, to comply with the mediator’s requests made in accordance with the Mediation and Dialogue Law, to comply with the principles of courtbased mediation and dialogue, and to comply with the content of a mediation or dialogue agreement (paragraphs (c) – (e) of the same section). These requirements include (i) “having served as a judge, court examiner, court clerk, procurator, procurator’s office inspector, civil execution enforcement officer or auditor, being a lawyer or other professional with at least ten years’ experience in the field of work concerned. Further, having good knowledge of the customs and practices and having prestige in the resident community”; (ii) “having experience and skills in mediation and dialogue”; (iii) “having health that guarantees the completion of the assigned tasks”; (iv) “having a training certificate for work in mediation and dialogue issued by the educational institution of the Supreme People’s Court, with the exception of those who have served as judges, court examiners at the level of main examiner and highlevel examiner, court clerks at the level of chief clerk and high-level clerk, prosecutors, civil execution enforcement officers and auditors, clerks of court at the level of chief clerk and high-level clerk, prosecutors, civil execution enforcement officers and auditors” (paragraphs (a) – (d). There are exceptions for cases falling under Article 19 (1), (2), (4), (6) or (7) of the ‘Mediation and Dialogue Law’. For example, due to the 2015 amendment to the Law on the Organization of People’s Courts in Vietnam created, in addition to the various existing tribunals, ‘Family and Juvenile Tribunals’ have also been established within the ‘High People’s Court’ (Article 30 (1)(b)), the ‘People’s Courts of Provinces and Central Run Cities’ (Article 38 (1)(b)) and the ‘People’s Court of Rural

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Districts, Urban Districts, Towns, Provincial Cities and Equivalent Cities’ (Article 45 (1)). See https://www.jica.go.jp/project/vietnam/021/legal/ku57pq 00001j1wzj-att/legal_47_20150428.pdf. When compared to the Japanese legal system, these tribunals correspond to the courts responsible for family and juvenile cases in the Family Court. https://tapchitoaan.vn/bai-viet/thoi-su/nguoi-dan-tin-tuong-va-ung-ho-nenviec-trien-khai-luat-hoa-giai-doi-thoai-tai-toa-an-dat-ket-qua-tot5672.html. See Kawashima, Shiro, The Law of Summary Relief in Civil Litigation (Kobundo, 2020), p. 257. For more on some aspects of grassroots autonomy and dispute resolution in Myanmar, see Kaneko, Yuka, “Colonial Land Law and Modern Land Law Reform”, in Kaneko, Yuka (ed.), Market Reform and Civil Law: The Search for Legal Systematization and Issues in Legal Development Support, Kobe University Press, 2019 (in Japanese). In this respect, compared to a system like Japan’s, where the judge that writes the judgment also presides over the settlement during litigation and, in principle, the details of the settlement are not checked by another judge, it can be thought that a procedure for ensuring fairness is guaranteed in the “grassroots settlement”. In the case of Japan, although settlement during litigation may be considered as a rightful path to avoid judgment by a judge, it can also be appreciated as a system that promises the possibility of developing a procedural forum in which the parties can exercise their own initiative. On this point, see also the valuable remarks in Kaneko, supra note 18, p. 103. However, from practical experience in Japan, for example, as observed in labor-related cases where a case that ends in a settlement during litigation flows into a mediation case at the Labor Relations Commission, it seems that even in Japan there are at least a few aspects of untransparent proceedings that depend on the individuality of the judge. For example, see Kawashima, Shiro, “’ICT Transformation of Civil Trials’ and Access to Litigation Records - On the Occasion of the ‘Interim Draft on the Amendment of the Code of Civil Procedure (IT Transformation-related)’”, Doshisha Hogaku No. 425, 25, p. 26 note (3), etc. See, for example, Kawashima, supra note 6, p. 22. In addition, caution must be taken regarding non- contentious cases in Japan. This is because it also includes proceedings related to cases in which there is a dispute between the parties. Therefore, even if there is a dispute between the parties, it may be regarded as a non-litigation case, and as a result, many provisions which are cautious and elaborate procedures such as litigation proceedings are not applied to non-contentious case proceedings in Japan. According to several judgments of Japanese Supreme Courts, Articles 32 and 82 of the Constitution in Japan do not apply to non-litigation proceedings. See Matsui, Nobunori, “Towards the Promotion of Judicial Diplomacy”, ICD NEWS (2018) No. 77, 1, 1.

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(59) See Shiro Kawashima, “Legal Development Support and the Introspective Perspective Gained Through the Process: From the Perspective of a Civil Procedure Law Researcher”, ICD NEWS (2011) No. 48, p. 1. (60) Furthermore, the establishment of ICT-implemented judicial systems has recently become a pressing issue worldwide under the COVID-19 pandemic. The extent to which ICT-implemented consensual dispute resolution procedures conducted in a virtual space provide convenience and results for the parties concerned compared to consensual dispute resolution procedures conducted in a physical space should be examined in the future. The impact of ICT systems on the success or failure of reaching consent is also interesting. For the time being, regarding ICT in civil courts see, for example, Kawashima, Kasahara and Ueda, supra note 5. (61) This article is the revised English edition of “Recent Developments of the Court-annexed ADR in Vietnam” that is the article I published in Doshisha Hogaku (2022), No. 431,1 (in Japanese).

References 1. Kawashima, S., Kasahara, T., & Ueda, T. (2021). Historical development of the theory of ICT transformation in civil trials, Nihon Hyoron Sha (in Japanese). 2. Kawashima, S. (2020). Procedure in Vietnam from the viewpoint of Japanese technical legal support. B. Jaluzot (Ed.), Japanese Law, French Law, What Reform?, Carl Heymanns Verlag (pp. 239–250) (in French), etc. 3. Iseki, M. (2007). Vietnam’s civil procedure code. In K. Kagawa, Y. Kaneko (Eds.), Legal development support theory—Introduction to international cooperation in institution building (pp. 85–86). Minerva Shobo (in Japanese). 4. Saito, Y. (2007). Labor law and trade unions in Vietnam, Akashi Shoten, p. 116 (in Japanese). 5. Kawashima, S. (2018). One aspect of civil procedure law reform in Asia—Focusing on legal development support related to the enactment of the civil procedure code in Vietnam. Doshisha Hogaku, No. 396, pp. 189, 197 (in Japanese). 6. Hazard, G., Leubsdorf, J., & Bassett, D. (2011). Civil procedure, 6th ed., Foundation Press, p. 4. 7. Kawashima, S. (2013). Civil procedure law, Nihon Hyoron Sha, pp. 603, 625.

Chapter 6

Asset Preservation Procedures and Compulsory Execution as Basic Framework for Debt Recovery in the ASEAN Late-Developing Countries Yoshifumi Akanishi Abstract This chapter attempts at a comparative study focusing on the legal systems of asset preservation procedures and compulsory execution, which form the basic framework for debt recovery and hence facilitate the economic activities, with a particular focus on Vietnam, Indonesia, and Myanmar during their rapid economic growth, and comparisons with Japan as one of the major donors in legal assistance. Some recommendations cover the clarification of requirements for preservation measures and execution procedures for litigation and arbitration procedures, the grounds of objection in such procedures to be arranged, utilizing property registration as a means of public notice of preservation measures and execution, and also treating registration as the standard for handling opposing claims when a transaction is made in violation of a preservation measure or seizure.

6.1 Introduction The main purpose of this joint research is to measure whether there is any interrelationship between the legal system and the economy, and if so the extent of such relationship, in ASEAN’s late-developing countries that are undergoing remarkable economic growth. As a contribution to this project, the author proposes that as an economy develops, various types of transactions naturally become more active and rights and obligations arise accordingly, and since the introduction of foreign capital is important for economic development, it is assumed that a mechanism for enabling the smooth recovery of debts is essential for maintaining and developing economic growth as basic infrastructure, in order for creditors (including foreign investors) to feel assured when making investments and enter transactions. Therefore, this chapter will perform a comparative study focusing on asset preservation procedures and compulsory execution, which form the basic framework for debt recovery. In addition, the target countries of this chapter have been narrowed down to Vietnam, Y. Akanishi (B) Ex Osaka Hight Court, Fuji Partners Law Office, Attorney-at-Law, Kyoto, Japan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_6

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Indonesia, and Myanmar, and comparisons with Japanese law have been included. Securities and their execution should also be considered in relation to debt recovery, but they will not be addressed in this chapter. Since the purpose of this chapter is to ascertain an overview of the problems, it will be limited to establishing some indicators and comparing the outlines of each country’s systems, and some recommendations will be made from the viewpoint of efficient execution. The basic framework for debt recovery presupposes that rights (claims) are efficiently recognized by a reliable institution such as a court and according to fair rules, and that there are preservation procedures and execution procedures (for the purposes of this paper, compulsory execution procedures) as the system for efficiently recovering the recognized claims. In other words, the ability to reliably and efficiently recover, within a certain and reasonable period of time, the various claims which arise from the contracts and transactions between domestic and foreign companies and individuals due to the development of economic transactions is basic infrastructure for the stable development of economic transactions. Asset preservation procedures involve the assertion of a right and the provisional recognition of a certain right or position before the debt is formally recognised, in order to prevent the debtor from concealing their assets, with the purpose of preventing a situation where the debt is recognised in a winning court judgment or arbitration award but cannot be recovered due to the debtor transferring their property. Compulsory execution is a process where the claim is forcibly realized by the use of the state’s authority to seize and sell the debtor’s assets, in cases where the debtor does not voluntarily perform its obligations after the formal recognition of the claim. This paper will focus on the execution of monetary claims, and mainly focusing on real estate as the target of the execution process. Because it is difficult to compare the details of each country’s practical implementation of the procedures in detail, and it is not necessarily in line with the purpose of this research, for convenience the points listed in the next two sections will be used as indicators in this paper. Then, there will be an examination from the viewpoint of facilitating the economy regarding whether there are any common issues between the ASEAN countries and what kind of differences there are.

6.2 Asset Preservation Procedures (Provisional Seizure Procedures) The following factors have been considered regarding asset preservation procedures. (1) Relationship with substantive dispute procedures (whether foreign arbitration procedures are included) (2) Method of preserving monetary claims (provisional seizure procedure)

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Substantive requirements for issuance of an order Possibility of petitioning before commencing a substantive procedure Provision of security and the amount Restrictions on length of the order’s period Appeals and suspensions Execution and publication Effect of breaching a preservation measure.

6.2.1 Vietnam (1) Relationship with substantive dispute procedures Civil litigation is the standard procedure, and preservation can also be sought when the substantive dispute procedure is domestic commercial arbitration, but there are no preservation measures premised on foreign arbitration. The purpose of the procedure is to avoid irreparable loss and ensure the execution of the judgment [1]. (2) Method of preserving monetary claims There is a procedure called an emergency preservation measure. This will freeze bank accounts and the debtor’s assets,1 but the creditor is required to show that the debtor owns the relevant assets. (3) Substantive requirements for issuance of an order The existence of preservatory rights is not explicitly prescribed, but since petitioning for preservation before the filing of the substantive claim is not allowed (Vietnam CPC, Article 99 (2)), it seems to be premised upon being evidenced prima facie from the evidence attached to the complaint.2 Regarding the necessity of preservation, it is prescribed that “the petitioner must provide the court with evidence demonstrating the need to apply the emergency preservation measures.” (Vietnam CPC, Article 117 (1)(e)). (4) Possibility of petitioning before commencing a substantive procedure It is not possible to file a petition prior to commencing a substantive procedure, because it is prescribed that “in urgent cases where it is necessary to immediately preserve evidence or to prevent possible serious consequences, a relevant individual, agency or organization may file an application to request the competent court to issue a decision to apply the emergency preservation measures prescribed in Article 102 of this Code simultaneously with the filing of an application to initiate a lawsuit in the 1

Articles 99, 102 and 112–114 of Vietnam’s Civil Procedure Code (as enacted on 15 June 2004 and hereinafter referred to as the “Vietnam CPC”). 2 Claim Recovery Legal Systems, 4. Vietnam, p. 52.

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relevant court” (Article 99 (2), Vietnam CPC). This point also applies to emergency preservation measures under commercial arbitration.3 (5) Provision of security and the amount Security is necessary and “must be the same amount as the proprietary obligation to be performed by the debtor” (Article 120 (1), Vietnam CPC). In other words, because it requires the security to be the same amount as the amount being claimed, without considering the value of the property to be seized, it can become a large amount and is an impediment to petitioning for preservation.4 (6) Time limit for issuing an order When an application for emergency preservation measures is made at the same time as commencing a lawsuit, the decision is to be made within 48 h (Vietnam CPC, Article 117 (3)), but this is not complied with and delays by the executing agency in response to decisions on preservation measures regarding arbitration awards are often seen.5 (7) Appeals and suspensions A party may file an objection to the chief judge of the competent court against a decision to apply, change, or cancel an emergency preservation measure, and there is a provision that the chief judge must resolve the objection within three business days after receiving it (Vietnam CPC, Articles 124 ~ 125). However, it cannot be said that matters such as the specific grounds for filing an objection and the accompanying conditions for suspending the execution of a measure have been established, so these issues remain unclear. (8) Execution and publication According to Article 102 of the Vietnam CPC, the execution of preservation measures involves the seizure of the disputed property, the prohibition of transferring property rights and the freezing of accounts with banks and other institutions. However, regarding seizure as an example, it is prescribed that “until a decision of the court is issued, the seized property shall be kept and preserved at the office of the judgment execution agency, or the management of the property may be requested in writing to one of the parties or to a third person” (Vietnam CPC, Article 108) and it seems there are no provisions regarding the use of the registration system. (9) Effect of a breach It is unclear, but because there are no specific provisions, it is inferred that breaches are thought of as being invalid absolutely.

3

See Footnote 2. See Footnote 2. 5 Claim Recovery Legal Systems, 4. Vietnam, p. 53. 4

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6.2.2 Indonesia (1) Relationship with substantive dispute procedures Article 226 of the Indonesia’s revised Procedure Law (which was enacted during the era of Dutch colonial rule,6 hereinafter referred to as the “Indonesia Procedure Law”) provides for the seizure of movable property, and Article 227 provides that “prior to the delivery of a judgment under which the debtor loses, or prior to the execution of the relevant judgment, if there is a reasonable suspicion that the property will be hidden or concealed, regardless of whether it is movable property or real estate, then at the request of a party, the chief judge of the district court … shall order the seizure of the relevant property.”7 Based on this, it seems that a petition is filed with the competent court on the premise of civil litigation before the court. Since domestic arbitration and foreign arbitration awards can also be executed via a court’s execution order,8 it is thought that preservation measures are possible, but it is unknown whether there are any actual examples. The execution of foreign judgments is not recognised.9 (2) Method of preserving monetary claims It is prescribed that in the case of seizure of property described in (1) above, the person subject to the seizure “shall not move or mortgage the relevant property or lease it to a third party” (Indonesia Procedure Law, Article 199 (1)), which appears to have a similar function as provisional attachment under Japanese law. (3) Substantive requirements for issuance of an order The right to be preserved and the necessity of preservation (when there is a reasonable suspicion of hiding or concealment) need to be proved. In practice, the right to be preserved must be proved to the same extent as in substantive litigation.10 On the other hand, if the right to be preserved is proved, the necessity of preservation is easily recognized.11 (4) Possibility of petitioning before commencing a substantive procedure In practice, petitions are only allowed at the same time as or after the filing of the substantive litigation. In the past, petitions prior to the substantive litigation were accepted, but it is said that cases of the process being abused by not filing the substantive litigation were conspicuous.12 6

Nobuo Fukui, “Survey research on the legal system and actual implementation of compulsory enforcement, civil preservation and execution of security rights in Indonesia”, website of Japan’s Ministry of Justice (hereinafter referred to “Fukui Research Report”), p. 7. 7 A Japanese translation of the relevant provisions is provided in footnote 4 on page 26 of Fukui Research Report. 8 Fukui Research Report, pp. 28–30. Pages 29 and 30 of Fukui Research Report state that compared to domestic arbitration, the enforceability of foreign arbitration is often denied. 9 Fukui Research Report, p. 30. 10 Claim Recovery Legal Systems, 6. Indonesia, p. 76. 11 See Footnote 9. 12 Fukui Research Report, p. 15.

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(5) Provision of security and the amount Security is not required in practice.13 Due to this, there was no psychological restraint on a petitioner filing a petition and the number of abusive pre-litigation petitions increased. Thereafter, the practice has been to not accept pre-litigation petitions and the courts have become cautious about issuing preservation orders, such that it is said that the system is rigid and ineffective.14 (6) Time limit for issuing an order Although there is no time limit, it often takes a long time to be issued because the trial of the substance of the litigation proceeds cautiously; it is said that in the South Jakarta District Court it takes an average of about four months from the filing of a petition until a decision is made.15 (7) Appeals and suspensions This issue is not clear. (8) Execution and publication An order is executed by a bailiff and two witnesses appointed by the court. Only the disposal of the property is prohibited, and the possession, use and receipt of income by the debtor is not prohibited. Regarding publication, preservation measures against real estate are registered in the land register. Regarding deposit accounts, the bailiff attends the financial institution to freeze the account.16 (9) Effect of a breach It is unclear, but because there are no specific provisions, it is inferred that it is understood as being invalid absolutely.

6.2.3 Myanmar (1) Relationship with substantive dispute procedures A petition is filed with the court hearing the substantive civil litigation. Arbitration procedures are also eligible, but foreign litigation and arbitration procedures are not eligible.17 13

Fukui Research Report, p. 17. Fukui Research Report, p. 18. 15 See Footnote 13. 16 See Footnote 14. 17 Claim Recovery Legal Systems, 7. Myanmar, p. 84. 14

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(2) Method of preserving monetary claims Attachment before judgment is prescribed in Order 38, Rule 5 of the Code of Civil Procedure (hereinafter, references to Order and Rule numbers refer to the Code of Civil Procedure). If the debtor disposes of all or a part of his assets or transfers them outside of the jurisdiction in order to hinder or delay execution, the court can order the debtor to provide as security the relevant assets or other assets to the same value. Further, a temporary injunction (Order 39, Rule 1) or interim sale order (Order 39, Rule 6) may be issued in relation to the subject of the litigation; where the subject of the litigation is movable property or money, the court may order for them to be deposited into the court. (3) Substantive requirements for issuance of an order As an order for pre-judgment attachment is issued during litigation (“at any stage of the suit”, Order 38, Rule 5 (1)), on the presumption that the right to preservation has been prima facie evidenced, it is understood as meaning the necessity of preservation is required. The necessity is based on the possibility that the debtor will dispose of or move assets with the intention of hindering or delaying the execution of the judgment. The standard of proof is unclear. (4) Possibility of petitioning before commencing a substantive procedure As described in (3) above, it is understood that a petition cannot be filed prior to litigation. (5) Provision of security and the amount Although there is a provision for the debtor to provide security as a form of executing the preservation measure, no provisions were found that require the petitioner to provide security. (6) Time limit for issuing an order No provisions regarding time limits were found. (7) Appeals and suspensions There are no provisions that clarify appeals or suspension of execution of preservation measures. Claims are investigated under the same rules that apply when appealing the execution of a judgment regarding a monetary obligation (Order 38, Rule 8). (8) Execution and publication Pre-judgment attachment is executed in the same way as attachment at the time of execution of a judgment (Order 38, Rule 7). As will be described below, execution is via the traditional method of beating a drum and affixing the attachment order to the property. It is unclear whether the registration of pre-judgment attachment is performed under a commission from the court (this is a similar problem as in the case of compulsory execution).

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(9) Effect of a breach There are provisions which state that pre-judgment attachment does not affect the rights of third parties acquired prior to the attachment and does not prevent a creditor from selling the attached property (Order 38, Rule 10). From this, it is presumed that following pre-judgment attachment, transactions which breach it will be invalid.

6.2.4 Japan (1) Relationship with substantive dispute procedures The court with jurisdiction over the substantive dispute and the court with jurisdiction over the location of the subject property both have jurisdiction. Eligible procedures include litigation procedures and arbitration procedures. (2) Method of preserving monetary claims Provisional seizure is the method. (3) Substantive requirements for issuance of an order The right to be preserved and the necessity of preservation both need to be shown with prima facie evidence. (4) Possibility of petitioning before commencing a substantive procedure It is possible and is a means of maintaining, from amongst the debtor’s assets, appropriate assets that are equivalent to the amount of the debtor’s liability in order to preserve the payment of the monetary claim and secure future execution. This is because it is necessary to prevent the debtor concealing property or changing the current situation before the filing of a substantive procedure. (5) Provision of security and the amount Security is needed in order to guarantee the damage that the debtor may incur. The amount of security is determined under the court’s discretion. In the case of provisional seizure, it depends on the value of the property to be provisionally seized, but also on the degree of evidence of the right to be preserved. In the case of real estate, it is generally about 10–20%.18 (6) Time limit for issuing an order Although there are no particular provisions, in the Tokyo District Court the practice is that the creditor appears before a judge, and after security is provided (usually within 7 days), consideration of the application commences immediately and a decision is made promptly, which is served upon the debtor about one week after the decision (according to the court’s homepage). 18

The Legal Training and Research Institute of Japan (Ed.), civil advocacy education material “Revised Civil Provisional Remedies”, pp. 25–28.

