Other countries adopt more discre-
tionary methods to screen the ad-
International Joint
Ventures in Asia —
An Overview
by Benny S Tabalujan*
With this issue of the AsiaBLR, we
complete our Forum survey of inter-
national joint ventures in 13 juris-
dictions in the Asia Pacific region. It
is appropriate for us at this point to
reflect upon the country reports pre-
sented in the past four issues and
provide an overview of the legal
framework for international joint
ventures in the region.
By their nature, our country re-
ports are limited in their breadth of
coverage and depth of detail. Never-
theless, the key characteristics of each
country’s framework for interna-
tional joint ventures have been
clearly presented. Table 1 has been
compiled from information con-
tained in the country reports. It pro-
vides a summary of some key fea-
tures of the joint venture regimes in
the 13 jurisdictions. Readers should
note that gaps in Table 1 indicate
the absence of information, not the
absence of the matter referred to.
Three tentative points may be
made from the summary.
Regulation of international joint
ventures and the legal system
First, insofar as it concerns interna-
tional joint ventures, there appears
to be no discernible connection be-
tween the form of domestic regula-
tion adopted by various countries and
the nature of their legal system. It
seems that the type of legal system
of the host country does not deter-
mine the type of regulation it applies
to international joint ventures.
The jurisdictions surveyed in-
cluded countries from the common
Asia Business Law Review No 6 October 1994
law tradition — some with distin-
guished legal histories, such as Aus-
tralia and New Zealand — as well as
countries from the civil law tradi-
tion (such as Japan, South Korea and
Indonesia) and the socialist law tra-
dition (China and Vietnam). Table 1
shows that the two countries with
socialist legal systems — China and
Vietnam — have specific investment
codes governing foreign joint ven-
tures.
This is not unexpected given that
socialist economies, despite the shift
in recent years, still rely on central
planning mechanisms to a signifi-
cant extent. However, specific codes
governing foreign joint ventures are
also found in common law countries
such as Australia and Malaysia as
well as civil law countries such as
Indonesia and Taiwan.
In other words, whether or not a
country adopts specific codes to gov-
ern foreign joint ventures in their
jurisdiction does not appear to be
determined by the background of
their legal system. It is perhaps more
a question of economic expediency
rather than legal pedigree.
The extent of regulation of inter-
national joint ventures also appears
to be independent of the type of le-
gal system used by a country. This is
particularly evident on the question
of the scope of economic activities
which are open to foreign joint ven-
tures in each country.
For example, Indonesia, the Phil-
ippines and South Korea use the
“negative list” to identify areas which
are closed to foreign joint ventures.
mission of direct foreign investment.
Thus, “guidelines” are used by the
Malaysian FIC (Foreign Investment
Committee) and the Australian FIRB
(Foreign Investment Review Board).
Using this approach, foreign joint
venturers must apply for approval to
undertake their ventures on a case
by case basis.
Two jurisdictions — Hong Kong
and Singapore — have relatively lib-
eral approaches to foreign joint ven-
tures, welcoming foreigners to most
sectors of their economy with com-
paratively little supervision. For ex-
ample, neither Hong Kong nor Sin-
gapore has a formal foreign invest-
ment regulation body. Specific sec-
tors, however, such as banking, in-
surance, media and telecommunica-
tions, are regulated by relevant gov-
ernment departments. Nevertheless,
these two jurisdictions arguably boast
the most open foreign investment
regimes in the Asia Pacific region.
Perhaps not coincidentally, they are
two of the most successful econo-
mies in the region.
Regulation of international joint
ventures and economic development
There also does not appear to be a
clear connection between the form
or extent of regulation over interna-
tional joint ventures and the rate or
level of economic development in
various Asia Pacific countries.
The fact that a country, such as
Australia, is an economically devel-
oped country and a member of the
OECD, does not mean that its regu-
lation of foreign joint ventures would
be different to that practised by a
developing country such as Malay-
sia. Indeed, their form of joint ven-
ture regulation is similar in a number
of respects. Yet, in terms of their
stage and rate of economic develop-
ment, Australia and Malaysia are
clearly different.
