Volume 29, Issue 2 (summer 2024)                   JEPR 2024, 29(2): 167-163 | Back to browse issues page


XML Persian Abstract Print


Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:

heidari haratemeh M. (2024). Bilateral Investment Treaties; ; A strategy for Attracting Foreign Direct Investment in developing countries. JEPR. 29(2), 167-163. doi:10.61186/jpbud.29.2.143
URL: http://eprj.ir/article-1-2295-en.html
Islamic Azad University, Naraq Branch, Naraq, Iran , heidarimu@yahoo.com
Abstract:   (7590 Views)
In recent decades, bilateral and multilateral investment treaties have become key international legal tools to encourage foreign direct investment (FDI) by providing protections that attract foreign investors. Consequently, many developing countries enter into bilateral investment treaties (BITs) to boost FDI inflows. This study aims to investigate the impact of these treaties on FDI in developing countries, analyzing economic data from 21 developing nations from 2007 to 2022 through an attraction model. The findings indicate that BITs have a consistently positive and significant impact on FDI across all models, with a particularly strong effect observed among developing countries. Additional variables—including institutional quality, colonial ties, and a free trade agreement dummy variable—were added to the model. When a BIT is concluded, the host country provides foreign investors with a reliable institutional framework that may offer better investment protection than domestic institutions. In this context, BITs and domestic institutional quality appear to be substitutes, leading to an expected negative relationship. On the other hand, BITs can also serve as a signaling mechanism, indicating to foreign investors that the host country is committed to safeguarding their investments. To capture this effect, an interaction term between BITs and institutional quality was added to the model. This interaction variable is negative across most country pairs, indicating substitutability, but is positive and significant among pairs of developing countries, highlighting a unique dynamic in these contexts.
Full-Text [PDF 562 kb]   (6948 Downloads)    
Type of Study: Research | Subject: business and international finance
Received: Jun 19 2024 | Accepted: Sep 11 2024 | ePublished: Jan 12 2025