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(7) Appeals and suspensions A person who disagrees with a preservation order can file an objection in the court that issued the order (Article 26 of the Civil Provisional Remedies Act). Further, although there is a system for the suspension of execution due to the filing of an objection, it is limited to cases where the circumstances are clear that the preservation order will be revoked or where there is prima facie evidence that there is a risk of irreparable damage due to execution of the preservation order. (Article 27 of the Civil Provisional Remedies Act). (8) Execution and publication The provisional seizure of real estate is executed by the court that is executing the order commissioning the registrar to register the provisional seizure (Article 47 of the Civil Provisional Remedies Act). (9) Effect of a breach Provisional seizure prohibits the debtor from setting security over the subject property or disposing of it in any way, and the effect of any such breach is denied in relation to the execution procedure. If the debtor disposes of the property in breach of the order, the relevant transaction will be valid between the debtor who is the party to the transaction and the third party (procedural relative validity). Tabulating the above summary produces the following (Table 6.1).

6.2.5 Comparative Analysis Comparing the requirements described above, the ASEAN countries have a negative tendency towards foreign litigation and foreign arbitration being the substantive procedure. This should be examined for the introduction of foreign capital in the future. The ASEAN countries have provisional seizure processes for the preservation of monetary claims, but do not permit applications before the commencement of the substantive procedure, and the emphasis is on examining the right to be preserved rather than the necessity of preservation. From the point of view of the significance of preservation measures, it is desirable to allow for applications prior to commencing the substantive procedure and not make it too difficult to prove the right to be preserved. As a prerequisite of this, it will be necessary to develop means to allow the creditor to ascertain the debtor’s assets prior to commencing the substantive procedure. A system in which an executing agency or a court investigates and ascertains the debtor’s property, rather than the creditor, would be burdensome and inefficient. Regarding security, it is not required in Indonesia but there is concern about the ability to file petitions being abused, while in Vietnam, the fact that the amount of security is too high hinders the active use of the system. Consideration of setting an amount of security so as not to allow abuse of preservation petitions is desirable.

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Table 6.1 International comparison of preservation procedures Vietnam

Indonesia

Myanmar

Japan

(1)

Relationship with substantive dispute procedures

Civil litigation and commercial arbitration Foreign arbitration is excluded

Civil litigation Domestic and foreign arbitration as well? Foreign litigation is excluded

Civil litigation Domestic arbitration Foreign arbitration and litigation are excluded

Civil litigation Arbitration procedures

(2)

Methods of preserving monetary claims

Emergency preservation measure Asset freezing

Property seizure order

Pre-judgment attachment (of the asset or an equivalent sum) Temporary injunction

Provisional seizure

(3)

Substantive requirements for issuance of an order

Right to be preserved is proven using the evidence attached to the complaint Necessity of order

Right to be preserved is proven to the same extent as in substantive litigation Necessity of order is easily recognized

Ordered during litigation Degree of proof of necessity of order is unclear

Right to be preserved Necessity of preservation Both shown with prima facie evidence

(4)

Petitioning before commencing a substantive procedure

Not permitted

Not permitted in practice

Not permitted

Possible Necessity of preventing hiding or changing of assets before commencing litigation

(5)

Provision of Necessary security and the Same value as amount amount being claimed

Not necessary (criticized for leading to abuse)

Unclear whether the petitioning creditor must provide security

Necessary Court’s discretion About 10% ~ 20% for seizure of real estate

(6)

Time limit for Order is to be issuing an order issued within 48 h, but is not being complied with

No provisions. A long time is required for order to be issued

No provisions

No provisions About 2 ~ 3 weeks from petition (continued)

6 Asset Preservation Procedures and Compulsory Execution as Basic …

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Table 6.1 (continued) Vietnam

Indonesia

Myanmar

Japan

(7)

Appeals and suspension of execution

Specific grounds to object and conditions for suspending execution are unclear

Unclear

Same rules as judgment execution (uncertain)

Objection to preservation Suspension of execution is limited

(8)

Execution and publication

Seizure and preservation; no provisions for registration

Executed by bailiff and two witnesses Registered against real estate

Same method as judgment execution Unclear whether registration is commissioned

Registration of provisional seizure is commissioned

(9)

Effect of a breach

Absolutely invalid?

Absolutely invalid?

Absolutely invalid?

Valid between parties to transaction (debtor and third party), but cannot be asserted by purchaser

(Summarized by the author)

Some countries have provisions on the time limit for issuing orders, while other countries do not, but the fact that it takes a long time in all countries acts as a bottleneck in the active use of the system. In each ASEAN country, the specific requirements for an appeal or for the suspension of execution of an order are unclear. Clarification of the public notice methods is desirable. Registration of provisional seizure is desirable for clarification of public notice to external parties and for the handling of objection issues. The effect in the case of breach of preservation measures is not clear in the regulations, though it is presumed that a violation is considered invalid in each ASEAN country. Such effect should be clearly provided by the law as a basis to facilitate the economic transactions in each member country.

6.3 Execution Procedures The following factors have been considered regarding execution procedures. (1) Writ of execution The enforceability of foreign judgments and foreign arbitration awards becomes a problem from the viewpoint of the introduction of foreign investment.

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(2) Executing agency Other than a bailiff, does the court which delivers judgment become the executing agency, or is a separate execution court or administrative body other than a court responsible? Also, what is the expertise of bailiffs? (3) Time limits Are judgments executed within a reasonable period? (4) Identification of target assets Does the creditor identify the assets in advances, or does the court or other executing agency investigate and identify the assets? (5) Execution methods What are the seizure and sale methods? (6) Asset valuation Are reliable valuations made? (7) Appeal system (suspension of execution) The reliability of the procedures and improving efficiency are major factors. (8) Method and effect of seizure Is registration an execution method? What is the effect of transactions which violate the seizure? (9) Multiple applications It is predicted that the number of cases where there are multiple creditors will increase due to the vitalisation of the economy, so what are the methods for handling this? (10) Problems.

6.3.1 Vietnam (1) Writ of execution In addition to finalized judgments and decisions, there are retrial and cassation review decisions (a cassation review is commenced by filing an appeal to the Chief Justice of the Supreme Court when there has been a serious error in the application of the law). Civil judgments by a foreign court and foreign arbitration awards and commercial arbitration awards that have been approved and given permission to be executed in Vietnam by a Vietnamese court are also included. Although Vietnam is a party to the New York Convention, in practice the approval and execution of foreign arbitration awards is left to the broad discretion of the Vietnamese courts.19 19

Claim Recovery Legal Systems, 4. Vietnam, p. 48–49.

6 Asset Preservation Procedures and Compulsory Execution as Basic …

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(2) Executing agency Civil judgment executing agencies and bailiffs (appointed by the Minister of Justice) under the Ministry of Justice and the prefectures, which are separate from the courts, are responsible for execution (Articles 11–17 of the Vietnam’s Law on Enforcement of Civil Judgments, dated November 14, 2008; hereinafter referred to as the “Enforcement Law”). There is criticism that effective execution is not being implemented due to the lack of expertise of bailiffs.20 (3) Time limits A party can apply for execution within five years from the date that the judgment, etc. took effect (Article 30 of the Enforcement Law). The head of the executing agency issues an order to execute the judgment within five days from the date that the application for execution of the judgment is submitted (Article 36 (2) of the Enforcement Law). (4) Identification of target assets The executing agency, not the creditor, investigates and identifies the assets, but this is not functioning effectively.21 (5) Execution methods Compulsory execution is carried out (Article 46 (1) of the Enforcement Law) after a 15-day period for voluntary performance has passed (Article 45 (1)). Execution methods include a decision to make a deduction from the debtor’s bank account and seizure and sale of the debtor’s assets (Article 71). Real estate is auctioned by an organization responsible for conducting auctions (a government-operated auction centre or a private auction company) (Article 101). (6) Asset valuation The bailiff will respect the parties’ decision if they agree upon the value, but if there is no agreement, an asset valuation organization (a private company supervised by the Ministry of Finance) will be requested to perform a valuation (Article 98 of the Enforcement Law). There is criticism that the asset valuation organizations are unreliable, and that valuations must be repeated many times.22 (7) Appeal system (suspension of execution) A party may appeal against a decision or action of an execution agency or bailiff if there are grounds to believe that it breaches the law and violates the party’s legal rights or interests (Article 140 of the Enforcement Law). There are no provisions on specific reasons for an appeal. In addition, there are provisions which state that execution is suspended “when a dispute concerning the seized property arises and a petition for its resolution is filed with a court” (Article 48 (1)(d)), execution of a 20

Claim Recovery Legal Systems, 4. Vietnam, p. 51. Claim Recovery Legal Systems, 4. Vietnam, p. 47. 22 See Footnote 20. 21

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Y. Akanishi

judgment is provisionally suspended when “a decision to provisionally suspend the execution of the judgment is received from a person who has the authority to appeal the judgment or decision” (Article 49) and execution of the judgment is suspended due to the death of the debtor (Article 50), but there are no provisions such as the requirements for suspension of execution that are linked to a party filing an appeal. Further, the handling in practice is unclear. (8) Method and effect of seizure There is a provision that states the bailiff is to notify the parties and executing agency of the seizure in advance and prepare a seizure report (Article 88 of the Enforcement Law), but there is no provision regarding registration of the seizure. The judgment execution decision is sent to the parties, related persons and the People’s Committee at the town or village level where the execution will be carried out (Article 38 of the Enforcement Law). In addition, there are provisions for public notice and notification in the media when the address of the person to be notified is unknown (Articles 42 and 43). However, because such notice does not have the effect of prohibiting disposal of assets, there is criticism that it is not possible to prevent the debtor from concealing their assets.23 (9) Multiple applications The decision to execute a judgment is made for one creditor, but several judgment creditors can participate in a single judgment execution procedure if applications for execution are submitted by several creditors at the same time, or where a creditor submits an application for judgment execution within thirty days of receiving notice that there has been an execution decision made against the debtor.24 In this case, after deducting the execution costs, etc. from the amount obtained via the execution, the funds will be applied in the order of priority claims, litigation costs, and other claims, and will be apportioned according to the amount of claims among creditors who are ranked equal in priority (Article 47 of the Enforcement Law).

6.3.2 Indonesia (1) Writ of execution An application is made to the court that heard the substantive procedure. The execution of domestic arbitration awards is possible via an execution order being added by a court. Foreign arbitration awards can be executed by filing an application for execution with the Central Jakarta District Court, which will issue an execution

23

See Footnote 22. Article 5 (3) of Decree No.58/2009/ND-CP dated 13th July 2009 on the implementation of the Law on Enforcement of Civil Judgments.

24

6 Asset Preservation Procedures and Compulsory Execution as Basic …

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order if the requirements such as not violating the public order are met. The enforcement of foreign judgments is not permitted.25 Indonesia is a party to the New York Convention. (2) Executing agency Execution is by the executing court and performed by a bailiff and two witnesses Article 197 (2) and (6) of the Indonesia Procedure Law). (3) Time limits No time limits are prescribed. (4) Identification of target assets The provisions are unclear, but it is presumed that the creditor making the application identifies the assets. (5) Execution methods Real estate is subject to seizure and auction. However, there are no clear provisions regarding the execution of a credit.26 The majority of auctions are performed by a national asset auction agency that is under the jurisdiction of the Ministry of Finance. (6) Asset valuation There are no provisions on who performs valuations. (7) Appeal system (suspension of execution) A debtor who objects to execution or a third party who asserts ownership of a seized item can file an appeal to the district court that is executing the relevant decision (Articles 207, 208 and 195 (6) of the Indonesia Procedure Law). Such an appeal does not have the effect of suspending the execution procedure, but there is an exception where the chief justice can order deferral of the execution (Article 207 (3)). However, in practice, because the filing of appeals is abused, which is accompanied by a suspension of execution, it is said to hinder the smooth progression of execution.27 (8) Method and effect of seizure A seizure report is prepared and published. Regarding real estate, the seizure report is transcribed to the land register (Article 198 of the Indonesia Procedure Law). The person who is the subject of a seizure is prohibited from transferring, offering for a mortgage or leasing the relevant items from the day that the seizure report is published (Article 199 (1) of the Indonesia Procedure Law). However, there are no provisions regarding the effect of such actions in the case of a breach. It is inferred that it is understood as being invalid absolutely. 25

Fukui Research Report, p. 27–30. Fukui Research Report, p. 25. 27 Fukui Research Report, p. 26. 26

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Y. Akanishi

(9) Multiple applications After questioning the debtor and creditors, the court prescribes the method for distributing the funds that are obtained from converting the assets to cash (Articles 201, 202 and 204 (1) of the Indonesia Procedure Law). The court will then prepare a distribution table and send it to the person responsible for conducting the auction (Article 205).

6.3.3 Myanmar (1) Writ of execution As a general rule, an application for execution is made to the court that delivered the decision. The writ of execution is called a Decree. Although there is an arbitration law that allows for the execution of domestic arbitration awards, there have been no confirmed examples of an arbitration award being executed.28 Regarding the enforcement of foreign arbitration awards, Myanmar became a party to the New York Convention in 2013 and the Arbitration Law came into force in 2016. Recently (in 2020), it has been reported that an arbitration award by the Japan Commercial Arbitration Association (“JCAA”) was approved and enforced in Myanmar [2]. (2) Executing agency The court that delivered the judgment and a bailiff performs the execution. Bailiffs are young judges, and it has been noted that they lack experience [3]. (3) Time limits In principle, 12 years from the date that the Decree is issued (Article 48 of the Code of Civil Procedure). (4) Identification of target assets It is not necessary for the petitioner to identify the assets to be seized when filing a petition for the commencement of execution (Article 38 and Order 21, Rules 10– 11 of the Code of Civil Procedure). The creditor may request the court to summon the debtor to examine whether they have enough assets to satisfy the execution of the judgment (Order 21, Rule 41). As a result, it can be thought that assets may be disclosed. Regarding the seizure of specific assets, in the case of real estate, the creditor identifies the lot number and attaches a map to the petition (Order 21, Rule 13 (1)). 28

Claim Recovery Legal Systems, 7. Myanmar, p. 81–82.

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(5) Execution methods Regarding monetary claims, there are provisions for the seizure and sale of the debtor’s assets and civil detention of the debtor (Order 21, Rule 13 (1)), but there are few examples of civil detention.29 (6) Asset valuation The debtor provides the relevant documents, maps and price information regarding the relevant land, an expert performs a valuation of the asset, and the court decides the bid price based upon the valuation [4]. However, there are no clear provisions in the Code of Civil Procedure. (7) Appeal system (suspension of execution) There is a system for appealing against the procedure or objecting to execution based on the target asset being owned by a third party (Order21, Rules 58–63). There are also procedures for the suspension of the procedure (Order 21, Rules 26–29). However, the relationship between a specific objection and the requirements for suspending execution is not clearly defined. Many objections are raised on procedural issues, which result in the long-term suspension of the procedure and delay in the execution procedure.30 (8) Method and effect of seizure Seizure is declared by a customary method such as the beating of a drum, and a seizure order is posted at the target real estate (Order 21, Rule 54 (2)). It is not clear whether the court’s seizure order is commissioned for registration under Article 17 (1)(e) of the Registration Act, but at least, in the knowledge of Myanmar’s judges, it is understood that registration is not required in the execution procedure.31 (9) Multiple applications If multiple creditors petition for an auction, they will receive a distribution (Article 73 (1) of the Code of Civil Procedure). After procedural expenses and the principal and interest of securities are deducted, the funds obtained from the sale are apportioned according to the respective amounts of their claims (Article 73 (1)(c)).

29

See Akanishi, Yoshifumi “An Attempted Comparison of Compulsory Execution in Japanese Law and Myanmar Law” (in Kaneko, Yuka (ed.) Market-Oriented Economic Reform and Civil Law in Asia), p. 220–221, and Kaneko, Myanmar’s Law and Development, note 31 above, p. 188–189. 30 Akanishi, “An Attempted Comparison of Compulsory Execution in Japanese Law and Myanmar Law” note 32 above, p. 209–210, and Kaneko, Myanmar’s Law and Development, note 31 above, p. 185–188. 31 Regarding this point, see Kaneko, Myanmar’s Law and Development, note 31 above, p. 193–194.

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Y. Akanishi

6.3.4 Japan (1) Writ of execution Executable orders include finalized judgments, judgments containing a declaration for provisional execution, and foreign judgments and arbitration awards. Foreign judgments can be executed by an execution judgment issued by a Japanese court after investigating the satisfaction of the requirements in Article 118 of the Code of Civil Procedure (Article 24 of the Civil Execution Act). In the case of an arbitration award, an execution judgment from the court is required (proviso to Article 45 (1) of the Arbitration Law, Article 22 (VI)-2 of the Civil Execution Act). Foreign arbitration awards can also be executed if an execution judgment is obtained from a Japanese court in the same manner. Japan is a party to the New York Convention. (2) Executing agency The executing court and bailiffs perform the execution (Article 2 of the Civil Execution Act). The executing court is different from the court that issues the writ of execution, and concentrates on prompt execution based on the writ of execution and the execution orders. Bailiffs are independent national civil servants, work in district courts, and are supervised by the court in which they work. Bailiffs work under a fee-based system and play an active role in the seizure of moveable assets and the implementation of auction procedures. (3) Time limits There are no time limits. A right of demand is executable as long as it is not subject to extinctive prescription. (4) Identification of target assets The executing creditor identifies the property (real estate) that is the subject of an application for compulsory auction and must describe it on the petition (Rule 21 of the Civil Execution Rules). (5) Execution methods A declaration of seizure of the target assets is issued by the court at the same time as the decision to commence execution, and registration of the seizure is commissioned. An auction is conducted after investigation of the current circumstances and valuation of the asset by the court. (6) Asset valuation A valuer (real estate appraiser) appointed by the court performs the valuation. (7) Appeal system (suspension of execution) Objection to execution and appeal against execution exist as methods to appeal about procedural issues, and claim objection litigation and third-party objection litigation

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exist as methods to appeal about substantive issues. Execution will not be automatically suspended due to one of these appeals. Further, delay to the execution procedure via appeals is prevented by measures such as appeals against a decision on an objection to execution not being allowed in principle. (8) Method and effect of seizure The seizure of the real estate described in the petition for the commencement of execution is declared via the decision to commence compulsory execution, and the registration of the seizure is commissioned. If a third party acquires a right over the subject property from the debtor after seizure, the transaction is valid between the parties, but it cannot be a defence against a purchaser under the execution procedure (procedural relative validity). (9) Multiple applications In addition to the creditor that obtained the seizure, creditors who request distribution before the distribution request deadline defined by the court can also receive a distribution (Articles 87 (2), 51 and 49 of the Civil Execution Act). Tabulating the above summary produces the following (Table 6.2).

6.3.5 Comparative Analysis (1) Writ of execution From the perspective of the introduction of foreign capital, it is considered necessary to be able to execute foreign judgments and foreign arbitration decisions with certainty. Execution is possible under the laws of the ASEAN countries, but in practice the court’s discretion is large and it can be seen that there is instability in execution. The transparency of the procedures should also be considered. (2) Executing agency The countries are divided by whether the court which issues the judgment, a separate executing court, or an administrative agency is responsible for execution. The organization responsible for execution is relevant to where objections are handled, so this problem is thought of as a system design issue. There are also other problems such as the lack of experience of bailiffs. (3) Time limits Each country differs in whether time limits are defined and how long the time periods are, but from the perspective of the efficiency of execution, there is a problem in the actual time required from applying for execution until the creditor’s rights are realized. On this point, each of the ASEAN countries has a problem with procedural delays.

Five years from when the judgment, etc. takes effect

Time limits

Asset identification

Execution methods

Asset valuation

(3)

(4)

(5)

(6)

Seizure and auction

The creditor?

None

Executing court Bailiffs Two witnesses

Judgments and domestic arbitration awards can be executed. Foreign arbitration awards require an execution order. Foreign judgments cannot be executed practically

Indonesia

By agreement or by an asset No provisions valuation organization (unreliable)

Seizure and auction

The executing agency identifies the assets, but it is insufficient

Judgment executing agency and bailiffs under the Ministry of Justice or Prefecture

Executing agency

(2)

Finalized judgment, cassation decision, foreign judgment or arbitration award

Writ of execution

(1)

Vietnam

Table 6.2 International comparison of compulsory execution systems

Debtor provides relevant documents, expert performs the valuation

Seizure and auction Civil detention

The executing agency? There is no requirement for the creditor to do so

12 years from when the Decree is issued

Court that delivered the judgment Bailiffs (lacking in experience, which harms effectiveness)

Judgments No actual examples of execution of a domestic arbitration award Examples of execution of a foreign arbitration award exist

Myanmar

(continued)

Court-appointed appraiser

Declaration of seizure and commissioning of registration by the court Auction

The judgment creditor does when petitioning for the commencement of execution

None

Executing court Bailiffs

Finalized judgments, provisional execution judgments, foreign judgments Domestic and foreign arbitration awards

Japan

152 Y. Akanishi

Multiple applications

(9)

Submission of judgment execution application

No provisions on registration of seizure Effect of breach is absolutely invalid?