One point, however, which does
emerge is that no economically de-
veloped country in the region uses
the negative list to exclude foreign
investment in specific fields. Cur-
rently, the negative list is used by
Indonesia, Philippines and South
Korea all of which are still develop-
ing countries, albeit at different stages
of development. One possible expla-
nation is that, as a country develops,
27

it gains greater confidence allowing
it to increase the level of foreign par-
ticipation in its economy.
For example, Indonesia progressed
from using what may be called a
“positive list” — containing a lim-
ited list of fields open to foreign joint
ventures — to using a negative list.
This change opened many more
fields to foreign joint ventures. More
developed countries, it seems, are at
the next stage. For them, foreign joint
ventures are generally welcomed and
restrictions are few. This trend ap-
pears to be broadly consistent with
the view of the World Bank, as mani-
fested in its Guidelines on the Treat-
ment of Foreign Investment.
Common factors
A third observation which may be
drawn from the country reports is
that they are conspicuous for their
differences rather than their uniform-
ity. Among other things, the 13 ju-
risdictions differ in the way they
regulate, tax and encourage foreign
joint ventures. Even the way foreign
joint ventures are permitted to remit
foreign exchange also differs.
Interestingly, however, there are
two factors which appear to be com-
mon to all. They are the availability
of commercial arbitration as a means
of dispute resolution and the avail-
ability of a corporate structure for
foreign joint ventures.
It is tempting to speculate on the
reasons for the existence of these two
common factors. One possibility is
that they reflect matters which are
so universally accepted that all legal
systems (common law, civil law or
28
hand, the fact that international joint
ventures are widely used and have
become an accepted means of doing
business in the region says much
about the flexibility of each of the
jurisdictions. It seems that they are
able to embrace this method of do-
ing business with relative ease. If
nothing else, this fact may be the
one outstanding conclusion of our
survey.
* Associate editor, AsiaBLR
Further reading
1 Jacques Buhart (ed), Joint Ventures
in East Asia — Legal Issues (1992).
2 CCH, Doing Business in Asia (1990).
3 Neill Macpherson, South East Asia
Investment Guide (1992).
4 World Bank, ‘Legal Framework for
customary law) from differing eco-
the Treatment of Foreign Investment’
nomic and political persuasions (so-
(1992) 7 ICS1D Review — FILJ 295,
cialist or capitalist) utilise them. 5 Ibrahim F I Shihata, ‘Recent Trends
In other words, perhaps the ad- Relating to Entry of Foreign Direct
vantages of separate corporate per- Investment’, Singapore Conferences
sonality are so obvious that compa- on International Business Law —
Conference No VII, 31 August —
nies are now acceptable everywhere. 2 September 1994, National Univer-
Similarly, arbitration as a means of sity of Singapore.
resolving cross-border commercial
disputes appears to be acknowledged
as a viable if not desirable alternative
to litigation. All 13 jurisdictions have
avenues for commercial arbitration.
Some, such as Hong Kong, Australia,
Malaysia and Singapore have gone
further and established international
commercial arbitration centres.
If so, perhaps in the twin notions
of incorporation and arbitration, the
law may have found two useful con-
cepts which are workable and capa-
ble of being transplanted into differ-
ent legal, political and economic sys-
tems. If more such concepts are
found, then there is hope yet for the
gradual development of a voluntary
code for foreign investment for the
region — something which has been
mooted from time to time but which
still eludes us.
Conclusion
Overall, our survey of international
joint ventures in the 13 jurisdictions
probably reveals more differences
than they do similarities. Futher-
more, the similarities which do exist
seem to defy any attempt to corre-
late them on a causal basis.
On the one hand, this may be ex-
pected given the wide diversity of
backgrounds which are found in
these jurisdictions. On the other
Asia Business Law Review No 6 October 1994