Method and effect of seizure

(8)

Vietnam

Appeal and suspension of No provisions on specific execution appeal reasons or linking these to suspension of execution

(7)

Table 6.2 (continued)

Court examines parties and prepares a distribution table

A seizure report is prepared and published. The seizure report is transcribed to the register for real estate No provisions regarding breaches. Absolutely invalid?

Appeal by the debtor or a third party asserting ownership Under the provisions, in principle this does not suspend execution. In practice, execution is delayed by many applications and suspension

Indonesia Procedural and substantive objections Does not automatically suspend execution (to prevent delay)

Japan

Multiple parties petition for auction Apportioned based on value of claims

(continued)

Request for distribution

Beating of drum and posting Registration of seizure of seizure order Procedural relative validity Unclear whether registration of seizure is systemized Effect of breach is absolutely invalid?

Appeals against the procedure and objections by third parties Execution is delayed by abuse of objections and suspension of execution

Myanmar

6 Asset Preservation Procedures and Compulsory Execution as Basic … 153

(Summarized by the author)

(10) Point of criticism

Table 6.2 (continued)

Bailiffs lack expertise Publication of execution decision does not have the effect of prohibiting disposal, which invites asset concealment Asset investigation is insufficient Cooperation with the court is insufficient

Vietnam (No clear provisions on the execution of claims) Execution is delayed due to abuse of objection appeals and suspension of execution

Indonesia

Japan

Bailiffs lack experience. It is Effectiveness of asset unclear whether the disclosure registration of seizure is commissioned Relationship with defences against third parties is unclear Execution is delayed due to abuse of objections and suspension of execution

Myanmar

154 Y. Akanishi

6 Asset Preservation Procedures and Compulsory Execution as Basic …

155

(4) Identification of target assets The countries are divided on whether identification is performed by the creditor or the executing agency, but for the executing agency to perform it under its own authority increases its burden and is inefficient. It is thought that it is better to have the creditor to perform it, but as a prerequisite to this, it is necessary to consider effective asset disclosure methods. (5) Execution methods Seizure and sale (auction) as the execution methods is common to all of the countries. (6) Asset valuation Specialists or specialist organizations perform the asset valuations, but there are problems with the reliability of the valuations (especially in Vietnam). (7) Appeals and suspension of execution There are provisions for objections against the procedure and third-party objections in each of the ASEAN countries, but there does not seem to be any more specific classification of the reasons for objection. Also, there are no specific provisions for suspension of the execution that are linked to specific reasons for objection. Further, in practice, the excessive use of objections and the accompanying suspension of execution procedures are a major cause of delay. Therefore, from the viewpoint of efficient execution in the future, it is desirable to define specific rules for appeals and the accompanying suspension of execution, as well as provisions which limit appeals against decisions concerning objections to certain cases. (8) Method and effect of seizure There are differences between the ASEAN countries regarding whether or not seizure is registered, and in practice, it is sometimes unclear whether or not registration is recognized as a requirement to defend the seizure (particularly in Myanmar). Regarding the effect of acting in violation of the seizure, the provisions are unclear in the ASEAN countries regarding the relationship with the counterparty (third party) to the debtor who violates the seizure. In the future, due to the increase in economic activities, it is expected that there will be cases where the relationship between the rights of the debtor’s counterparty and the execution procedure becomes a problem, and it is thought that the use of registration and the method of handling disputes should be considered. It is presumed that seizure is generally considered to have absolute effect in the ASEAN countries, but if such a principle is adhered to with insufficient public notice, problems will arise from the viewpoint of the security of transactions. (9) Multiple applications (creditors) There are procedures for handling this in each of the countries. However, how creditors other than the creditor who petitioned for execution are made aware of the execution process, and whether the process for participating in the distribution are smooth, require further consideration.

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Y. Akanishi

6.4 Statistical Figures Related Enforcement in Vietnam and Indonesia (Figures About Myanmar Were not Available) (1) Vietnam The following description, including the statistical figures, is based on the FACTFINDING SHEET on Vietnam reported to February, 2021 to KOBE University Center for Social Science Innovation (KUSSI) by Prof. Duong Anh Son, Ph.D. Vu Kim Ha.nh Dung, and Truong Trong Hieu, National University- Ho Chi Minh University of Economic & Law, Vietnam. The data shows that the ratio of incompleted judgment execution remains to be high. Remarkably, according to the General Department of Judgment Enforcement (2016– 2020), the percentage of about 70–80% is counted in the total judgments that are considered to have enough conditions for enforcing (Tables 6.3 and 6.4). (2) Indonesia The following description, including the statistical figures, is based on the FACTFINDING SHEET on Indonesia reported to February, 2021 to KOBE University Center for Social Science Innovation (KUSSI) by Dr. Rudy Lukman, Lampurng University, Indonesia. Table 6.3 The yearly number of civil judgment execution (filled at the judgment enforcement agencies—not at the court)

Year

Total

Completed execution (ratio) (%)

Nov. 2020

586,543

72,63

2019

973,376

78,59

2018

926,175

80,33

2016

835,119

78,53

2017

881,941

79,24

Source Fact-Finding Sheet on Vietnam by Prof. Duong Anh Son, Ph.D. Vu Kim Ha.nh Dung, and Truong Trong Hieu (1.4-2 Table 2)

Table 6.4 The yearly total amount of civil judgment execution Price: Milllion VND

Year

Total

Completed execution (ratio) (%)

Nov. 2020

285,802,270

31,77

2019

273,748,831

35,43

2018

195,803,107

38,40

2016

144,458,488

33,73

2017

174,888,210

42,89

Source Fact-Finding Sheet on Vietnam by Prof. Duong Anh Son, Ph.D. Vu Kim Ha.nh Dung, and Truong Trong Hieu,(1.4-3 Table 2)

6 Asset Preservation Procedures and Compulsory Execution as Basic …

157

Trend of the yearly number of civil judgement execution filed at the court (1990s up to present). With regard to the trend of annual filing for the execution of civil judgement to courts. The tracing was also carried out through the court service information system of 514 state courts spread across 416 regencies and 98 cities throughout Indonesia. The trend can be seen through the following tabulations (Table 6.5).

Trend of the yearly average price of the auction (1990s up to the present). The auction process is carried out by the State Wealth and Auction Service Office, which is also an institution under the coordination of the Directorate General of State Assets. However, the digitization of government data in Indonesia was only held massively in 2007 (Table 6.6). In fact, related to the average annual auction price data provided by the Directorate General of State Assets, it only includes reporting for the 2008-2019 period. Data related to the trend of annual auction prices is presented by comparing the receivables target to be settled, then compared with the settleable state receivables (PNDS) in the current year. Thus, the percentage of achievement of the target for settlement of receivables through the auction can be mapped. For clarity, the data can be found through the following tabulation (Table 6.6).

From these figures we may presume that there are some substantive inefficiencies and instabilities in the practices of both countries.

6.5 Conclusion Some recommendations based on the above considerations, from the perspective of preservation measures and execution procedures that are consistent with economic development (i.e., for the purpose of investment being conducted smoothly, creditors being able to transact with confidence, and efficient debt recovery), are as follows. (1) In order to facilitate the introduction of foreign capital, the procedures eligible for preservation measures and execution procedures should include not only domestic civil litigation but also domestic and foreign arbitration procedures, and the execution requirements should be clarified, and their transparency secured. (2) Petitions for preservation measures before filing of the substantive procedure should be allowed, and a reasonable amount of collateral should be provided. As a prerequisite of this, a mechanism that allows creditors to acquire information about the debtor’s assets should be considered. Also, in order to increase the use of preservation measures, the need to prove the right to be protected should not be excessively strict. (3) Orders for preservation measures should be issued within a reasonable period of time after filing of the petition, and execution procedures should be carried out promptly. (4) During the preservation measures and execution procedures, appeals (objections) and the accompanying suspension of execution are a common cause of delay in the ASEAN countries. The grounds of objection should be arranged,

158 Table 6.5 Trend of civil judgement execution filed at the court

Y. Akanishi Year

Total

1990

1

1991

1

1992

0

1993

1

1994

2

1995

3

1996

3

1997

4

1998

2

1999

5

2000

2

2001

8

2002

14

2003

4

2004

8

2005

6

2006

15

2007

9

2008

20

2009

48

2010

67

2011

152

2012

283

2013

441

2014

565

2015

559

2016

686

2017

698

2018

544

2019

404

2020

134

Total

4689

Source Fact-Finding Sheet on Indonesia by Dr. Rudy Lukman (1.42 Table 4)

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159

Table 6.6 Trend of the yearly average price of the auction data presented in IDR) Year

Target

PNDS

Achievement Percentage

2008

704.551.140.000

829.654.560.000

117,76

2009

1.065.445.590.000

597.388.940.000

56,07

2010

770.000.000.000

816.214.000.000

106,00

2011

820.000.000.000

833.440.530.000

101,64

2012

990.000.000.000

1.125.349.360.000

113,67

2013

521.374.100.000

655.833.580.000

125,79

2014

402.000.000.000

462.484.520.000

115,05

2015

350.000.000.000

352.825.980.000

100,81

2016

349.000.000.000

243.660.000.000

69,82

2017

348.000.000.000

296.210.000.000

85,12

2018

347.000.000.000

221.760.000.000

63,91

2019

346.000.000.000

809.400.000.000

233,93

Source Fact-Finding Sheet on Indonesia by Dr. Rudy Lukman (1.4-2 Table 5)

for example, by dividing them into procedural objections and substantive objections (e.g., claim rights and ownership rights), the requirements for execution to be suspended in each case should be organized, and cases where execution can be suspended should be limited. (5) It is desirable to utilize registration as a means of public notice of preservation measures and execution. In addition, treating registration as the standard for handling opposing claims should be considered as the handling method when a transaction is made in violation of a preservation measure or seizure.

References 1. Section “4. Vietnam” in the special report “Legal System Relating to Claim Recovery in Asian Countries”, Financial Law J, No. 1987 (hereinafter referred to as “Claim Recovery Legal Systems”), p 51 2. Baker M (2020) “Client Alert” dated 6th August 2020. 3. Kaneko Y (2018) “Chapter 6: Civil execution system issues”, Myanmar’s Law and Development, Koyo Shobo, 20 November 2018, pp 184–185 4. Nishimura H, Asahi S (2015) The state of the civil and commercial dispute resolution system in Myanmar, p 60–61

Chapter 7

Status of the Reform of Laos’ Real Property System and a Perspective on Legal Development Support: A Fundamental Consideration of Phases 1 and 2 of the Lao Land Titling Project Kenzo Okawa Abstract This paper examines future perspectives on the land law support currently being provided in Lao PDR by Japan and other international organizations. The Lao Civil Code, which has been enacted with Japanese assistance and been in effect since May 2020, contains a number of provisions related to real estate. However, the Land Law exists as a system related to land, and specific details are stipulated there. This Land Law is not the subject of Japanese legal technical assistance. Therefore, it is necessary to analyze the background of the Land Lawleading to its enactment in order to determine how real estate regulations in Laos should be regulated in the future. This is because the past discussions and considerations can be used as a reference when the Civil Code and related laws and regulations are revised in the future. Therefore, this paper will review the objectives and goals of the “Lao Land Titling Project 1”, and then analyze what results have been produced by “Lao Land Titling Project 2”. As a result, it points to the importance of linking the content of the Civil Code and the Land Law in Laos.

7.1 Objective of this Paper The South-East Asian country of Laos has an economy that is in a very rapidly developing state, with, for example, a nominal GDP of approximately USD 18.12 billion in 2018, USD 18.77 billion in 2019 and USD 18.88 billion in 2020 [1]. In addition, the country became a member of ASEAN in 1997 and a full member of the WTO in 2013. In order to gain these memberships, it has commenced reform of its banking system, tax system and economic structure, as well as continually working on enacting and revising trade-related legislation. As part of this, for example, the

K. Okawa (B) Setsunan University, Neyagawa, Japan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_7

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Lao Civil Code was enacted with Japanese assistance and has been in force since 2020. Japan’s legal development support is led by the International Cooperation Department of the Research and Training Institute of the Ministry of Justice (“ICD”) and the Japan International Cooperation Agency (“JICA”) and is performed with the purposes of drafting and revising basic laws and regulations, developing judicial systems and training legal personnel, mainly in Asian countries [2]. The support activities are carried out in response to a request from the recipient country and aim to establish the rule of law, good governance and the development of a market economy in the country. The support activities take the form of respecting the recipient country’s autonomy and independence without unilaterally imposing Japan’s proposals and supporting the country’s self-help efforts, while conducting research on the actual situation in the recipient country [3]. Although the specific support varies according to the situation of each country’s request, it is provided from a medium- to long-term perspective. These activities are funded by Japan’s Official Development Assistance (“ODA”), whose basic policy is to strengthen the support system through an all-Japan approach, in collaboration with various organisations [4]. Many states and institutions other than Japan also provide assistance to countries, not only in Asia but around the world, in areas other than legal development support. This paper will review the details and evaluation of a series of support that has been provided to the Lao People’s Democratic Republic, in particular a project to establish a system of land titling and registration known as the “Lao Land Titling Project”. It can be said that the basic system that governs real estate systems is the law and registration. As mentioned above, until now Japan has provided support regarding laws in various forms; in the area related to real estate, the preparation of Laos’ Civil Code is an example of such support [5]. Laos’ Civil Code governs chattels and real estate, including changes in real rights. However, Laos’ Civil Code only regulates the basic aspects of the land system, and the foundational law that regulates the specific handling and details of registration is the Land Law. The Land Law has not been the subject of direct Japanese support to date. Therefore, one of the issues for future Japanese support is how to connect the Civil Code and the Land Law. Institutions from other countries have been implementing projects regarding these property-related systems and regulations ahead of Japan. The Lao Land Titling Project, led by the World Bank, Germany and Australia, has been implemented in two phases, and a further project is currently being developed. One of the objectives of this support, as will be discussed below, is to clarify titles to the use of land and promote an efficient land market and the domestic circulation of resources, thereby expanding the nation’s real estate-related revenue base and improving the government’s ability to provide social and economic services. However, even if economic growth is anticipated, there is also the possibility of a subsequent increase in social conflicts related to real estate and problems concerning unfair treatment and the expropriation of land. In addition to this, it can be said that the social conditions in Laos after receiving the support, particularly the ongoing reforms in ASEAN, could have a significant impact on Laos in the future.

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In view of the above, the objective of this paper is to provide a fundamental consideration and lay out the current issues concerning Laos’ real estate system, in order to organise the viewpoints required for future legal development support by Japan. The structure of this paper includes a digest of the support given in Phase 1 and Phase 2 of the Lao Land Titling Project and its evaluation (Sects. 7.2 and 7.3), the situation concerning subsequent support (Sect. 7.4), and a review of the situation in ASEAN, which is another factor, and an outline of an interview survey, followed by a brief summary of the outstanding issues (Sect. 7.5).

7.2 Outline of Phase 1 of the Lao Land Titling Project 7.2.1 Objectives and Details of the Project [6] The Lao Land Titling Project was implemented in two phases, with Phase 1 being a jointly funded project between the World Bank and the Australian Agency for International Development (AusAID). The overall objective was to strengthen the foundations for long-term sustainable economic and social development. The project period was from 1997 to 2005. Prior to this support, the Lao Government launched a pilot project that issued land use title deeds in Vientiane Prefecture in June 1994, but only about 300 title deeds were issued. Following the pilot project, approximately 1,000 title deeds were issued between July 1995 and February 1996 (1.7). One of the reasons for the low registration rate was reportedly a lack of documentary evidence, as well as the reluctance of landowners that had unpaid land tax and transfer tax obligations to participate in the land registration for fear of being required to pay the outstanding tax (2.9). This was followed by the implementation of Phase 1 of the project. The World Bank originally stated that the main objectives of the country support strategy for Laos were to reduce poverty and improve the living standards of the Lao people, and that economic growth was a prerequisite for poverty reduction, which required the development of appropriate economic infrastructure and an environment that enabled private investment. In relation to this, it was noted that the lack of a land market had been a problem for domestic and foreign investors. It was therefore considered important to reduce the uncertainty related to land that arose from unclear land titles and the lack of records of land transactions (2.1). The land-related support was aimed at promoting an efficient land market and the domestic circulation of resources by providing a clear and enforceable land use tenure system and developing land valuation capacity. For this purpose, certain land title was to be expanded and a land management and valuation system, including a cadastral mapping system, was to be developed. The six main areas were as follows (see below for details). (1) Completion of a policy and legal frameworks for land management and administration

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(2) (3) (4) (5) (6)

Implementation of an accelerated land titling program Improvement of land management infrastructure, facilities and systems Improvement of land valuation Support for land management and valuation systems Research on community land tenure and registration, definition of forest boundaries, cost recovery, issues regarding land rights over state-owned land, and socio-economic impact.

The target areas were identified as the capital Vientiane and Savannakhet, Champasak and Vientiane provinces (2.3, 2.4), but eventually the target areas were the capital Vientiane and eight provinces (Luang Prabang, Vientiane, Khammouane, Savannakhet, Champasak, Sainyabuli, Bolikhamxai and Salavan provinces). It should be noted that the project itself was said to focus on the registration of existing rights and did not involve any land reform issues (1.28).

7.2.2 Details of the Support 7.2.2.1

Completion of a Policy and Legal Frameworks for Land Management and Administration (Regarding (1))

This component supported the activities of the Ministry of Finance and the Ministry of Justice with the purpose of preparing future land laws while at the same time applying existing regulations within the framework of the overall policy, in order to eliminate institutional deficiencies and inconsistencies, and also to improve the legal foundations of land management and administration. To that end, it took over the work performed under the pilot project that began in 1994, with the intention of enacting laws and regulations to “address the legal constraints to the titling program,” “ensure secure legal status of land titles,” and “support the ongoing registration of transactions” (2.8). Since only 300 titles could be issued during the first pilot project, in order to achieve a higher registration rate the government also took into consideration nondocumentary evidence as evidence of land ownership and introduced an option to issue provisional and qualified titles, under which the titles would become full land use rights if not challenged after a certain number of years (about three years) (2.10). Subsequently, on 27th September 1995, a Ministerial Order (MD990) on land registration procedures was issued, which reflected the above policy considerations and included provisions for (1) empowering systematic adjudication teams, (2) regulations for the issuing of titles, (3) the issuance of provisional titles, and (4) clarification of institutional preparations. These provisions were implemented in the second pilot land titling project. This succeeded in introducing a systematic adjudication method, and 80% of the 1,200 target parcels of land were registered, including state-owned land. The government then considered issuing implementing regulations related to land by 31st January 1997 at the latest (2.11).

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7.2.2.2

165

Implementation of an Accelerated Land Titling Program (Regarding (2))

The government’s initiatives to accelerate the issuance of land titles and increase the capacity of the Ministry of Finance’s Department of Land and Housing Management (DOLHM), which registers and administers land, were also the subject of support. Specifically, (1) the preparation of base maps, (2) the development and implementation of a systematic adjudication and registration program for land parcels in the target areas, and (3) improvement of the sporadic adjudication and registration activities that were being performed at that time were supported (2.12).

7.2.2.3

Improvement of Land Management Infrastructure, Facilities and Systems (Regarding (3))

In terms of increasing the amount of land transactions and their records, a new burden was placed on the government agencies responsible for the target areas of this project. Therefore, the long-term development of a land management system was supported in order to improve efficiency and service provision, ensure the certainty of land records, and maintain the land titling program after the project had completed. Specifically, (1) the review of systems and procedures, (2) development of a land records administration policy that considers the security of land documents and allows timely access to the documents for use in land transactions and land management and administration, and improvement of the records management systems and their security, including digitization in the relevant areas, (3) improvement of the facilities and equipment in regional land offices, (4) staff training, and (5) development and implementation of customer service were performed (2.13).

7.2.2.4

Improvement of Land Valuation and Support for Land Management and Valuation Systems (Regarding (4) and (5))

The project provided support to the Ministry of Finance in order to increase its revenue collection from land registration services, the administration of state-owned land including leasing and, in the medium term, from land taxes, by using a fair valuation system. In this regard, a valuation course was established at an educational institution in Laos for the purpose of developing human resources and skills. In addition, support was conducted for the building of a sales and rent valuation databases, the development of valuation systems, and the preparation of manuals for the education and development of valuation staff, first in the capital city of Vientiane and then in other major urban areas, as well as support for the formulation of policies and legislation regarding land valuation (2.14).

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7.2.3 Benefits, Costs and Risks of the Project The benefits, costs and risks of the project have been described from the viewpoints of (1) its effects and beneficiaries, (2) the fiscal impact, (3) cost burden, (4) environmental impact, (5) social impact, (6) gender issues, (7) sustainability, and (8) risk perspectives. This section will focus on (1), (2), (5) and (8).

7.2.3.1

Anticipated Effects and Beneficiaries (Regarding (1))

The objective of this project was to register 258,500 parcels of land, which equates to 80% of the target parcels, in urban areas and urban periphery areas. It has been identified that this would especially benefit low-income landowners, and that without the project, only high-income landowners would be able to register their titles over real estate. In addition, it has been said that by improving land valuation and administrative systems, the general public can receive more efficient land administration services (4.1).

7.2.3.2

Fiscal Impact (Regarding (2))

It was also predicted that the government’s revenue would increase, and the causes of such increase would be (1) revenue from fees due to the increase in transactions that would accompany the increase in land values, (2) improved collection rates due to accurate land records and realistic valuation of land values, and an increase in land tax revenue as a result of this, and (3) income tax on capital gains due to the increase in land values (4.5).

7.2.3.3

Societal Effects (Regarding (5))

It has been identified that the promotion of title issuance and registration of land can be expected to reduce disputes over land rights in the target area. This was assumed from the results of a project in Thailand (4.12). In Laos, many farmers own their own farmland and have traditional access rights to it. On the other hand, most households (families) in rural villages and urban periphery areas own household land through customary acknowledgement rather than formal registration. Meanwhile, it has been pointed out that most urban residents also own their own homes and have a high registration rate. The main purpose of this project was to legalize and register the land rights of long-term occupants (users), and it was also proposed to reduce the importance placed on the documentary evidence required for title acquisition by users. These measures are also said to have a positive effect in terms of minimizing the possibility of long-term users being evicted (4.13).

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In addition, communal ownership rights also exist in the project area, which apply to places considered to be communal land that is jointly used by villagers, and such land is not subject to registration. The project focused on urban areas and excluded issues such as lowlands and highlands in rural areas. However, they were treated as a subject of research in preparation for future programs (4.14). In fact, in later years, German support was commenced in relation to such areas, which is described below.

7.2.3.4

Risks (Regarding (8))

In progressing the project, it was pointed out that there was not a high proportion of land registration due to the Department of Land and Housing Management’s capabilities being exceeded and many land users lacking eligibility. The former issue was said to be minimized by the following three methods, namely (1) simplifying how the project was progressed and providing a certain amount of training and technical support prior to the project, (2) outsourcing the management of the project for the first three years, and (3) providing a sufficient amount of capacitybuilding support under the project. The latter issue was addressed by proposing new land registration procedures. Further, it was decided to test these methods as part of the pre-implementation activities before incorporating them into the project. Even though it was not possible to completely eliminate the project’s risks, it was deemed worth taking the risks considering the benefits that could be obtained, as there was potential to create demand for the issuance of titles and economic benefits. (4.19).

7.2.4 Summary of Results [7] Through the project’s support, it was found that the following results were obtained. • Completion of training staff for surveying and land administration • Improvement of the governance of land offices that provide services related to land administration • Introduction of a systematic registration program that is transparent regarding access to records, fees, etc. The following are some of the outputs that have been described as having supported the above main results. • Promulgation of a new Land Law on 31st May 1997 • Development of laws that enable systematic registration and valuation of land. The main regulations are: a regulation on the initial issuance of land titles via the method of systematic adjudication (MD 997/MoF), initial issuance of land titles via the method of sporadic adjudication (MD 998/MoF), updating the land title system via a land parcel registration system (MD 996/MoF), a primary

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regulation issued by the Ministry of Finance regarding land and building valuation (1677/MoF), and a Ministerial Direction issued by the Ministry of Finance regarding cadastral surveying (748/MoF) Registration of more than 120,000 land parcels and the adjudication of more than 175,000 land parcels Acquisition of 3,200 photographic maps at scales of 1:1,000, 1:2,000 and 1:4,000, using digital technology that was a first for Laos Development and establishment of valuation information systems in both manual and computerised formats. They were established in Vientiane Prefecture and Luang Prabang, Savannakhet and Champasak provinces and provide a fair and highly transparent system for the determination of taxes and charges based on land transactions, which has become a base for increased government revenue Development of computer software named “Parcel and Land Use Registration Information System” (PLURIS) used by systematic adjudication teams As specific investigation and research, a social assessment survey in order to evaluate the impact of the systematic registration certification program at the community level, a survey regarding existing land ownership and forest lands for the purpose of investigation aimed towards the implementation of systematic registration in rural areas, and socio-economic baseline research intended to develop data for the purpose of measuring the impact and benefits of the project.

7.3 Outline of Phase 2 of the Lao Land Titling Project [8] 7.3.1 Project Background Phase 2 was implemented from 2003 to 2009 under the joint investment of the World Bank together with Australia and Germany. The target areas were the same as Phase 1 (2.1), but during the implementation of the project the government requested the expansion of the project, and eventually the project was implemented in all areas. However, the target areas in each province were limited to urban areas, urban periphery areas and agriculture lowlands, while highlands where communal land titles are widespread were excluded. The 1997 Land Law that was enacted during Phase 1 was amended to state that while the country’s land is under the ownership of the national community in accordance with the Constitution, the state is obliged to allocate land to individuals and organizations (1997 Land Law, Article 3). The Land Law was subsequently amended in 2003 and 2019, but this detail has been maintained in principle. The 1997 Land Law stipulated that land may not be bought or sold as a commodity, but this was removed by the 2003 amendment. Following the 2019 amendments, the current Land Law still does not recognize communal or customary rights to land. Therefore, protests about the uncertain status of land rights were raised in the National Assembly at the time of the amendment, and it was reported that pressure was increasing on the government’s administration

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to clarify the policy regarding customary rights to land and the formalization of rights to communal land (1.3). In this regard, it was also explained that because communal and customary rights are not clear, land administration projects have avoided this problem and focused on the issuance of land titles in areas where there are few rights conflicts (1.4). Against the above background, Phase 2 succeeded the Phase 1 project, the contents of which are reflected in the results of Phase 2.

7.3.2 Objectives and Details of the Support The objectives of Phase 2 were to (1) improve the security of land ownership, (2) develop transparent and efficient land administration organizations at the national and provincial levels, and (3) expand the income base from real estate related fees and taxes and improve the government’s ability to provide social and economic services (2.1); in order to realise these objectives, five specific details were identified, namely (1) development of land policy and a regulatory framework, (2) development of institutions, (3) development of a modern land registration system, (4) promotion of the issuance of land titles through systematic registration, and (5) support for administration and implementation of the project (2.10).

7.3.2.1

Development of Land Policy and a Regulatory Framework (Regarding (1))

This objective targeted the strengthening of the government’s ability to formulate land administration and operational policies, facilitating the preparation of those policies, related government ordinances and implementation orders, and establishing a National Land Information Centre (initially in Vientiane Prefecture). It also aimed at strengthening the newly established Department of National Land Use Planning and Development. Within the department, there is a secretariat office of the National Land Policy Committee, which is an overarching organization that represents each of the institutions involved in land administration and operation. The secretariat has the objective of supporting the preparation of a national land policy that addresses (1) land administration, (2) land allocation and settlement, (3) land use planning, and (4) land taxes, fees and valuations.

7.3.2.2

Development of Institutions (Regarding (2))

This objective supported the implementation of the previously agreed restructuring plan, which had the aim of strengthening the Department of Land and the provincial and district land offices. This included improvements in coordination between central authorities and the provinces, the recruitment of staff (mainly in provinces and

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districts) and strengthening the management of provincial land taxation. In addition, financial support related to improving the capabilities of relevant staff was planned.

7.3.2.3

Development of a Modern Land Registration System (Regarding (3))

This objective supported the development and application of service standards for land offices and the improvement of work procedures. This included staff training, PC hardware and software, and investment in offices and equipment. Special attention was paid to improving services, especially in the provinces. In addition, a community education strategy was implemented, mainly by the provincial land offices. Funds were also invested in training land evaluators and strengthening the valuation information system, and support was provided to improve the capacity of the Department of State Assets Management, a unit of the Department of Land that is responsible for registering leases over state-owned land.

7.3.2.4

Promotion of Land Title Issuance Through Systematic Registration (Regarding (4))

This objective supported community education by providing funding for community mapping related to systematic registration and the mobilization of human capital for this purpose. Mapping was used to identify land use rights, including communal rights and indigenous peoples’ rights, and was necessary to determine the appropriateness of issuing individual titles. In practice, the activities of 22 systematic adjudication teams were supported and the aerial photography, maps, and geographical positioning information system equipment needed for the work was provided.

7.3.2.5

Support of Project Management and Implementation (Regarding (5))

Under this objective, technical support essential for strengthening the system was provided mainly by the Australian Agency for International Development (AusAID). Advice was provided on project management and planning, human resource development, community education, surveying, land valuation, and monitoring and auditing. The selection of areas subject to the systematic title issuing, future plans and the preparation of work programs was also supported.

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7.3.3 Perspective on the Security of Land Tenure Recognizing that the exact interpretation of the security of land tenure varies depending upon the situation, the World Bank’s Independent Evaluation Group (IEG) assumes that the following are necessary to enhance that security (2.18). • Legal recognition that, although the degree of formality may differ, rights to land are continuous and there may be overlapping and conflicting claims over the same piece of land. • Creation of a national inventory of all types of land and to make all land records public and easily accessible • Participatory and highly transparent procedures for resolving situations where land rights are unclear or there are conflicting claims • Protection of residents from forced evictions and allowing those who face eviction to obtain a resolution under the law • More cost-effective mechanisms for the registration of rights related to land, which implements special measures for those who are hesitant to register their title due to ignorance, lack of power, or insufficient means (typically women, minorities, and the poor).

7.3.4 Results The evaluation is that the objectives listed in 3.2 to (1) improve the security of land ownership, (2) develop transparent and efficient land administration organizations at the national and provincial levels, and (3) expand the income base from real estate related fees and taxes and improve the government’s ability to provide social and economic services, were achieved. Each of these were evaluated from the viewpoints of “output” and “outcome”, with the former understood as referring to “what the support achieved” and the latter referring to “the phenomenon that occurred in Laos as a result of the support”.

7.3.4.1

Improved Security of Land Tenure

Outputs The objectives of this project were, in order to ensure the security of land tenure, strengthening laws and regulations on the one hand and granting of titles to stateowned land via systematic adjudication on the other hand, and different details were implemented for each objective (4.1). First, 13 land policy studies were conducted, but the use of them in policy reform was limited, and it seems that the National Land Management Authority did not use the studies’ results and recommendations as the basis for drafting new laws. The National Land Policy Committee (see 3.2.1

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of this paper) was established at the start of the project, but it was dissolved when the implementation of the project was subsequently transferred to the newly established National Land Management Authority and an equivalent consultative body was not established. (However, the National Land Management Authority itself was subsequently dissolved in 2011 and responsibility has been transferred to the Ministry of Natural Resources and Environment). Various draft national land policies were also drafted, but most have not been realized. The reasons for this were that, in particular, these drafts were not based on extensive consultation and that they did not gain the support of the National Assembly. It was also expected that a white paper on the National Land Policy Framework would be submitted to the National Assembly, but this had not been realized by the end of the project, nor at the time of the IEG’s assessment more than three years later (4.2). It is said that the systematization of documents that evidence the existence of rights to land in Phase 2 of the project may have strengthened the security of land tenure. In this regard, a study conducted in 2009 identified that there is a very wide range of documents related to land. As a specific example, it has been pointed out that customs and the colours of documents differ in each province, and that the interpretations by local governments also differ (4.3). From Phase 1 until the final day of Phase 2 on 30th September 2009, a cumulative total of 550,256 registrations were made as a result of the systematic titling. Of these, 395,729 were issued during Phase 2, exceeding the target of 320,000. The goal was to grant title (a secure grant to the owner) over at least 80% of the areas where the investigations and adjudications were conducted, but the actual achievement rate was 93% (4.4). In this regard, as of the end of Phase 2, there are differences in the areas where titles were systematically granted depending upon whether the targeted area was also targeted in Phase 1. Also, this needs to be considered from two aspects. The first is the percentage of all villages in the province that were targeted under the project, that is, the percentage of villages that were considered eligible for titling based on the selection criteria. The second aspect is how much of the land in the eligible villages was actually the subject of titling (see Tables 7.1 and 7.21 ). The selection criteria for Phase 2 were described as being (1) urban, urban periphery and lowland agricultural areas, (2) high population density and growth, (3) high real estate and land-related fees and tax revenue, (4) the existence of numerous commercial or industrial facilities and a high employment rate, (5) the potential for the concentration of economic activities and employment opportunities, (6) a high necessity, or a high level of investment tax deductions and participation in the initial registration project, (7) no reserved forest areas, (8) a village that has not voluntarily or involuntarily relocated as a group in the last three years, and (9) a village which does not have a tribe living on communal land according to traditional culture (4.5). The reasons why the systematic adjudication was not completed have been described as the difficulty of accessing areas during the rainy season, the reduction of staff numbers, budget shortages (e.g. the lack of boundary markers), the inability to completed work by the agreed deadlines, the unexpected need to remove unexploded munitions, the existence of households whose ownership could not be confirmed due to the lack of tax declaration forms, and the inclusion of land which did not meet the

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Table 7.1 Coverage of systematic titling under first and second land titling projects Provinces

Project span First project

Districts covered

Villages covered

Entry year

All

Treated

%

All

Treated

%

Vientiane Capital City

1996

9

8

889

500

355

71.0

Khammuane

1996

9

3

333

601

111

185

Vientiane Prov

1996

13

5

38.5

524

158

30.2

Savannakhet

1996

15

8

53.3

1,006

286

284

Champasack

1996

10

10

100 0

637

356

55 9

Luangprabang

1996

11

7

63.6

792

220

278

Xayaboury

1996

11

4

364

448

81

181

Borikhamxay

1996

6

4

66 7

328

66

20 •

Saravane

1996

8

5

62.5

631

124

197

Luangnamlha

2007

5

1

200

357

7

20

Oudomxay

2007

7

1

14.3

490

9

1.8

Sekong

2007

4

1

250

239

14

59

Bokeo

2007

5

1

200

292

13

45

Attapeu

2007

5

1

20.0

157

25

15.9

Huaphanh*

2008

8

–

–

738

–

–

Phongsaly*

2008

7

–

–

563

–

–

Xiengkfiuang*

2008

8

–

–

502

–

–

141

59

4' 8

8,805

1 825

207

Total

9

Second project

17

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Table 7.2 Progress of systematic filling until november 30, 2008 (projects 1 and 2) Provinces

N of Parcels Adjudicated

N of Titles Signed

N of Titles Distributed

Vientiane prefecture

178,640

161,920

158,034

Khammuane

29,749

23,882

23.505

Vientiane province

79,023

75,687

74.862

Savannakhet

95,475

89,458

86.918

Champasack

87,324

77,775

76.306

Luangprabang

50,355

47,391

43.967

Xayaboury

29,257

29,125

28.797

Bonkhamxay

24,554

21,084

19,170

Saravane

22,925

21,436

21.339

Luangnamtha

1,487

85

–

Oudomxay

1,847

779

685

Sekong

1,374

216

–

Bokeo

2,297

344

167

Attapeu

1,986

1,074

–

Huaphanh*

–

–

–

Phongsaly*

–

–

–

Xiengkhuang*

–

–

–

I Total

606,293

550,256

533,750

Sources World Bank 2010:43; National Land Management Authority These provinces received training but—given the lateness of their entry to the second project—they were not given a budget for fieldwork no systematic land titling was carried out

selection criteria (for example, land at an altitude higher than that approved under the project rules) due to mistakes in the definition of the areas subject to adjudication (4.7). It has been said that there is some evidence that land which should have had the highest priority for adjudication under the selection criteria for Phase 2 was excluded at the government’s initiative. The reason for this has been identified as the government having plans to develop the land and wanting to avoid the possibility of high compensation claims if the land had been titled (4.9).

Outcomes At the time of appraisal, the expected outcomes of the improved security of land tenure were “increasing resolution of land-related disputes”, “equal access of women to land titling” and “an increase in the number and size of loans from banks (assuming that land titles would be used to secure loans)” (4.11). This section will consider the first and third outcomes.

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Table 7.3 Incidence of disputes over land in the five years before 2009 Land claim status Percent of No respondents document (N = 720) reporting that in the previous five years there was…

Laud title (issued)

Land title (in progress)

Temporary land use certificate

Laud tax declaration

Other documeut

At least one land dispute

2

14

2

7

15

0

No laud dispute

133

872

64

402

682

23

Total

135

886

66

409

697

23

% with dispute

1.5

1.6

3.0

1.7

2.2

0.0

Source [9]

In the 2003 baseline survey it was investigated whether households with title were less likely to be involved in land-related disputes than households without title. The survey found that the majority of households (89%) had not experienced a land-related dispute within the last 12 months, regardless of whether they held title. Of the households that had been involved in a conflict, slightly more were in villages where titles had been granted than those outside the project. Amongst these, the average incidence of disputes was 4 per village with titles granted and 3.7 per village without titles granted. However, this difference is not statistically significant (4.12). If the frequency of land disputes reflects the level of security of land tenure, it can be considered that Laos has a high level of security. In a 2009 survey, only 2% of respondents said they had been in a land-related dispute over the last five years (Table 7.3). It found that the frequency of disputes did not change significantly depending on the existence of land titles. In fact, respondents who did not have a document supporting their land title were reported to have experienced a relatively small number of disputes compared to respondents who had been granted or were in the process of acquiring land title. In this regard, it has been identified that those lacking title may not be well informed about their rights or may not be cause a dispute due to uncertainty (4.13). According to the 2003 baseline survey, it took longer for those who had title to settle a land dispute than for those who did not have title. The proportion of unresolved disputes was higher among title holders than those without title in respect of cases such as border disputes, consensus reaching within a household and environmental damage (Table 7.4, 4.14).

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Table 7.4 Time taken to resolve land-related disputes in 2003 Time taken to resolve dispute (%) Dispirt category

1 week

1 month

3 months

6 months

>6 months

Not resolved

Total

Inheritance Claims Titled villages (N-22)

39.0

4.0

9.0

0.0

13.0

35.0

100.0

Untitled villages (N ~ 18)

12.0

6.0

17.5

18.0

6.0

40.0

100.0

Rights of way 30.0 titled villages

10.0

0.0

0.0

10.0

50.0

100.0

Untitled villages

33.0

0.0

0.0

0.0

0.0

67.0

100.0

Untitled villages (n = 18)

50.0

25.0

0.0

0.0

0.0

25.0

100.0

Environment titled villages (n-22)

20.0

0.0

0.0

0.0

0.0

80.0

100.0

Untitled villages (N-18)

100.0

0.0

0.0

0.0

0.0

0.0

100.0

Source [10]

Regarding financing, there was a trend in the 2003 baseline survey of title holders receiving loans from banks rather than from other institutions, but the banks themselves provided the same number of loans to title holders as they did to those lacking title (Table 7.5). However, the number of applicants for loans is unknown. The average loan amount to title holders (USD 8,526) was larger than the average loan amount to persons lacking title (USD 988), and the loan period was also generally longer for title holders. However, the 2003 study also identified from commercial bank records that between 1998 and 2001, persons lacking title received on average much larger loans than title holders, but in 2002 the difference was not large. It is noted that according to the report, the situation at the time that Phase 2 ended was unclear due

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Table 7.5 Relationship between titling and credit source Source of credit

Credit to persons with land title

Credit to persons without land title

No

No

%

%

Relatives

5

14.7

21

27.3

Money lender

6

17.6

33

42.9

Bank

23

67.6

23

29.9

Total

34

100.0

77

100.0

Source [10]

to the lack of evidence and other factors (4.17). In a few villages, it was reported that acquiring title made it difficult to obtain a loan. That is, titled land is of high value (because inheritance rights are more certain) and there is a fear that the bank will take the land in the event of default (4.19). One aspect of security of tenure playing an important role is protection from forced evictions. Although it is common for states to forcibly acquire land, this requires transparent procedures and the provision of reasonable compensation according to law to the people who have their land expropriated. However, in the 2007 policy survey in Phase 2, there were examples of land that was titled under the project subsequently being expropriated without due compensation. However, it is unclear how widespread such cases of expropriation are (4.21). Based on the above, considering that there is a disparity in the areas of land subject to the systematic titling, and considering the evidence of the project’s performance indicators of security of tenure (reduction of land disputes, land held in women’s names, and increased loans from banks), there is no strong indication that the project improved the security of tenure, and even if such improvement was achieved, it is not known whether it led to increased incomes or the reduction of poverty, and the degree of achievement of the tenure security objective is said to be “modest” (4.22).

7.3.4.2

Development of Transparent and Effective Land Management Institutions at the National and Provincial Levels

Outputs The regional offices established in Phase 1 continued to operate effectively, and capacity development was also implemented at the provincial offices that were added in Phase 2. Also, more than 250 people are said to have obtained an advanced diploma in surveying and land administration through the support (4.23). However, it is said that the area covered was expanded too much compared to Phase 1, the appropriate education and support for communities in the target villages was reduced compared to Phase 1, and the budget to appropriately “inform, consult and ensure participation” could not be secured. Furthermore, it seems that there was a reduction in the number

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Fig. 7.1 Increase in the number of transactions registered after titling (all types). Source World Bank 2010: 16 transaction types include: sale, mortgage, inheritance, transfer, lease, subdivision and consolidation

of support staff (4.24). However, such community outreach is said to have played an important role in developing a culture of land titling in the villages. It has been stated that those who received free title under the institutional titling will willingly bear the cost of registering subsequent transactions (4.25). However, although the number of staff involved in community outreach had been reduced, it has seemed not to have affected the subsequent transaction volumes, as shown in Fig. 7.1. However, it has been pointed out that although the number of sales registered increased from zero to 2,687, the number of leases registered decreased from 671 to 98 (4.26).

Outcomes Regarding transaction costs, between 2004 and 2007 the average fees for all types of real estate transactions nominally decreased by an average of 52% for the nine provinces initially targeted in Phase 2, which indicates increased efficiency (Fig. 7.2). However, there was an increase in fees in two of the nine provinces. It has been pointed out that this is due to the differences in real estate values between areas (4.27). Ultimately, the degree of achievement from this perspective is “modest” (4.29).

7.3.4.3

Increased Real Estate-Related Fees and Tax Revenue

Regarding fees and revenues, no outputs were indicated and only the outcomes were described. Land tax revenue increased, growing at a rapid pace from 2006 (Fig. 7.3). The titling is said to have contributed to the increase in tax revenue. However, it was not the main factor, and another factor that has been identified is that the area of plots has been recorded more accurately in connection with the systematic titling, making it difficult for land users to underreport the area of land subject to tax payments.

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Fig. 7.2 Variations in the mean fee per property transaction. Source [11]

Furthermore, the rise in land prices has also been a factor, which also has also been described as having a speculative aspect. It is said that government officials with insider information were taking advantage of the soaring land prices in these areas by developing roads based on urban plans, purchasing land in industrial areas, and providing information to investors (4.30). As mentioned above, the increase in tax revenue was due to multiple factors and it is impossible to evaluate the outcomes of the project based on the available data, so the degree of achievement of this objective is said to be “modest” (4.34).

Fig. 7.3 Revenues from land tax and property registration. Source Ministry of natural resources and environment

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7.3.5 Issues The following lessons have been reported through this project based on the matters reported above. First, it was identified that “if the government is not willing to commit to a longterm program of land administration and to allocate the necessary budget, the benefits from land titling projects may not be achieved or sustained”. It is also said that land registration has become dependent on the donors. Although it was something which was said at the time, there was a concern that the withdrawal of the World Bank and Australia would mean that the capabilities cultivated in Phase 1 and Phase 2 of the titling project may not be integrated. Despite the establishment of the National Land Management Authority as an overarching organization, it is said that it did not bring efficiency. As mentioned above, the National Land Management Authority has been dissolved by the government (see Sect. 3.4.1.1 of this paper) and its jurisdiction has been transferred to the Ministry of Natural Resources and Environment (7.1). Second, it was said that “in a country like Lao PDR where there is little or no transparency in reviewing the status of land rights and limited enforcement of these rights, the security offered by land titles will always be qualified, and the scope for expropriation in the interest of the ‘public good’ is likely to be substantial”. It has been pointed out that the provincial and central governments understand that the public good brought by economic growth outweighs individual and communal rights to land, and the security of land registration becomes a problem when external investors are allowed to compulsorily acquire (or seize) land without transparent review or fair compensation (7.2). Third, it is said that “the World Bank’s decisions to support land administration interventions should not be made without a full appreciation of the broader political context in which land rights are defined”. In the case of land administration projects, if the scope of the area in which the state may subsequently exercise its authority for the public good is ambiguous, it is necessary to decide whether to proceed with the systematic titling or to classify land parcels before conducting the titling. In the case of Laos, under the strong support of the government, the World Bank decided to proceed with the titling before an inventory of claims and usage methods of land was completed. However, it seems that the government changed direction during Phase 2 and stated that classification should be prioritized over titling. It is said that this change raised the concern that the government may become able to arbitrarily reclassify land that has been used by individuals and communities for many years (7.3). Fourth, it was said that “it may prove more effective for policy reforms and regulatory changes to be completed before a campaign of systematic land titling is launched”. The policy and regulatory framework in Laos was not clear and it took more than five years to resolve. Therefore, it was identified that it may have been more appropriate to address policy and regulatory issues through a technical assistance project before investing in land titling (7.4).

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Fifth, it was said that “systematic land titling does not necessarily ensure a significant and sustained increase in tenure security in the absence of impartial and efficient enforcement of the new land titles”. Tenure security here means that rights to land are documented and protected by the state. In Laos, the increase in benefits from systematic titling was not that great. That is, first of all, using land tax returns as documentary evidence of land rights was widespread prior to the systematic titling and banks accepted this as sufficient security for lending. Second, regarding the handling of highlands in Phases 1 and 2, the highlands with a high level of uncertainty about ownership were intentionally excluded from the target areas because crop rotating is common and there are overlapping claims between individuals and communities regarding the land in the highlands. It has also been pointed out that once title has been granted under the project, there is the possibility that subsequent transactions are not registered, meaning the contents of the database will become obsolete in a relatively short period of time. This is a risk that arises from the government’s inadequate funding of the land administration infrastructure, especially the reduction of community outreach that should have increased public awareness and access to land registration services. Third, even if title is guaranteed under laws and regulations, although they are imperfect in Laos, there is a concern that the government does not always properly recognize the rights of those who have been granted title and provide fair compensation in the event of expropriation. This is especially true in a country where the central, provincial and district governments do not necessarily act cooperatively, with each exercising their discretion and providing opportunities for domestic and foreign investors seeking land development (7.5). Sixth, it was said that “it is always important to probe just how ‘systematic’ it is feasible for land titling to aspire to be, and to recognize that meeting or exceeding titling targets does not necessarily mean that the process achieved full coverage of parcels eligible for systematic titling”. If there is no inventory of parcels, the estimation of the number of parcels to be titled is inevitably an approximation. Similarly, reports regarding the setting of targets and the extent to which targets are achieved need to take into account information gaps in areas where titling is planned. In Phases 1 and 2, systematic titling in the form of “block by block, section by section, and district by district” was not envisioned. Furthermore, the procedure excluded people who did not have existing documented rights to the land, and was limited to urban areas, periphery areas and lowlands. On the one hand, these limitations were made clear from the beginning and can be defended from the point of view of feasibility; on the other hand, it has been pointed out that the village surveys and investigations necessary to decide whether an area was eligible for titling were not always performed before the designation of areas subject to titling was made. In addition, it is said that there are research results which show that titles had not been granted in a considerable portion of designated areas at the time that surveying and adjudication work was declared as having been completed (7.6). Seventh, it was said that “the increase in land values is not a sufficient indicator of the benefits resulting from a land titling project”. Land prices fluctuate due to

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economic growth, government policies that affect rents obtained from land, investment and other factors, and although it is assumed that the rise in land prices is due to the titling, there has not been sufficient verification (7.7).

7.4 Situation of Subsequent Support Concerning Real Estate Even after Phase 2 ended, the support regarding land in Laos has been continuing. First, from the viewpoint that the lack of land use plans in rural areas, disorderly access to land resources, and lack of tenure security are the main causes of poverty and conflict and are hindering Laos’ economic development, Germany (LMRP, LMRED, NU-IRDP) commenced a participatory land use planning (PLUP) and land registration approach in rural areas in 2008 and is implementing it experimentally. Then, from 2015 to 2019, the “Laos-German Land Management and Decentralised Planning (LMDP) Program” was established, focused on expanding the systematic land registration system in four more provinces (Luang Namtha, Sainyabuli, Houaphanh and Khammouane) and at least eight rural districts, and is also being deployed in the form of LMDP2 [12]. Subsequently, LMDP3 is being deployed from 2019 to 2023 by the German Federal Ministry of Economic Cooperation and Development (BMZ) in the form of the successor of the above project. In order to improve land use in Laos, this project is providing support for land use planning tools at all levels to manage natural resources and to resolve and prevent disputes over land and resources [13]. Second, the World Bank is providing support with the objective of supporting the Lao government to improve land tenure security and land administration service provision in certain areas, and promptly and effectively responding in the event of an applicable crisis or emergency. The details of the support are (1) the systematic registration of land use rights, (2) modernization of land administration and service provision, (3) development of an implementation, policy and legal framework, (4) project management, (5) emergency response factors. This support is aiming at the issuance of about 1.2 million land titles by 2025, while at the same time building a unified land administration system in the country [14]. The above items will be the subject of consideration in the future.

7.5 Issues to be Considered 7.5.1 Relationship with ASEAN In addition to the status of the support, Laos is also a member of ASEAN and the ASEAN Economic Community (AEC) that was established in 2015 and adopted

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the “ASEAN Economic Community Vision 2025” in November 2015, which has set out five strategic goals of (1) an integrated and highly cohesive economy, (2) a competitive, innovative and dynamic ASEAN, (3) enhanced sectoral integration and cooperation, (4) a resilient, inclusive and people-cantered ASEAN, and (5) a global ASEAN [15]. A concrete action plan for the five strategic goals was issued in February 2017 as the “AEC 2025 Consolidated Strategic Action Plan” (CSAP), which includes many areas including growth through productivity improvement, technological innovation, research and development, good governance, regulatory reform, ICT and e-commerce, digital trade, ICT infrastructure development, smart cities and big data, cross-border electronic commerce, consumer protection, and personal information protection.

7.5.2 Relationship with Judicial Conditions in Laos In connection with this research, an interview survey was conducted with experts (lawyers) involved in JICA’s legal development support. The following information was obtained in relation to the topic of this paper. As of 30th March 2019, there were 243 lawyers in Laos, and since then about 30 people became lawyers (trainees) in April 2019, about 70 in November 2019, about 30 in April 2020, and about 70 in November 2020. The chair of the bar association has announced a policy of aiming for a body of 1,000 lawyers by 2030. In this regard, the number of lawsuits where a lawyer is providing legal representation is about 10% to 30%, which is considered to be the effect of the proceedings being inquisitorial. However, this number seems to be rising. Since 2019, courts and prosecutors’ offices seem to have been suppressing the use of lawyers due to national budgetary concerns. Along with this, there is a movement to reduce the number of students and graduates of the National Institute of Justice. There is also a route for lawyers to produce more lawyers by setting up their own framework outside of the institute, and it is expected that the number of lawyers will continue to increase in the future in relation to this. As for the reliability of the judiciary, Article 94 of the Constitution stipulates that “in their adjudication, judges must be independent and strictly comply with the laws”, and in principle courts are public and judgments are prima facie available to be read. Regarding alternative dispute resolution (ADR), the options are settlement during litigation, arbitration and mediation by the Ministry of Justice’s Centre for Economic Dispute Resolution and the Office for Economic Dispute Resolution in the Justice Department of each province, village mediation, village child mediation units (Article 53 of the Law on the Protection of the Rights and Interests of Children), and legal consultation regarding women’s and children’s issues by the Lao Women’s Union. Regarding arbitration and mediation by the Ministry of Justice and the provinces, Japan provided support from 2014 to 2016 and an Economic Dispute Resolution Law Handbook was prepared, but it is not currently the subject of any support. The

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number of mediations and arbitrations at the Centre for Economic Dispute Resolution in FY2015 was 36 cases, consisting of 16 cases between domestic parties, 17 cases between a domestic party and foreign party, and three cases between foreign parties. The main types of disputes concerned construction contracts, consumer loan contracts, and sales contracts. The arbitration procedure was often selected, but there were few cases in which an arbitration agreement had been concluded in advance, and it is said that the arbitration procedure is selected upon bringing a case to the Centre. A list of mediators and arbitrators has been created for the Centre and each Office; in principle, the parties select their preferred mediator or arbitrator from the list and the Centre or Office makes the appointment. The list includes lawyers, former judges, and others with legal knowledge, as well as bank employees and others from private companies. In addition, the staff of the Office for Economic Dispute Resolution are also on the list of mediators and arbitrators, and in practice they are often selected as mediators and arbitrators. Regarding village mediation, the “2016 Prime Minister’s Decree No. 01: Decision on Village Mediation Committees” and “2016 Ministry of Justice Decision No. 404: The Organization and Role of Village Mediation Committees” exist as legal norms; committees consist of five members (Article 14 of the Ministry of Justice Decision) who are selected by public election and submitted by the village mayor to the district, and the district appoints the members. There are no rules regarding composition, but usually the village mayor or deputy mayor, a representative of the Front for National Development, the Lao Women’s Union representative, the youth alliance representative, and the public security representative are elected. Regarding land, most of the problems related to land disputes involve boundary demarcation, disputes over title certificates (e.g., lost certificates), and fictitious transfers for collateral purposes. Regarding the progress of land registration, it is said that about 30% of the three million parcels of land nationwide have completed registration (as of August 2019). Land surveying is carried out by the World Bank and registration is planned to be completed nationwide by 2025. In addition, GIZ has introduced a system called the “Lao Land Register” and has published real estate registration information since 2019, but only the central government ministries can publish and view all of the information. Also, free support for map creation software called QGIS is being provided. In addition, as a measure of collateral valuation used for bank loans, in an interview with the Laos Development Bank (LDB) in November 2019 it was said that there were three land price valuations existing prior to 2019. They were (1) the Land Bureau’s valuation (Ministry of Natural Resources and Environment), (2) the market price, obtained from interviewing the village mayor, advertisements, etc. and (3) the LDB’s valuation; it was said that a bank would calculate the average of the three valuations and deduct 20% as a risk buffer. From 2019, valuations are based on (2) only and 40% is deducted. Other than land and buildings, assets such as savings and machinery (valued only at 20%) are also accepted, but cars cannot be used as collateral. It is also possible to use future claims to be received from a project (a fixed payment date is necessary) as collateral. In addition, although collateral over land is to be set via registration under the Civil Code, there is a long-standing commercial practice of

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setting collateral by depositing the title certificate with the bank. Therefore, it is said that there are cases where the title certificate is forged to obtain further loans from other banks.

7.5.3 Viewpoint of Legal Development Support As mentioned above, support regarding land in Laos is continuing, and it is necessary to confirm and pay close attention to the details of support subsequent to the Lao Land Titling Project and currently in progress. In addition, the relationship with ASEAN and the status of the judicial system and reforms cannot be overlooked. Based on these details, it is necessary to continue Japan’s legal development support. However, many issues such as the following problems have been identified regarding the status of support regarding real estate. These include (1) land law reform which promotes the liquidity of the land market, which is related to the country’s entry into the global market due to the collapse of the COMECON system and the liberalization of trade and investment by joining the WTO, and support for the collateral law recommended by the World Bank that is aimed towards financial liberalization; (2) in the context of regionalism that started after joining ASEAN, the perspective of promoting land expropriation law under the Master Plan on ASEAN Connectivity (MPAC), and financial promotion through reform theory such as the collateral law and insolvency resolution system under the CSAP, and (3) the state of the domestic legal system and the dissemination of the legal codes established with Japan’s support [16]. In addition, the mass registration of land using the Torrens-style definitive title registration system as the registration method and the accompanying nationalization of unused land, as well as the physical expulsion of farmers using official force, have also been identified as problems. Also, another problem is the fact that the current situation of the conflicts that have arisen in that context is unclear [17]. These are major issues that are raised for consideration by legal development support and are indispensable viewpoints for analysing the status of such support. As has been the case since the beginning, Japan is not directly involved in these kinds of support. However, the general law that regulates real estate in Laos is the Civil Code, and it is necessary to confirm the system relating to real estate such as the Land Law that implements the Code’s contents, and to ascertain, examine, and organize the subsequent development under the “Civil Code”. In some cases, it may be necessary to amend the unclear and inconvenient parts of the real estate system via the Civil Code, and it is necessary to establish such a situation of transactions in Laos. Therefore, it is necessary to further confirm the status of support regarding real estate in the future. (This study was supported by JSPS Grants-in-Aid for Scientific Research 19H01405 and 19K01243.)

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Notes 1. The tables and figures in this paper are from footnote (8) above, and the numbering etc. used in that paper is the same.

References 1. International Monetary Fund (IMF) (2022) World Economic Outlook Database, October 2019. http://www.imf.org/external/ns/cs.aspx?id=28 (viewed February 2022) 2. For an overview of ICD’s support for law development and the details of each country’s support, see ICD’s website, http://www.moj.go.jp/housouken/houso_icd.html (viewed February 2022), and country documents therein, etc. For an overview of JICA’s support for law development and the details of each country’s support, see ICD’s website, http://www.moj.go.jp/housouken/ houso_icd.html (viewed February 2022), and country documents there. For information on the content of the support, see JICA’s portal site, at See https://www.jica.go.jp/activities/issues/ governance/portal/index.html (viewed 2022 Feb) 3. See footnote (2) above and JICA, ‘Project Study on Legal Support, Aiming to Realise the ‘Rule of Law’ - Characteristics of JICA’s Legal Support’ (2009) 4. As a basic policy on legal and institutional support in ODA, see the Ministry of Foreign Affairs website, International Cooperation and Official Development Assistance website. http://www. mofa.go.jp/mofaj/gaiko/oda/bunya/governance/hoshin_1305.html (viewed February 2022) 5. For more information on the contents of the Lao Civil Code, see the website “Lao Civil Code” by JICA. https://www.jica.go.jp/laos/office/information/event/ku57pq00003tnqx8-att/ 20200527_01.pdf (viewed February 2022) 6. The details and of the project are based on Document of The World Bank, Lao people’s democratic republic, land titling project, 1996, and the numbers in this text refer to the sections of that report 7. Lao Land Titling Project—Phase I, Land Equity International. https://www.landequity.com.au/ projects/lao-land-titling-project-phase-1/. Land Equity International (LEI) is a private company with close ties to BHP Billiton and the Australian Government and has the Australian Department of Foreign Affairs and Trade (DFAT) as a client 8. The details and evaluation of the project are based on Document of The World Bank, project performance assessment report, lao people’s democratic republic second land titling project, 2013, and the numbers in this text refer to the sections of that report 9. Sacklokham S (2012) Results of 2009 Baseline Survey. Presentation of preliminary findings at the Welfare Impact of Land Titling in Lao PDR Workshop, National University of Laos and University of Sydney, Vientiane, December 7 10. Lahmeyer International and Lao Consulting Group (2003) Lao PDR land titling project: Socioeconomic baseline study—final report 11. Ngaosrivathana P, Keomanivong K (2007) Land policy study no. 7: Study on land consolidation in Lao PDR 12. Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) (2015) Systematic land registration in rural areas of laos PDR 13. Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) (2020) Land Management and Decentralised Planning 3 (LMDP 3). https://www.giz.de/en/worldwide/31066.html 14. Department of Land Ministry of Environment and Natural Resources (Lao PDR) (2021) Enhancing Systematic Land Registration Project (P169669), Environmental and Social Management Framework (ESMF) 15. Ishikawa K (2019) The ASEAN economic community’s current status and future outlook, Keiei Sensor, p. 50 onwards

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16. Kaneko Y (2021) A review of economic law reforms in the ASEAN late-developing countries: periodical changes of legal policies. J Int Cooper Stud 29(2):53 17. Kaneko Y (2019) An approach to Asian land law. J Int Cooper Stud 28(1):1; Kaneko Y (2020) Torrens-style land titling: reviving colonial land law in the developing countries. J Int Cooper Stud 27(1):1

Chapter 8

Foreign Direct Investment and Inflow Climate in Laos by Industry Terukazu Suruga

Abstract Laos has received a lot of FDI in the mining and electricity generation sectors. The share of mining in exports was approximately 60% at the peak and also the sector made a significant contribution to the government revenue. However, since FDI inflowed quickly into this sector, the government could not evaluate properly the companies. Accordingly, the government gave the land concession for mining to the companies without experience and technology in mining business resulting natural environmental problems. Laos has a lot of suitable places for hydro-power generation. Since the government gave incentives and guaranteed profits to the construction of hydro-power generation, huge FDI inflowed into this sector. The electricity sector has succeeded in exports and the share in exports increased to 26.3% in 2018. However, the management of domestic electricity was unsuccessful. The failure of adjustment between demand and supply induced the oversupply and the construction of transmission lines were not effective resulting in having huge debts and a chronic deficit. The FDI inflows are limited in the manufacturing sector and thus Laos could not achieve sustainable and inclusive economic growth. The development of human capital, governance and infrastructure is required for receiving FDI in the manufacturing.

8.1 Introduction Laos announced its New Economic Mechanism and started an open-door policy in 1986, and since then has been accepting foreign investment and trying to promote economic development. It has accepted a lot of foreign investment, especially in the mineral resources and electricity sectors, and has succeeded in acquiring foreign currency, improving financial conditions and promoting growth, centred around the export of copper, gold and electricity. However, signs of decline in the export of T. Suruga (B) Center for Social System Innovation, Kobe University, GSICS Bldg 2-1 Rokkodai-Cho, Nada-Ku, Kobe 657-8501, Japan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9_8

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mineral resources have begun to appear, and problems with electricity are also emerging. Modern growth is taking the path of development through incorporation into the global supply chain, centred around the manufacturing sector. To that end, it is important to accept direct investment not only in the mineral resources and electricity sectors, but also in the manufacturing industry. Sustainable growth cannot be expected from mineral resources and electricity, and the development of the manufacturing industry is essential for sustainable and inclusive growth. International competition is fierce for the acceptance of high-grade direct investment in the manufacturing industry, so the development of human resources, law and governance, and infrastructure such as transportation networks and electricity are indispensable. This paper will examine by industry the results and issues in the direct investment flowing into Laos and discuss the progress and issues such as governance in the inflow climate.

8.2 Investment Law in Laos Laos began to transition to a market economy in 1986 under the one-party dictatorship of the Lao People’s Revolutionary Party. The Law on the Promotion and Management of Foreign Investment soon came into force in 1988. A revised Law on the Promotion and Management of Foreign Investment was enacted in 1994 and was further revised as the Law on the Promotion of Foreign Investment in 2004. As it was necessary to regulate domestic and foreign capital without discrimination in order to join the WTO in 2011, the Law on Investment Promotion in Laos was promulgated March 2010, which unified the foreign and domestic investment laws, and was amended in April 2017. According to [17], the 1988 and 1994 versions of the Law on the Promotion and Management of Foreign Investment put a great deal of emphasis on “management”. However, the word “management” was removed from the title of the 2004 Law on the Promotion of Foreign Investment. 100% foreign ownership of a project was allowed under the original Law on the Promotion and Management of Foreign Investment. However, foreign investors were required to own at least 30% in the case of a joint venture, and at least US$ 100,000 of capital was required for a solely owned company or a joint venture. Under the 2010 unified investment law, a joint venture was required to have at least 1 billion kip (approximately US$ 120,000) of foreign capital and at least 10% foreign ownership, which showed that the minimum ownership ratio is declining, the minimum capital requirements were abolished under the 2017 amendment. However, the law provides that at least 30% foreign ownership is required for concession projects. Under the 1988 Law on the Promotion and Management of Foreign Investment, there were project limits imposed of 20 years for joint ventures and 15 years for solely owned investments, but both of these were extended to 50 years under the

8 Foreign Direct Investment and Inflow Climate in Laos by Industry

191

2004 Law on the Promotion of Foreign Investment. Under the 2010 Law on Investment Promotion in Laos, investments in general projects and special economic zones became indefinite, and concession projects and special economic zone development projects were given a 99-year limit. However, under the 2017 amendments, concession projects were again shortened to 50 years. Investment incentives include profit tax, customs duties and value-added tax incentives. Since the 2004 Law on the Promotion of Foreign Investment, the reduction or exemption of profit tax is decided based on the project being located within one of three zones that are defined according to the area’s level of infrastructure development. The 2010 Law on Investment Promotion in Laos added incentive levels based on industries in addition to regions. The 2017 amended law also defines levels of profit tax incentives according to the region and industry. Zone 1 areas are poor areas, remote areas, and areas where socio-economic infrastructure to facilitate investment is not developed. Zone 2 areas are areas where the development of socio-economic infrastructure has progressed to a certain extent and Zone 3 areas are the Special Economic Zones (SEZs). Regarding industry promotion, nine industries are defined as promoted industries, such as “advanced state-of-the-art technology, science and technology research, research and development, use of technology, and environmentally friendly projects that contribute to the saving of energy from natural resources”; amongst these, the tax exemption period is longer for four industries, including the “environmentally friendly processing of agricultural products, national traditional and unique processed goods, and the production of handicrafts”. The profit tax exemption periods are 10 years for five of the nine promoted industries in Zone 1, with an additional 5 years for the four extended industries, giving a total of 15 years. In Zone 2, it is 4 years for the five promoted industries, with an additional 3 years for the four extended industries, giving a total of 7 years. In Zone 3, the period is determined under the SEZ-related bill. Import duties were introduced under the 1994 Law on the Promotion and Management of Foreign Investment. The import duty on machines, equipment, parts, etc. used by foreign companies for processing and export was 1% but became duty-free under the 2004 Law on the Promotion of Foreign Investment. The provisions regarding exemption of import duties were removed in the 2010 Law on Investment Promotion in Laos. Under the revised 2017 Law on Investment Promotion in Laos, the duties and value-added tax are 0% for equipment that cannot be procured or produced domestically and for vehicles that are used directly in production, such as heavy machinery. The import of raw materials, equipment and parts used for processing intended for export are exempted from import duty and value-added tax. Domestic raw materials (excluding natural resources) used in manufacturing for export are exempt from value-added tax. Further, if the net income generated by a Lao corporation is used for investment, it may be exempt from profit tax in the following fiscal year. Investment incentives are gradually being added. JETRO [4] explains Laos’ investment-related legal system in detail.

192

T. Suruga

8.3 Current Conditions of Direct Investment Inflow in Laos Movements in the net inflow of foreign direct investment into Laos can be seen in the UNCTAD database. Figure 8.1 is a diagram of UNCTAD data, in which three waves of fluctuations in direct investment in Laos can be seen. The first wave was the increase in direct investment due to the Asian investment boom in the mid-1990s, which ended with the Asian financial crisis that occurred in 1997. The second wave was the investment boom that occurred in the mid-2000s, which then stagnated due to the global financial crisis that occurred in 2007. The third wave has been increasing rapidly since the mid-2010s. The inflow of direct investment by country and industry can be viewed from the website of the Ministry of Planning and Investment, however this data is based on project approvals. However, as [18] points out, the Ministry of Industry and Commerce became responsible for granting licenses for general projects under the 2010 revisions to the foreign investment law, and the Ministry of Planning and Investment remained responsible for granting licenses for concession projects only. Therefore, the Ministry of Planning and Investment has become unable to ascertain overall direct investment. In fact, according to the Ministry of Planning and Investment’s data, the number of foreign direct investments was 276 in 2010 and 276 in 2011 but has dropped sharply to 48 in 2012 and 14 in 2018. A cumulative total of US$ 17.2 billion of foreign direct investment from 1989 to 2014 can be ascertained from the website of the Ministry of Planning and Investment. It is possible that approximately three years’ worth of direct investment in general projects has been omitted, but looking at this foreign direct investment by country, China is the top investor at 31.34%, with Thailand at 26.08% and Vietnam at 18.06%, giving a total of 75.48% for three of the countries that share a border with Laos. The next largest share is 1800 1600 1400

Millions US$

1200 1000 800 600 400 200 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

0

Fig. 8.1 FDI net inflow in Lao PDR. Source UNCTAD

8 Foreign Direct Investment and Inflow Climate in Laos by Industry

193

South Korea at 4.36%, so it is clear that the three neighbouring countries occupy an overwhelming share. Recent foreign direct investment in general projects by country can be seen in JETRO’s “Global Trade and Investment Report” on Laos. In 2018, the total amount was US$ 4.764 billion (Ministry of Planning and Investment projects were US$ 777.96 million) and investment by the three neighbouring countries had a combined share of 92.10% of the total, consisting of 57.75% from China, 25.67% from Thailand and 8.64% from Vietnam. In 2019, the total amount was US$ 7,786 million (Ministry of Planning and Investment projects were US$ 2,321.8 million) and the three neighbouring countries’ share was 87.4%, consisting of 58.91% from China, 18.97% from Thailand and 9.52% from Vietnam. Based on this, it can be seen that the three neighbouring countries still carry a significant weight, and that the inflow of investment for general projects licensed by the Ministry of Industry and Commerce carries a larger weight than the inflow of investment for concession projects licensed by the Ministry of Planning and Investment. Looking at the breakdown of foreign direct investment by industry, the cumulative total from 1989 to 2014 in the Ministry of Planning and Investment’s data shows that electricity generation was 27.76% and mining was 24.35%, together accounting for more than half of the total at 52.11%. Other industries include agriculture at 12.44%, the service industry at 11.13% and manufacturing at 7.98% (or 8.47% if the clothing manufacturing industry is included), indicating that there is little foreign direct investment in the manufacturing industry. The amounts by industry provided in JETRO’s “Global Trade and Investment Report” on Laos include domestic investment. For reference purposes, the share of direct investment (including domestic investment) by industry in 2019 was 30.8% for wholesale, retail and automobile repair, 15.3% for manufacturing, 13.5% for electricity and gas, 10.4% for agriculture and forestry, 8.9% for construction, 4.2% for finance and insurance and 4.2% for mining. However, if the investment (including domestic investment) inflow under concession projects licenced by the Ministry of Planning and Investment is added, electricity is still at the top, and the position of mining rises to be behind manufacturing. In 2018, there was particularly large domestic investment in finance and insurance, so if that is excluded, the construction industry had a large share, followed by agriculture and forestry, mining, and wholesale and retail. However, with the addition of inflow under concession projects, mining and electricity came next behind the construction industry. The direct investment in mining is declining because approvals of projects in the mining industry have been suspended in principle since 2012 (however special cases are approved in practice), while the inflow in other fields such as construction, wholesale and retail is increasing.

8.4 Mining Industry The mining sector has introduced a large amount of foreign direct investment and has contributed to economic growth, foreign currency acquisition through exports, and government revenue. Lane Xang Minerals, a subsidiary of an Australian company,

194

T. Suruga

began producing gold in 2003 and copper in 2005 at its Sepon mine, and the production of both copper and gold began in earnest from 2006. In addition, Phu Bia Mining (which operates the Houayxai and Phu Kham mines), a subsidiary of Pan Australia, which is also an Australian company, started producing gold in 2006 and copper in 2008. These two mining companies played an important role in the production of ore in Laos. Measured in terms of the value of their production, copper has been overwhelmingly greater than gold. Later, the parent companies of the two companies were acquired by Chinese investors. The reserves of the Sepon mine have decreased and it was sold to an Inner Mongolia company at the end of November 2018. Table 8.1 summarizes the trend in the ratio of the mining sector’s portion of nominal GDP. Mining’s portion was only 0.2% in 2000, but it increased to 5.79% in 2005 when the production of copper at the Sepon mine started and 12.63% in 2006 when production started in earnest. After that, the share of GDP declined due to the price decline caused by the global financial crisis, but it occupied around 10% of the share of nominal GDP from 2010 to 2013. With the development of other industrial sectors such as electricity generation, the market share has been at the 6% level since 2015. The share of exports can also be seen in Table 8.2. Starting from 0% in the early 2000s, it increased due to copper production at the Sepon mine to 39.16% in 2005 and 56.55% in 2006, peaking at 59.94% in 2007. Although the share decreased due to the global financial crisis, it recovered to 56.70% in 2011, and then gradually decreased to 28.83% in 2018; although electricity exports are gaining ground, mining retains the top share of exports. Phonvisay and Manolom [12] presents data using 2010 materials related to concession projects by the Ministry of Energy and Mines, of 111 projects with exploration concessions, 56 were foreign-owned, 46 were domestically owned and nine were joint ventures. Although the number of domestically owned projects is large, they account for only 17% of the total land area. Looking at foreign investment by country, 34 projects are Chinese-owned, 12 are Vietnamese-owned, four are Russian-owned and three are Australian-owned. But looking at these projects by land area, Chinese projects account for 37%, Australian projects for 32% and Vietnamese projects for 7%; therefore, it can be seen that the land area for each Australian project is large. 564 projects have received concessions to conduct mining, consisting of 413 domestically owned, 127 foreign-owned and 24 joint ventures. Although the number of domestically owned projects is large, their land area is small at 21%, indicating that they are small-scale mines. The land area covered by foreign-owned projects is 65%. By country, 69 projects are Chinese-owned, 32 are Vietnamese-owned and nine are Thai-owned. The amount of investment in domestically owned projects is small and they lack technological capabilities, so although their quantity is large, they are small-scale mines, and it can be seen that the sector is centred on foreignowned mines. Similarly, [12] uses the Ministry of Finance’s 2017 data to examine the distribution of the Lao, Chinese and Vietnamese projects that received concessions by the mineral produced. According to the data, coal accounts for 28% of Lao-owned projects, followed by gold at 26%. On the other hand, copper accounts for the most

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

689

8.53

4.64

0.20

Mining & quarrying

Manufacturing 8.39

Electricity

Source ADB key indicators

4.38

0.22

45.83

Agriculture

Industry share (%)

42.91

1,268

Electricity

565

Manufacturing 1,084

4.89

8.46

0.26

40.29

865

1,495

45

7,125

4.37

8.17

2.64

38.71

930

1,739

562

8,239

4.29

8.38

2.02

36.68

1,079

2,108

508

9,227

3.55

8.09

5.79

34.38

1,027

2,341

1,675

9,953

3.03

7.74

12.63

30.34

1,091

2,784

4,544

2.59

8.40

10.49

31.19

1,048

3,399

4,245

2.54

8.65

9.94

30.05

1,173

3,999

4,595

2.56

14.45

6.59

29.05

1,281

7,217

3,289

3.83

9.77

9.26

28.82

2,135

5,441

5,158

4.41

9.65

10.56

27.24

2,852

6,246

6,834

6.45

8.98

11.49

18.55

5,265

7,331

9,379

7.15

8.44

9.43

17.93

6,707

7,918

8,853

6.44

8.43

8.59

17.85

6,875

9,001

9,170

10,915 12,621 13,889 14,511 16,053 17,629 15,137 16,831 19,062

6.79

8.19

6.80

17.59

7,963

9,603

7,968

20,622

8.68

7.77

6.49

17.23

11,220

10,046

8,391

22,275

10.55

7.48

6.56

16.20

14,843

10,534

9,235

22,801

10.85

7.45

6.01

15.71

16,530

11,360

9,160

23,944

32

2006

6,374

2005

26

2004

5,920

2003

Mining & quarrying

2002

Agriculture

2001

12,918 14,854 17,682 21,287 25,152 28,948 35,981 40,467 46,215 49,946 55,694 64,727 81,610 93,868 1,06,797 1,17,252 1,29,279 1,40,749 1,52,414

GDP (billions Kip)

2000

Table 8.1 Industry GDP in Lao PDR

8 Foreign Direct Investment and Inflow Climate in Laos by Industry 195

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

34.46

0.00

0.00

0.00

Mineral Products

Gold

17.50

17.50

27.12

27.10

Source Bank of Lao PDR annual report

Copper

0.00

31.80

30.89

Garments

Electricity 33.30

Industry share (%)

58.71

13.76

13.76

26.70

29.20

49.98

0.00

0.00

Gold

Copper

49.98

58.71

0.00

0.00

Mineral Products

101.20 84.24

107.99

12.47 42.00

20.40

56.55

11.47

18.76

39.16

17.81

14.46

47.89

10.06

59.94

9.13

13.69

40.85

7.38

51.44

9.89

23.45

31.12

8.61

42.42

9.56

12.07

327.59

20.04

90.59

80.61

446.58

100.62

127.09

112.83 370.40 441.85 446.03

103.76 110.00 92.85

216.59 498.75 553.09 561.68

98.48

106.11 110.83 127.50 126.29 256.03

97.01

90.90

Electricity 106.40 103.60 90.98

95.60

26.81

7.52

35.81

6.48

9.80

468.28

131.37

625.39

113.18

171.07 502.20

183.90

31.80

5.11

56.70

14.94

10.04

696.28

111.82

30.08

6.64

41.70

22.12

8.10

683.12

150.74

1241.58 946.87

327.16

219.91

34.19

6.62

42.95

26.05

6.93

774.13

149.83

972.60

589.81

156.92

518.85

353.11

178.67

189.69 1041.87 1283.19 1422.42

249.60

152.28

110.74

178.27

155.64

32.81

4.29

39.27

17.41

11.94

30.63

4.17

40.40

14.20

9.67

25.88

2.61

32.77

24.54

5.88

23.15

3.66

30.37

26.33

3.67

21.56

2.88

28.83

26.30

3.51

1074.85 1118.89 1098.53 1128.06 1165.68

140.47

1286.64 1475.86 1391.10 1479.74 1558.89

570.25

391.30

98.70

2003

Garments

2002

319.50 300.60 335.47 363.35 553.08 882.00 922.69 1091.91 1052.68 1746.36 2189.55 2270.67 2264.46 3276.35 3653.30 4244.77 4873.16 5407.81

Total exports (millions US$)

2001

Table 8.2 Industry exports in Lao PDR

196 T. Suruga

8 Foreign Direct Investment and Inflow Climate in Laos by Industry

197

Chinese- and Vietnamese-owned projects at 29% and 31% respectively, followed by gold at 21% and 31% respectively, while coal’s portion is less than 10%. The first Mining Law was promulgated in 1997, with the Ministry of Industry and Handicrafts responsible for regulation and the approval of concession contracts. It also defined the concession fees, royalty tax rates, and time periods of mining activity. In 2008, the Law on Minerals was promulgated and replaced the Mining Law. Under this law the Ministry of Energy and Mines became responsible for approving mining activities. Investors were also required to contribute to community development funds to compensate the community and provide benefits to the region. The Law on Minerals was amended in December 2011, with the purpose of clarifying the principles, regulations and methods of management, protection and utilization of mineral resources, and the supervision of mining projects. The Law on Minerals was amended in November 2017 to include a tender system for mining areas. According to [6], it has been pointed out that the number of concession contracts for mining areas, centred around foreign investment, increased rapidly around 2009. Until then, Laos had no major mineral resource developments and had almost no experience in managing mineral resources. This led to a large number of applications for concession contracts for mining areas being approved without sufficient information such as the applicant company’s previous performance in mining businesses, mining development technology, and amount of funding, and without conducting an examination. As a result, some companies that did not have experience in mining business or mining development technology acquired concessions for exploration of mining areas for the purpose of reselling the rights without conducting any exploration activities, and some project activities were conducted while ignoring the impact on the local community and the environment. According to [13], the number of concession contracts for mining areas increased from 58 in December 2003 to 100 in 2007 and 150 in September 2009. Further, Japan [3] states that “mining rights holders that only acquire exploration rights for the purpose of resale and do not carry out the prescribed exploration activities, and those that carry out mining activities while ignoring the impact on the environment and local communities, have increased”. For this reason, the government suspended the issuance of new mining rights for about 10 months in 2007 and reviewed existing mining rights, which resulted in the cancellation of 18 of the 169 licensed mining rights (including 69 foreign-owned). To address this issue, the revised Law on Minerals was adopted by the National Assembly in 2008. However, overall, the cancellation of concession rights that have seen no development has not progressed smoothly. Following the suspension of concession approvals in January 2007, a second suspension was imposed from September 2009 to September 2010 and a third suspension has been in place since May 2012. However, the suspension has only been in principle, and approvals are still being given. Suruga (2020a) used the 2016 data from the Ministry of Finance of Laos to analyse the payment of concession fees for mining areas. Land concession fees are higher for mining than for general inspection and exploration. According to this data, 256 mining companies held concessions in 2016 and more than 100 companies were not required to pay concession fees. It is thought that perhaps these companies had applied for an extension of their concessions and were waiting for the results due

198

T. Suruga

to delays in reviews. 146 companies were required to pay concession fees, of which only 64% had paid in full, 11% had made partial payments and the remaining 25% had not made any payments at all. Companies that had not paid the concession fees by the deadline could be charged an interest rate of 10% per month, but this was not done in practice. Phonvisay and Manolom [12] analysed the unpaid land concession fees but did not find that any particular nationality of investors had a large number of unpaid fees. The 2017 revision of the law introduced a tender system, but most of the promising mining areas were already subject to contracts. Therefore, the tender system can only be utilized if the contracts for mining areas where development is not progressing can be cancelled.

8.5 Electricity Sector As described in Sect. 8.2 above, a lot of direct investment has flowed into the electricity sector alongside the mining sector. According to the 2018 Electricity Statistics from the Ministry of Energy and Mines, in 2018 there were 69 hydroelectric power plants, one coal-fired power plant, nine solar power plants, and three biomass power plants, for a total of 82 power plants (with a capacity of 7,422 MW). However, the solar power plant and biomass power plants are small in scale, and their power generation capacity makes up only 0.97% of the total. There is only one coal-fired power plant, but it is a very large-scale plant at 1,878 MW, accounting for 25.3% of the total power generation capacity, and there are several more such plants being planned. The price and quantity of electricity purchased is fixed in a contract, so unlike mineral resources, there are no major price fluctuations and stable income can be expected. However, in Laos’ climate, where there are clearly identifiable rainy and dry seasons, hydroelectric power generation faces the problem that production volume decreases when the rainfall is low. This is especially true in the case of the inflow method of hydropower, which will be described later. In the electricity sector as well, the government has signed contracts that guarantee profits, leading to a rapid inflow of capital and the construction of many power plants, which has resulted in a failure to find a balance between domestic supply and demand and the occurrence of environmental problems such as the collapse of dams. First, it is necessary to look at the structure of power generation and distribution in Laos. Most of the large power plants are owned by export-oriented independent power producers, (IPP (e), nine in operation as of 2018), which are joint ventures between foreign investors and (partially owned) state-owned enterprises and export most of their electricity directly to Thailand and Vietnam, of which a large amount is sent to the Electricity Generating Authority of Thailand (EGAT). The remaining electricity is contracted to be transmitted to Électricité Du Laos (EDL), which is the sole seller to the domestic market. Other companies that produce electricity for the domestic market include EDL itself, EDL-Generation Company (EDL-GEN, a subsidiary of EDL), and domestic-oriented independent power producers (IPP (d)).

8 Foreign Direct Investment and Inflow Climate in Laos by Industry

199

EDL is synchronized with EGAT and they operate at the same voltage and frequency, so if there is surplus electricity on the Laos side it will flow (i.e., be exported) to the Thai side, and vice versa, if there is surplus electricity on the Thai side it will flow (i.e., be imported) to the Laos side. EDL is extremely small compared to EGAT, so EGAT controls the entire system. EDL also imports electricity from another Thai company (PEA), a Chinese company (YPC) and a Vietnamese company (EVN). Table 8.3 summarizes the statistics for the generation, domestic consumption, export and import of electricity. In 2018, 77.05% of total electricity production was exported, of which 92% was exported by IPPs, and the remaining 8% was exported by EDL. The IPP projects are build-operate-transfer (BOT) contracts, under which the facilities are handed over to the Lao government after 25 to 30 years of operation. Table 8.1 shows the electricity sector’s contribution to GDP. Although gas and water are included in the electricity sector, electricity is thought to provide the main proportion. The share of GDP was 2.6% in 2007 and has risen to 4.4% in 2011, 8.7% in 2016, and 10.9% in 2018. A 1,075 MW hydroelectric power plant started operation in 2009 and a 1,878 MW coal-fired power plant started operation in 2015, resulting in increases in the share of GDP. Looking at the share of exports in Table 8.2, it was 9.1% in 2007 but has since grown to 14.9% in 2011, 24.5% in 2016, and 26.3% in 2018, and is approaching closer to minerals as the leading share. Therefore, it is clear that the sector’s contribution to GDP and exports is extremely large. Lamphayphan et al. [7] created a macro model of Laos and Thailand to investigate the impact of Thailand’s electricity purchases from Laos. The results showed that Thailand’s increase in electricity purchases from Laos not only stimulated Thailand’s economic activity and had a positive impact on the Thai economy, but also had a positive impact on the Lao economy through the increase of income from electricity exports. Onphanhdala and Chansomphou [11] used the NamNgum2 and NamNgiep1 dams, which are large-scale hydroelectric power plants operated by IPP (e) companies, as examples to analyse the contribution of the two dams to Laos’ finances and economy, and their societal impact including the environment, resettlement and compensation. As mentioned above, the management of the rapid inflow of investment into the electricity generation sector was unsuccessful; there were three major problems regarding this management. The first problem was that, due to the overestimation of domestic demand, the plans for many domestic oriented IPP hydroelectric power plants were approved and constructed, which made it necessary to deal with the oversupply of power. The second problem was that there are two types of hydroelectric power plants, the inflow type and the reservoir type. The inflow type has a low construction cost but generally can only generate power in the rainy season. The reservoir type is also affected by the amount of water, but in addition to that, many inflow type power plants were constructed due to their low cost, so the amount of power generation in the rainy season and the dry season has become unbalanced. The third problem is that companies bear huge debts that are not commensurate with the size of their income, such as for investment in transmission lines. The reason for the large amount of investment inflow is that the contracts contain favourable conditions, including that corporate tax does not have to be paid for five years from the start of operation and a “take or pay” condition that EDL will purchase a certain amount of

200

T. Suruga

Table 8.3 Electricity generation, consumption, export and import (GWh) Generation

Domestic consumption

Export

Import

1991

834.6

220.7

562.6

34.9

1992

751.6

252.7

459.8

41.3

1993

919.6

264.8

595.8

47.7

1994

1,198.3

280.0

829.3

57.4

1995

1,085.0

337.5

675.6

76.8

1996

1,247.8

379.5

792.4

87.6

1997

1,218.7

433.9

710.2

101.6

1998

2,165.6

513.3

1,613.5

142.3

1999

2,806.3

565.5

2,228.8

172.2

2000

3,438.4

639.9

2,792.8

180.2

2001

3,653.7

710.3

2,871.4

183.8

2002

3,604.1

766.7

2,798.3

200.8

2003

3,178.2

883.7

2,284.6

229.3

2004

3,347.6

902.8

2,424.6

277.6

2005

3,509.4

1,007.4

2,506.0

329.5

2006

3,595.0

1,114.3

2,487.4

631.1

2007

3,373.6

1,298.4

2,230.4

793.4

2008

3,717.0

1,915.7

2,315.4

844.5

2009

3,384.3

2,257.7

1,920.8

1,175.1

2010

8,449.0

2,440.7

6,646.5

1,209.7

2011

12,979.5

2,555.8

10,668.4

904.3

2012

12,760.1

3,074.9

10,363.0

1,329.1

2013

15,511.6

3,381.0

12,494.0

1,271.7

2014

15,635.3

3,791.3

11,936.2

1,559.1

2015

16,499.2

4,239.1

10,842.4

2,049.8

2016

25,315.1

4,660.1

19,650.4

862.4

2017

31,314.7

4,966.3

24,901.6

499.0

2018

34,664.5

5,416.6

26,708.3

300.5

Source Ministry of energy and mines electricities statistics 2018

electricity even if it is unnecessary, and the price of electricity is set at a level where the total investment amount can be recovered at a certain rate of internal revenue. The first problem concerning the overestimation of forecasted demand was corrected around 2019, which reduced by half the original forecasted demand for 2030. Reasons that have been given as the cause of the overestimation include the fact that Laos has promising bauxite reserves and there was a period when using the reserves to produce aluminium was discussed, so the electricity demand for

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aluminium production, which requires a large amount of electricity, was included in the demand forecast; another is that it was overestimated that special economic zones would be created in various places and many companies would enter and demand electricity supply. In reality, there are no plans for aluminium production, and not as many companies have entered special economic zones than what was predicted. Suruga [14] has a detailed explanation of the method of forecasting demand. Table 8.4 summarizes EDL’s electricity purchase and sales volumes. As shown in Table 8.4, domestic oriented electricity production began to increase rapidly from around 2016, centred on electricity production by IPP (d) companies, and EDL transitioned from importing to exporting the surplus. Due to the increase in electricity supply, 22.8% of the electricity produced for the domestic market was exported in 2016, and that ratio rose to 28.0% in 2018. However, in 2016, EDL’s export price was set at a very low price of 3.76 cents per kWh, while the purchase price from IPPs was 5.96 cents per kWh. Therefore, the result was that EDL’s losses increased as the amount of electricity exported increased. From 2019, the export and import prices with EGAT were increased, but even with the changed export prices EDL continues to make a loss. The decline in domestic oriented production volume in 2019 was due to a drought. Fortunately, neighbouring Vietnam and Cambodia face a problem of electricity shortages due to being in the process of developing their industrialization. Therefore, electricity produced in the south of Laos is being exported to Cambodia from around 2020, and whether electricity produced in the north will be exported to Vietnam or used for domestic facilities that require large amounts of electricity is being considered. Due to the second problem of the imbalance in power generation between the rainy season and the dry season, a pattern has formed where EDL exports to EGAT in the rainy season, and the amount exported is reduced, or electricity is even imported, during the dry season. Table 8.5 shows the monthly variations in imports and exports, and the seasonal fluctuation in the amount of electricity produced can be confirmed from the production volumes. The rainy season in Laos is from May to October and the dry season is from November to April. In order to resolve this seasonal imbalance, and despite it going against current trends due to the environmental problems, the Table 8.4 Power supply of EDL (GWh) 2014

2015

2016

2017

2018

2019

EDL/EDL-GEN

2021.5

2218.7

2641.8

2848.6

3181.8

2713.8

Purchase from IPPs

1864.8

1991.0

4093.4

5015.0

6205.0

5452.5

Import

1486.5

1750.4

793.0

430.5

300.5

1344.7

Total supply

5372.8

5960.1

7528.2

8294.1

9687.3

9511.0

Domestic Consumption

3791.3

4239.2

4660.1

4966.3

5416.6

6595.8

Export from EDL

444.6

655.4

1538.3

1837.4

2630.2

1439.3

Total sales amount

4236.0

4894.6

6198.5

6803.7

8046.8

8031.2

Source EDL electric statistics 2019

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T. Suruga

Table 8.5 Monthly power supply of 2018 (GWh) Export from EDL

Import

Purchase from IPP

EDL/EDL-GEN generation

Jan

104.4

27.6

440.6

171.1

Feb

62.8

43.5

315.7

153.8

Mar

34.9

65.7

357.2

174.4

Apri

22.5

85.8

347.5

163.5

May

127.5

18.3

476.4

260.9

Jun

233.2

10.4

523.8

336.3

Jul

284.6

5.5

649.5

359.0

Aug

329.9

5.3

692.2

356.0

Sept

311.9

4.4

713.6

341.9

Oct

265.6

4.5

669.9

271.0

Nov

217.7

7.7

551.0

220.2

Dec

144.1

21.8

470.3

373.8

Source MEM electricity statistics 2018

planning of the construction of coal-fired power plants that do not rely upon water volumes is progressing. The third problem of debts is mainly due to EDL’s construction of transmission lines and investment in large-scale IPPs. Investing in an IPP is less of a problem because dividends can be obtained after a certain period, but in recent years the returns from investment in transmission line construction has been low since the country’s electrification rate has already become substantially high. According to EDL’s 2018 financial report, the company’s revenue was 5.34 trillion kip (approx. US$ 630 million, US$ 1 = 8530 kip) at the end of the 2018 financial year, while fixed liabilities were 49.11 trillion kip (US$ 5.76 billion) and current liabilities were 12.26 trillion (US$ 1.44 billion). Considering that Laos’ GDP is 152 trillion kip, the size of this debt can be understood. Further, the fixed liabilities increased by 2.5 times in one year in 2016. It is very questionable to be constructing transmission lines by investing amounts of money that are not sensible when compared to the company’s income, and there are also suspicions of corruption (Radio Free Asia “Lao Power Company Deep in Debts, But Managers live Well,” 10 May 2021). Operating income has been in the red since 2015 due to factors such as the increase in losses caused by increased exports, as mentioned above. In addition, interest payments on debt have increased, and despite other income such as dividends from its subsidiary EDL-GEN, the current account balance fell into the red from 2016. As a result, payments to IPPs for electricity purchases have continued to be in arrears. In the midst of this management crisis of huge debt and operational failures, the Électricité du Laos Transmission Company (EDL-T) was established in September 2020 as a joint venture between EDL and the China Southern Power Grid Company

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(CSG). The details of EDL-T are still unknown, but according to [9], CSG’s investment ratio is estimated to be 90% and it plans to purchase the 230 kV + high-voltage power grid from EDL. The company’s concession period is 25 years. The power grid is at the core of electricity facilities, and the risk to the security of the country’s people and companies is large if a Chinese company takes control of this part of the system. As the country ultimately could not solve the problem on its own, it has opted for the method of accepting an injection of Chinese funds in exchange for allowing it to operate this core equipment. There are some concerns about EDL-T. First, Yunnan Province in China has abundant electricity and is said to be cheaper than Laos. Demand for electricity is high in places such as Cambodia, southern Vietnam and Malaysia, and it will be possible to sell Yunnan’s electricity directly to each of these countries if the transmission line network that runs through Laos is completed, so there is a risk that Laos’ electricity will not come into play. Second, although EDL-T is taking over a certain portion of EDL’s debt, there is a high possibility of corruption related to transmission line construction, so the true value of the transmission lines is expected to be considerably lower than the nominal amount of EDL’s investment, so it is unclear how much debt can be transferred to EDL-T. Third, it is unclear how the transmission line usage fees will be determined, but EDL will carry the burden if the transmission line usage fees are too high. The merits of establishing EDL-T can be thought of as follows. The biggest advantage is that it can reduce some of EDL’s huge debt and avoid a national financial crisis for the time being. The second advantage is that it can prevent political intervention and corruption on the Lao side regarding the core transmission line construction. The third advantage is that it has the potential to introduce China’s more advanced electricity management technology and improve Laos’ technology (depending on Laos’ human resources). There is some relief for the time being due to some of the debt being taken over, but a big price has been paid, in that a portion of the transmission line network is held by China, leaving a cause for concern about the future.

8.6 Manufacturing Industry As seen in Sect. 8.2 above, foreign direct investment in the manufacturing industry is low. It accounts for only 8.47% of the cumulative total from 1989 to 2014. However, looking at direct investment in general projects that do not include concessions in 2019, including domestic investment, it accounts for 15.3% and is becoming relatively large. The development of mining and electricity described in the previous sections has played a role in the development of Laos. However, employment is limited in both industries, and the development of the manufacturing industry is indispensable for providing employment to the people and developing their skills. As shown in Table 8.1, the share of GDP was generally at the 8% level in the 2000s, but production value increased significantly in 2009 after the post-global financial

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T. Suruga

crisis and the share reached 14.45%, and in 2010 and 2011 it was in the 9% level. However, it has returned to the 8% level since then, and has fallen into the 7% level since 2017. From the annual reports of the Bank of the Lao PDR up to 2018, only the clothing manufacturing industry can be seen as having a proportion of exports. Looking at Table 8.2, it can be seen that the clothing manufacturing industry was an industry that occupied an important share alongside the electricity industry in the early 2000s. It had a 23.45% share in 2008, but it has gradually decreased since then and has fallen to the 3% level since 2017. The 2019 Bank of Lao PDR Annual Report has included a new industrial sector in the export statistics since 2015. Looking at this, the value of electrical machinery and equipment has gradually increased to account for 9.35% in 2018, and cooked food, drinking water and tobacco also accounted for 8.04%, and it can be seen that exports by this new industrial sector are growing in the place of the clothing manufacturing industry. However, in the case of electrical machinery, there is a high possibility that parts are imported from overseas and only labour-intensive portions are made in Laos and then exported, so even if the export value seems large, the value added in Laos may be small. Recently in East Asia, the production processes of the manufacturing industry, particularly the electrical industry, have been divided and spread across other countries. Therefore, as [16] argues, there is an opportunity for industrialization by moving partial manufacturing processes to Laos. Special economic zones have been created in various places to accept such manufacturing industries. Because Laos is landlocked, transportation costs are high and incorporation into the international supply chain is difficult. However, because transportation with Thailand is well developed, it is possible to move part of the manufacturing process taking place in Thailand, where the minimum wage has been raised, as a “Thailand Plus One”. In fact, there has been a shift in production from Thailand, but on a smaller scale than expected. Transportation to China and Vietnam is gradually being improved, so there is a possibility that opportunities to move some processes from China and Vietnam to Laos will increase in the future.

8.7 Investment Climate for the Inflow of Foreign Direct Investment For Laos, a shift from the mining and electricity generation sectors, which have had a lot of inflow of foreign investment, to the manufacturing industry will be necessary for inclusive and sustainable growth that benefits many of its citizens. However, competition is fierce because its neighbouring countries also want to increase the inflow of foreign investment for more advanced manufacturing industries. This section will look at the current condition of and problems in the investment environment that is necessary for the inflow of foreign investment into more advanced manufacturing industries.

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One of the disadvantageous conditions for Laos is that its small population of 6.9 million (ADB, 2019) is unattractive as a market. Neighbouring Vietnam has more than 90 million people, Thailand has close to 70 million, and Myanmar has more than 50 million, so these countries can expect direct investment in the manufacturing industry oriented towards the domestic market. Even the relatively small Cambodia has a population of about 15 million, which is more than double that of Laos. The second disadvantage is that it is a landlocked country that does not face the sea, its domestic transportation infrastructure is under-developed and transportation costs are high. Currently, the usual route for sea transportation is via a port in Thailand. The distance to Vietnam’s ports is similar, but transportation is not well developed at present. However, the convenience of transport is gradually improving, with a fifth bridge across the Mekong River currently under construction, the East–West Economic Corridor and the North–South Economic Corridor under the Greater Mekong Subregion program passing through Laos, and the China - Laos High Speed Railway and a China - Laos Expressway commencing operation. Since there are disadvantageous conditions regarding population and transportation costs, it is necessary to have an inflow climate that compensates for the disadvantages. This section will consider human capital and wages, governance, and infrastructure in turn.

8.7.1 Human Capital and Wages As Suruga [15] identifies, obstacles to investment in Laos include an “insufficiently educated labour force,” “quality of employees,” and “difficulty in hiring human resources (engineers)”. Because the history of the manufacturing industry is short, it is unavoidable that there is a lack of experienced human resources. Therefore, it is often the case that experienced people from Thailand are hired at the management level at the time of establishment, since Thailand’s long history of manufacturing means there are many skilled people. In addition, Laotians belong to the Thai language family, and not only the Lao and Thai languages are very similar, but Laotians regularly watch Thai television programs, so the language and cultural barriers are low. However, hiring Thais to work in Laos increases the cost, so it will eventually be necessary to replace them with Laotian managers. More advanced engineers have not been able to be trained in Laos until now because there was not much demand from the private sector, but it is thought that more people will develop their careers as engineers if employment opportunities increase. Laos has previously been in a state where education was not well developed and the level of education was low. As summarized by Suruga [15], according to the 2015 national census, the highest level of education of people aged 25 to 59 was that 15.4% have never been to school, 16.2% had not completed primary school, 24.6% had completed elementary school, and 15.6% had not completed junior high school; therefore, a total of 31.6% have not completed primary school and 72% have not completed junior high school. In the past, compulsory education was only

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five years of primary school, but from 2015, four years of junior high school has become compulsory, for a total of nine years. Due to the low level of education as a whole, there are problems with the quality of teachers and the level of educational achievement is very low. Reflecting this situation, general employees lack basic academic ability, and there are places where employing people who are illiterate or cannot perform mathematics satisfactorily cannot be avoided. However, education has improved significantly in terms of quantity, and according to [2], the net primary school enrolment rate has increased from 83.9% in 2005/06 to 98.8% in 2015/16, the rate of remaining in school for the five years of primary education has improved from 62.0 to 79.6%, and the gross enrolment rate in junior high school has improved from 51.7 to 82.2%. As mentioned earlier, people have no work experience in the manufacturing industry, so they lack information and understanding about work in the manufacturing industry, therefore, the turnover rate is high, and an interview survey found that it is about 5–10% per month. There are not many job opportunities at present, so new people can be hired immediately when workers leave. However, hiring on a scale of around 1000 people seems to be quite difficult. There are also vocational-technical schools that aim to find employment in the manufacturing industry. Vocational training in the industrial field is mainly carried out by public vocational-technical schools; according to the Ministry of Education and Sports [8], 40.2% of the students enrolled in public vocational-technical schools in 2014/15 were in the industrial field, while in private vocational-technical schools the services field accounts for 95.4%, and the industrial field accounts for only 4.6% of students. In general, vocational-technical schools are less popular than regular courses, but the number of students enrolling is increasing because public financial support is sometimes available. The quality of education is also a problem in vocational-technical schools. Since most people in society as a whole have no work experience in the manufacturing industry, there are also teachers who have no practical experience and cannot provide appropriate education. Concerning wages, the minimum wage is the standard for ordinary workers in Laos; as wages have been steadily rising in ASEAN countries and China in recent years, wages are also increasing steadily in Laos, although the rate of increase is moderate. According to Suruga [15], monthly wages were raised by about 22% in 2018 to US$ 130 (1.1 million kip). When the minimum wage of each country is converted into a monthly amount, it is considerably lower than Thailand’s $240, Vietnam’s $173, and Cambodia’s $170, but it is higher than Myanmar’s $80.

8.7.2 Governance The concept of contract-intensive goods is used by [10] and [1] to explain the relationship between the inflow of foreign direct investment into the manufacturing industry and the legal system. Goods with complex global value chains involve the trade of many goods between different companies in different countries, which increases the necessity that contracts are performed with certainty. In addition, the investment in

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equipment for the production of differentiated goods is less versatile than for homogeneous goods, so once an investment is made the equipment cannot be diverted to other production uses and the manufacturer’s bargaining power with the buyer of the product is weakened; therefore, the certain performance of contracts and legal protections are required. In this way, the goods embedded in more complex global value chains have high technological levels and are more contract intensive. That is, all other factors being equal, the higher the quality of the domestic system, the more that participation in industries with complex global value chains becomes possible, and in the case of countries like Laos, foreign direct investment will increase in that field. If the quality of the system is improved and incorporation into the global chain is successful, the technological level can be raised and the skill level of human resources can be improved. The World Bank’s Worldwide Governance Indicators measure each country’s governance from the six dimensions of (1) the population’s voice and accountability, (2) political stability and absence of violence, (3) government effectiveness, (4) regulatory quality, (5) rule of law, and (6) control of corruption. Table 8.6 summarizes the percentile ranks of Laos. The percentile rank represents the percentage of countries that are below Laos’ score. Looking at this, only political stability and the absence of violence is extremely high at 64.76 (in 2019) and is rising each year. The next highest is regulatory quality, which is only 23.56 and has been stable since 2012. Government effectiveness peaked in 2014 and has declined to 20.67. The rule of law and the control of corruption have also been on a downward trend since 2014, with the former falling to 17.31 and the latter to 13.46. The lowest is the population’s voice and accountability, which is only 3.94 and shows a trend of decline. The rule of law and the control of corruption, which are closely related to contract-intensive goods, have a declining trend, which is of concern.

8.7.3 Infrastructure The electrification rate on a household basis exceeded 94% in 2017 and has reached 100% in cities, which is quite high. JETRO [5] compares electricity prices to neighbouring countries, in 2015 it was 8 cents per kWh in Vientiane, while it was 9 cents in Vietnamese cities, 10 cents in Bangkok, 24 cents in Phnom Penh and 4 cents in Yangon. Phnom Penh is very expensive, and Yangon is very cheap, but Vientiane is a little cheaper than Thailand and Vietnam. The electricity supply is sufficient, but there are many companies that consider electricity as an obstacle to investment. This is thought to be due to electricity outages. When asked about this, companies identified the problem that there is no notification of planned maintenance outages, and even if notice is provided, the timing was not accurate. As mentioned above, road conditions are gradually improving, but there are still many problems. The improvement of roads is essential to participating in the global value chain. Looking at the World Economic Forum’s international comparison of roads, Laos scored a score of 2.8 out of a maximum of 7 points for the indicator of

10.95 2011

59.57 15.22 17.09 15.00 2010

Political stability and absence of violence/terrorism

Regulatory quality

Rule of Law

Voice and accountability

16.43 4.69

17.70 16.59 5.69

Regulatory quality

Rule of law

Source World bank worldwide governance indicators

Voice and accountability

18.96

35.55

Political stability and absence of violence/terrorism 45.02

20.85

21.05

Government effectiveness

9.95

8.57

Control of corruption

20.50

16.58

36.70

29.53

30.60

32.47

28.49

1998

Government effectiveness

1996

Control of corruption

Table 8.6 Lao worldwide governance indicators

4.23

22.07

23.22

45.97

22.27

15.64

2012

10.95

20.30

8.21

28.04

22.05

21.32

2000

4.23

24.41

23.22

48.82

25.12

18.48

2013

3.48

12.38

7.65

43.39

15.82

8.59

2002

4.43

25.48

21.63

62.38

39.42

21.15

2014

2.49

9.41

7.14

14.07

14.29

8.59

2003

4.43

23.56

23.56

61.90

35.10

17.79

2015

6.73

13.88

8.87

25.73

13.79

9.27

2004

4.43

20.67

24.52

64.29

38.94

14.42

2016

5.77

11.96

8.82

31.07

10.29

6.83

2005

4.43

18.27

25.48

61.43

37.50

15.87

2017

6.73

15.79

9.31

42.51

16.10

6.34

2006

4.43

18.75

21.63

60.48

24.52

15.38

2018

5.29

18.18

12.14

38.65

17.96

7.28

2007

3.94

17.31

23.56

64.76

20.67

13.46

2019

5.29

21.15

13.59

44.71

18.45

7.77

2008

5.21

15.17

13.40

39.34

18.18

6.22

2009

208 T. Suruga

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“availability and quality of road infrastructure” in 2016, ranking close to the bottom at 131st out of 136 countries. Neighbouring Thailand was ranked 54th with 4.7 points, Cambodia was ranked 101st with 3.6 points, and Vietnam was ranked 104th with 3.6 points, indicating that the road conditions in Thailand are good. Looking only at the “quality of road infrastructure”, Laos is relatively good, with a score of 3.4 out of 7 and 89th out of 136 countries. As there is not much difference with Vietnam’s 3.5 points (87th) and Cambodia’s 3.4 points (91st), this means that Laos’ “availability” of roads is inferior to that of neighbouring countries. Regarding quality, Thailand was in 59th place with 4.2 points. Laos’ “connectivity of roads” was 2.2 points out of 5 and 126th out of 129 countries, which is below landlocked countries in Central Asia such as Kyrgyzstan, Tajikistan and Mongolia. Laos’ “ease and affordability of shipment” was 2.2 points out of 5 points, ranking 129th out of 136 countries, indicating that there is a problem in the transportation of goods.

8.8 Conclusion Laos has accepted a lot of foreign investment by enacting investment laws and giving preferential treatment to investment. In particular, it has accepted a lot of foreign investment in mineral resources and electricity. The inflow of investment in these two areas has made significant contributions to economic growth, the promotion of exports, and increased fiscal revenue. However, some problems have arisen due to the lack of human resources, institutional development, and experience in managing the large inflow of foreign capital that has occurred due to the preferential treatment. Regarding mineral resources, no new minerals have been mined and reserves of the country’s main products of copper and gold are running out. The increase in domestic demand for electricity has been slow, and there are limits to the suitable locations for export oriented, large-scale hydroelectric power generation. Mineral resources and electricity are unlikely to bring about sustainable growth, nor have they led to inclusive growth that creates widespread employment. In order to realise sustainable and inclusive growth, investment that promotes the development of the manufacturing industry is indispensable. For the inflow of appropriate investment in the manufacturing industry, Laos faces the issues that it has a small population and lacks attractiveness as a market, and that transportation costs are high because it is a landlocked country. In addition, international competition is fierce for attracting investment in high-grade manufacturing industries. Therefore, it is necessary to improve the human capital, governance and infrastructure for such inflow.

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References 1. Dollar, D., & Kidder, M. (2017). Institutional quality and participation in global value chains. In Global value chain development report 2017: measuring and analyzing the impact of gvcs on economic development (pp. 161–173). WTO, Chapter 7. 2. Iwashina, M. (2018). Development of Basic Education in Laos and JICA Initiatives Towards ‘Education administration as the Foundation of School Education.’ In T. Suzuki (Ed.) The ASEAN Community and Laos (pp. 177-192), JICA Laos Office, Chapter 10 (in Japanese). 3. Japan Oil, Gas and Metals National Corporation. (2009). 2009 Trends in Global Mining: Laos (in Japanese). 4. JETRO. (2017). Laos Investment Guidebook 2017, JETRO Vientiane Office (in Japanese). 5. JETRO. (2018). Laos Overview, JETRO Vientiane Office (in Japanese). 6. JFE Techno-Research. (2012). About Mining Projects in Laos (Investigation of the MiningRelated Legal System in Laos) (in Japanese). 7. Lamphayphan, T., Toyoda, T., Crekawski, C., & Kyophilavong, P. (2015). Export supply of electricity from Laos to Thailand: An econometric analysis. International Journal of Energy Economics and Policy, 5(2), 450–460. 8. Ministry of Education and Sports (Lao). (2016). Technical and Vocational Education and Training Development Plan 2016–2020, Vientiane. 9. Namba, S. (2021). Has Economic Growth Slowed Rapidly Despite Succeeding in Controlling the Spread of Covid? Laos in 2020. In Institute of Developing Economies (Ed.) Asia Trends Report (pp. 240–258), Institute of Developing Economies (in Japanese). 10. Nunn, N. (2007). Relationship-specificity, incomplete contracts, and the pattern of trade. Quarterly Journal of Economics, 122(2), 569–600. 11. Onphanhdala, P., & Chansomphou, V. (2019). Hydropower development in Lao PDR: Macroeconomics and environmental implications. In Le Voet Phu et al. (Eds.), Resource governance, agriculture and sustainable livelihoods in the lower Mekong basin (pp. 65–91). The Lower Mekong Public Policy Initiatives, Chapter 3. 12. Phonvisay, A., & Manolom, T. (2020). Influence of Chinese investments in the mining sector in Laos: Land concession and concession fee. In S. Chirathivat, B. Ratchatorn, & W. Nakawiro (Eds.), China’s rise in mainland ASEAN (pp. 237-265), Worldscientic pub. Co. Inc, Chapter 10. 13. Sugimoto, S. (2010). Mining industry development in Laos. In N. Yamada (Ed.), New developments in Laos’ Chintanakan Mai (New Economic Mechanism), Research Report Chapter 10, Institute of Developing Economies (in Japanese). 14. Suruga, T. (2020a). “Natural Resources Management,” Working Group 2, Joint Policy Research and Dialogue Program for Fiscal Stabilization in Lao PDR, Final Report, JICA, pp. 60–81. 15. Suruga, T. (2020b). Initiatives regarding human capital. In K. Kagawa, T. Suruga, & K. Kitazawa (Eds.), Labour, employment and society in Laos (pp. 63–88). The Japan Institute for Labour Policy and Training, Chapter 3 (in Japanese). 16. Suzuki, M. (2009). Basic Knowledge of Laos’ Economy, JETRO (in Japanese). 17. Suzuki, M. (2010). Changes in Laos’ foreign investment law. In N. Yamada (Ed.), New developments in Laos’ Chintanakan Mai (New Economic Mechanism), Research Report Chapter 4, Institute of Developing Economies (in Japanese). 18. Yamada, N. (2018). Basic knowledge about Laos, Mekong (in Japanese).

Index

A Abuse of dominance, 58–60, 69 Abuse of superior positions, 42, 46, 49, 50 Access to justice, 95–97, 110, 123, 125 AEC Blueprint, 27, 30–32, 66 AEC Consolidated Structural Action Plan (CSAP), 27, 30, 31, 32, 40, 41, 42, 44, 45, 48 Agreement, 54, 57–59, 66, 70, 71, 75 Alternative Dispute Resolution (ADR), 25, 27, 31, 44, 80, 95, 97, 98, 122, 123, 131 Antimonopoly Act (AMA) of Japan, 53, 54, 56, 74 Antitrust law, 54 Arbitration, 133–138, 140–144, 146, 148, 150–152, 157 Arbitration award, xii, 79–82, 87–93 Arbitration council, 81, 82, 87, 88, 90, 91 ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), 63 ASEAN Competition Action Plan (ACAP) 2025, 42, 66 ASEAN Competition Conference (ACC), 64, 67 ASEAN Competition Enforcers’ Network (ACEN), xi, 67, 68, 74 ASEAN Comprehensive Investment Agreement (ACIA), 27, 30, 33, 34 ASEAN Economic Community (AEC), vii, xi, 57, 66, 68 ASEAN Expert Group on Competition (AEGC), 65–68, 70, 74 ASEAN Framework Agreement on Services (AFAS), 27

ASEAN Member States (AMS), 53, 55, 57, 64, 66, 68–71, 73–75 ASEAN Regional Cooperation Framework (ARCF), 71, 74 ASEAN Standards and Conformance Strategic Plan 2016-2025, 28, 40 ASEAN Strategic Action Plan on Consumer Protection (ASAPCP) 2021-2025, 42 ASEAN Trade in Services Agreement (ATISA), 27 ASEAN Way, vii, 70 Asian Development Bank (ADB), vii, viii Asset valuation, 144, 145, 147, 149, 150, 152, 155 Association of Southeast Asian Nations (ASEAN), vii, ix, xi, xii Australia Competition and Consumer Commission (ACCC), 63–65, 69, 75 Australian Agency for International Development (Aus AID), 163, 170

B Bailiff, 138, 143–148, 150–152, 154 Bilateral Investment Treaties (BIT), xi

C Calvo Doctrine, 37 Cambodia, Laos, Myanmar and Vietnam (CLMV), vii, viii, x, xi Cambodia’s Civil Code (2007), x Cambodia’s Investment Law (1994 amended in 2003), 37, 38

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 T. Suruga et al. (eds.), Economic Law Reforms in the ASEAN Emerging Economies, Kobe University Monograph Series in Social Science Research, https://doi.org/10.1007/978-981-99-1556-9

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212 Cambodia’s Investment Law (2021), 35 Canada Model Foreign Investment Promotion and Protection Agreement, 34 China’s Civil Code (2020), 28, 43 China’s integrated contract law (1997), 28 Civil code, viii, x, xii Civil contract, 43 Civil procedure code, xii Clausula rebus sic stantibus, 45 Collective bargaining, 79, 80, 82, 85 Collective disputes, 80, 81, 87, 89, 91 Collective labor disputes, xi Commission, 53–64, 67, 70, 71, 73–75 Common law family, xi Competition and Consumer Commission of Singapore (CCCS), 56, 73, 74 Competition authority, 53–57, 63, 65–68, 70, 71, 73–76 Competition culture, 66, 67, 75 Competition law, ix, xi, 53–76 Competition Law Implementation Program (CLIP), 63, 64, 66 Competition policy, 53, 55, 57, 63–71, 75, 76 Compulsory execution, xii Conditionalities, 26 Consumer protection law, 27, 30, 39, 42, 43, 48, 50, 72 Continental law (civil law) family, viii Contract-intensive good, 19 Contract workers, 85 Cooperation, 53, 54, 63, 65–71, 74, 75 Core labor standard, 31, 40 Corporate Social Responsibility (CSR), 28, 40 Council for Mutual Economic Assistance (COMECON), vii “Creditors’ bargain” theory, 47 Critical legal studies, viii, ix Cumulative debt problem, vii Customary international law, 33, 34

D De facto standard, 29, 34, 37 Definition of “investment”, 31, 33, 34, 38 Deregulation, 26 Dispute resolution, ix, x–xii Diversity, 68, 69 Doha Declaration, 41 Doha Millennium Round, 32, 41 Domestic workers, 81

Index E Economic contract, 43, 50 Economic Partnership Agreement (EPA), 66, 71, 75 Environmental and social considerations, x, 28, 32, 35, 39, 49 Environmental clauses, 32, 33, 38, 39 Environmental dumping, 39 European Competition Network (ECN), 68 European Union (EU), 53, 55, 64, 67, 68, 70, 71, 75 Executing agency, 136, 141, 144–148, 150–152, 155, 156

F Fair and equitable treatment, 30, 32, 33, 34, 37, 50 Foreign direct investment, ix, x, xii Foreign investment law, ix, xi Freedom of contract, 30, 43 Free Trade Agreements (FTA), 27, 29, 30, 31, 32, 34, 37, 40, 48, 63, 66, 71

G General Agreement on Trade Related Investment Measures (TRIM), 34, 38, 50 Global Value Chain (GVC), 1, 4, 19 Good faith, 43, 45 Good governance, viii Grassroots settlement, 95, 98, 100, 104, 106–111, 122–124, 128 Grievance procedure, 79, 80

H Human capital, ix Human Capital Index (HCI), 1, 3, 4, 19 Human Development Index (HDI), viii

I Independence, 53, 73, 74 Independent Evaluation Group (IEG), 171, 172 Independent Power Producer (IPP), 198, 199, 201, 202 Indian Code, x Indicator surveys, 26 Indirect expropriation, 32, 33, 34, 37, 50 Indirect finance, 47 Individual disputes, 79–81, 87, 89, 91

Index Individual labor disputes, xi Indonesia Commission for the Supervision of Business Competition (KPPU), 56, 57, 64, 68, 73, 74 Indonesia’s Competition Law (1999), 41 Infrastructure, ix Insolvency law reform, 28, 31, 46, 47, 50 Institution, 53, 57, 63, 73 Intellectual property rights, 26, 27, 30, 45 Inter-donor conflicts, viii, x Interest-based dispute, 79–82, 85 Interests disputes, xi International Center for Settlement of Investment Disputes (ICSID), 32, 33 International Competition Network (ICN), 41, 70 International Cooperation Department, Ministry of Justice of Japan (ICD), 162 International Monetary Fund (IMF), x Intra-ASEAN investors, 28 Investment guarantee, 32, 33, 37 Investment incentives, 33, 34, 35, 36, 37, 38, 48, 50 Investor-State Dispute Settlement (ISDS), 32, 33, 37, 40

J Japan-ASEAN Integration Fund (JAIF), 63, 64, 66 Japan Fair Trade Commission (JFTC), 41, 53–56, 63–67, 74, 76 Japan International Cooperation Agency (JICA), 162, 183 Japan’s Anti-Monopoly Act, 42 Japan’s Civil Code, 30–32 Judgement execution, xii, 157, 158

L Labor law, ix Labour contract, 81, 86, 87 Labour disputes resolution, 79 Labour law, 79, 80, 85–87, 93 Land law reform, 26 Lao Land Titling Project, 162, 163, 168 Laos Civil Code (2018), 43, 46 Laos Competition Law (2015), 42 Laos Department of National Land Use Planning and Development, 169 Laos Foreign Investment Law (1994), 35, 36

213 Laos-German Land Management and Decentralised Planning (LMDP), 182 Laos Insolvency Law (2017), 46 Laos Investment Law (2009, amended in 2016), 38 Laos Law on Minerals, 197 Laos National Land Policy Committee, 169, 171 Laos’ Land Titling Project, xii Laos’s Civil Code (2020), xii Law & Development, viii Law & economics, 43 Law & Society Association, viii Legal assistance, xii Legal development support, 162, 163, 183, 185 Legalization, 70 Legal origin, viii Legal pluralism, viii Legal Technical Assistance (LTA), 53, 54, 63–67, 69, 70, 75, 76 Legal transplants, vii, viii Limited liability, 47 Local content, 34, 36, 38 Lockouts, 80, 88, 90 M Malaysia’s Investment Promotion Act (1986), 36 Mediation, xi, 79–82, 85–87, 93, 95, 98, 102, 106, 107, 111–125, 129, 130 Mediation committee, 112 Mediator, 81, 82, 87 Memorandum of Understanding (MoU), 67, 74 Merger, 53, 54, 57, 61, 66–68, 69, 71, 74 Millennium Development Goals (MDGs), viii Minimum standard of treatment, 34 Minimum wage, 204, 206 Ministry of Finance’s Department of Land and Housing Management of Laos (DOLHM), 165 Model law, viii, x Monetary claim, 134, 135, 137, 139–142, 149 Moral hazard, 47 Most favored nation treatment, 31, 33 Multilateral Agreement on Investment (MAI), 32, 33, 40 Multiple application, 144, 146, 148, 149, 151, 153, 155

214 Myanmar’s Competition Law (2015), 42 Myanmar’s Contract Act (1982), 44 Myanmar’s Foreign Investment Law (1988), 35, 36 Myanmar’s Framework for Economic and Social Reforms (FESR), 26 Myanmar’s Insolvency Law (2019), 46 Myanmar’s Investment Law (2012 amended in 2015. 2016), 38 Myanmar’s Law on Consumer Protection (2014), 46 Myanmar’s Sales of Goods Act (1930), 44 N National competition law, 69, 75 National treatment, 30, 31, 33–36, 50 Negative list, 33, 36, 37 Neo-institutional economics, viii North American Free Trade Agreement (NAFTA), 29, 33, 40 O Organization for Economic Co-operation and Development (OECD), 30, 32, 55, 64, 68 P Performance Requirements (PRs), 33–37, 39, 50 Pilot mediation, 111–113 Policy balance, x Positive list, 33, 35, 36 Preservation procedure, 133, 134, 142 Property law Russia’s 1995 Civil Code, viii Protection of aliens, 32 Publication effect, 135 R Race to the bottom, 28, 39 Regional competition law, 68, 75 Regional supply chains, 45 Relational contract, 30, 45 Report on the Observation of Standards and Codes (ROSC), x Right-based disputes, 79 Rights disputes, xi Rule of law, viii, x, 95, 96, 98, 122, 123 S Secured transactions, 26, 45–47

Index Seizure, 133, 134, 136, 137, 140–155, 159 Settlement groups, 106–111 Settlement in the course of litigation, 95 Singapore Issues, 32, 39, 41, 48 Small and Medium-sized Enterprise (SME), 76 Small-Medium Enterprises (SME) promotion law, 28 Social clauses, 32, 39 Social dumping, 39 Socialist contract law, 43 Socialist market reform, vii, viii, ix, xi Special Economic Zone (SEZ), 10, 11, 13 Sporadic adjudication and registration, 165 State-Owned Enterprise (SOE), 55, 69 Strikes, 80, 82, 83, 88, 90 Structural adjustment program/ loan, vii, viii Super priority, 31, 46, 47 Supporting industries, x Sustainable Development Goals (SDGs), viii Systematic registration, 167–170

T Technical legal support, 95, 96 Thailand’s Alien Business Act (1999), 36 Thailand’s Trade Competition Law (1999, 2017), 41 Third party, 137, 141, 143, 147, 149–151, 153, 155 Trade Competition Commission of Thailand (TCCT), 56, 57, 74 Trade union, 79, 80, 82–87, 89–91, 93

U Unfair business practice, 58 Unfair competition law, 72 US Federal Bankruptcy Act Chapter 11, 46, 47 US-Laos Trade Agreement (2003), 26 US Model BIT, 32, 33, 50 U.S. Uniform Commercial Code (UCC) section 9, 46 US-Vietnam Trade Agreement (1997), 26

V Vietnam Civil Procedure Code 2004, 98, 100, 102 Vietnam Civil Procedure Code 2011, 102

Index Vietnam Civil Procedure Code 2015, 112, 126 Vietnam Directive on Strengthening Mediation in the People’s Courts, 112 Vietnam Grassroots Settlements Act, 107 Vietnam Law on Mediation and Dialogue at Court, 95, 98, 111 Vietnam Ordinance on Grassroots Settlement Organizations and Activities, 107, 109, 128 Vietnam Ordinance on Procedure, 98, 99, 102, 125 Vietnam’s Civil Code (1995, 2004 and 2014), x Vietnam’s Commercial Law (2005), 46 Vietnam’s Competition Law (2004, 2018), 42 Vietnam’s Foreign Investment Law (1987, amended in 1990 and 1992), 35

215 Vietnam’s Foreign Investment Law (1996, amended in 2000), 35 Vietnam’s Insolvency Law (2014), 46 Vietnam’s Investment Law (2006, 2014, 2020), 35–37

W Washington Consensus, vii, x Workers representatives, 91 World Bank, vii, viii, x, xii World Bank’s Principles for Effective Insolvency and Creditor Rights Systems (1999, revised in 2004 and 2015), 46 World Trade Organization (WTO), vii, ix, xi Worldwide Governance Indicator, 20, 22 Writ of execution, 143, 144, 146, 148, 150–152 WTO accession, 26, 36–38, 48