References
1. Aisbett, E., Busse, M., & Nunnenkamp, P. (2017). Bilateral inves tment treaties as deterrents of hos t-country discretion: The impact of inves tor-s tate disputes on foreign direct inves tment in developing countries. Review of World Economics, 154, 119-155. [DOI:10.1007/s10290-017-0285-1]
2. Bengoa, M., Sanchez-Robles, B., & Shachmurove, Y. (2020). Do trade and inves tmentagreements promote foreign direct inves tment within Latin America? Evidence from a S tructural Gravity Model. Mathematics, 8(11), 1882. [DOI:10.3390/math8111882]
3. Bhasin, N., & Manocha, R. (2016). Do bilateral inves tment treaties promote FDI inflows? Evidence from India. Vikalpa, 41(4), 275-287. [DOI:10.1177/025609091666668 1] [DOI:10.1177/0256090916666681.]]
4. Blonigen, B. A., & Piger, J. (2014). Determinants of foreign direct inves tment.Canadian Journal of Economics/Revue canadienne d'économique, 47(3), 775-812. [DOI:10.1111/caje.12091] [DOI:10.1111/caje.12091.]]
5. Business Today. (2021). US replaces Mauritius as second larges t source of FDI in Indiain 2020-21. [[https://www.business today.in/lates t/economy-politics/s tory/us-replacesmauritius-as-second-larges]
6. Buthe, Tim and Helen Milner (2008). The Politics of Foreign Direct Inves tment into Developing Countries: Increasing FDI through International Trade Agreements?" American Journal of Political Science 52, no.4 (October): 741-62. [DOI:10.1111/j.1540-5907.2008.00340.x]
7. Colen, L., Persyn, D., & Guariso, A. (2016). Bilateral inves tment treaties and FDI: Does the sector matter? World Development, 83, 193-206. [DOI:10.1016/j.worlddev.2016.01.020] [DOI:10.1016/j.worlddev.2016.01.020.]]
8. Dixon, J., & Haslam, P. A. (2016). Does the quality of inves tment protection affect FDI flows to developing countries? Evidence from Latin America. The World Economy, 39(8), 1080-1108. [DOI:10.1111/twec.12299] [DOI:10.1111/twec.12299..]]
9. Dutt, S. (2021). S tanding committee report summary India and bilateral inves tment treaties. PRS Legislative Research. [[https://prsindia.org/policy/report-summaries/india-and-bilateral-inves tment-treaties.]]
10. Egger, Peter and Michael Pfaermayer (2009). The Impact of Bilateral Inves tment Treaties on Foreign Direct Inves tment. In Karl P. Sauvant and Lisa E. Sachs, editors, The Effects of Treaties on Foreign Direct Inves tment. Bilateral Inves tment Treaties, Double Taxation Treaties, and Inves tment Flows. Oxford, UK: Oxford University Press. [DOI:10.1093/acprof:oso/9780195388534.003.0008]
11. Falvey, R., & Fos ter-McGregor, N. (2017). Heterogeneous effects of bilateral inves tment treaties. Review of World Economics, 153(4), 631-656. [10.1007/s10290-017-0287-z] [[DOI:10.1007/s10290-017-0287-z.]Elkins, Zachary, Andrew T. Guzman and Beth A. Simmons (2006). "Compe]
12. Guzman, Andrew, and Beth A Simmons. 2005. Power Plays and Capacity Cons traints: The Selection of Defendants in WTO Disputes. Journal of Legal S tudies 34 (2):557---98. [https://papers.ssrn.com/sol3/papers.cfm?abs tract_id=1518416]
13. Guzman, Andrew T. (1998). "Why LDCs sign treaties that hurt them: explaining the popularity of bilateral inves tment treaties," Virginia Journal of International Law, 38, 4, pp. 639-688.
14. Hafner-Burton, Emilie, Miles Kahler, and Alexander H. Montgomery (2009). "Network Analysis for International Relations," International Organization, 63, 3, p. 559-92. [DOI:10.1017/S0020818309090195]
15. Haftel, Yoram Z. (2008). "The effect of U.S. BITs on FDI inflows to developing countries: signaling or credible commitment?" (Unpublished manuscript, University of Illinois,Chicago).
16. Hallward-Driemeier, Mary (2009). Do Bilateral Inves tment Treaties Attract FDI? Only a Bit... and they could bite. In Karl P. Sauvant and Lisa E. Sachs, editors, The Effects of Treaties on Foreign Direct Inves tment. Bilateral Inves tment Treaties, Double Taxation Treaties, and Inves tment Flows. Oxford, UK: Oxford University Press. [DOI:10.1093/acprof:oso/9780195388534.003.0013]
17. Kotyrlo, E., & Kalachyhin, H. M. (2023). The effects of India's bilateral inves tment treaties termination on foreign direct inves tment inflows. Economics of Transition and Ins titutional Change, 31(4), 1007-1033. [DOI:10.1111/ecot.12363]
18. Kox, H. L. M., & Rojas-Romagosa, H. (2020). How trade and inves tment agreements affect bilateral foreign direct inves tment: Results from a s tructural gravity model. World Economy, 43(12), 1-40. (September 2019). [DOI:10.1111/twec.13002] [DOI:10.1111/twec.13002.]]
19. Milner, Helen, and Tim Buthe (2009) "Bilateral Inves tment Treaties and Foreign Direct Inves tment: A Political Analysis." The Impact of Bilateral Inves tment Treaties and Double Taxation Treaties on Foreign Direct Inves tment. Karl Sauvant, ed., NY: Oxford University Press.
20. Neumayer, Eric and Laura Spess (2005). "Do bilateral inves tment treaties increase foreign direct inves tment to developing countries?" World Development, 33, 10, pp. 1567-1585. [DOI:10.1016/j.worlddev.2005.07.001]
21. Ranjan, P., Singh, H. V., James, K., & Singh, R. (2018). India's model bilateral inves tment treaty: Is India too risk averse. Accessed June 9, 2020. [[https://www.brookings.edu/research/ indias-model-bilateral-inves tment-treaty-are-we-too-risk-avers]
22. Rose-Ackerman, Susan (2009). The Global BITs Regime and the Domes tic Environment for Inves tment. In Karl P. Sauvant and Lisa E. Sachs, editors, The Effects of Treaties on Foreign Direct Inves tment. Bilateral Inves tment Treaties, Double Taxation Treaties, and Inves tment Flows. Oxford, UK: Oxford University Press. [DOI:10.1093/acprof:oso/9780195388534.003.0011]
23. Salacuse, J. W., & Sullivan, N. P. (2005). Do BITs really work? An evaluation of bilateral inves tment treaties and their grand bargain. Harvard International Law Journal, 46, 67-130. [https://www.scirp.org/reference/referencespapers?referenceid=2977408]
24. Taipei Times. (2018). Taiwan, India sign updated bilateral inves tment pact. Accessed December 3, 2022. [[https://www.taipeitimes.com/News/taiwan/archives/2018/12/19/20 03706400#:~:text=Taiwan%20and%20Indi]
25. Tobin, Jennifer and Susan Rose-Ackerman (2005). "Foreign direct inves tment and the business environment in developing countries: The impact of bilateral inves tment treaties," Yale Law & Economics Research Paper, No. 293, May 2. [DOI:10.2139/ssrn.557121]
26. Singh, J., Shreeti, V., & Urdhwareshe, P. (2022). The impact of bilateral inves tment treaties on FDI inflows into India: Some empirical results. Foreign Trade Review, 57(3),310-323. [DOI:10.1177/00157325211027374]
27. Skovgaard Poulsen, Lauge N., Bilateral Inves tment Treaties and Preferential Trade Agreements: Is a BIT Really Better Than a Lot? (September 1, 2010). Investment Treaty News Quarterly, Vol. 1, No. 1, p. 16, September 2010, Available at SSRN: [https://www.iisd.org/itn/en/2010/09/23/bilateral-inves tment-treaties-and-preferential-tradeagreemen]
28. ung, H. J., & Kim, E. M. (2020). International treaties and foreign direct inves tment: An empirical analysis of effects of bilateral inves tment treaties on South Korea's FDI. Journal of the Asia Pacific Economy, 25(3), 402-417. [DOI:10.1080/13547860.2019.1686915] [DOI:10.1080/13547860.2019.1686915.]]
29. UNCTAD, United Nations Conference on Trade and Development (2005). "South-South Cooperation in International Inves tment Agreements." UNCTAD Series on International Inves tment Policies for Development. [[www.unctad.org.]]
30. UNCTAD, United Nations Conference on Trade and Development (2008). "Recent developments in international inves tment agreements (2007-June 2008)." IIA Monitor, No. 2 (UNCTAD/WEB/DIAE/IA/2008/1).
31. Yackee, Jason (2009). Do BITs Really Work? Revisiting the Empirical Link between Inves tment Treaties and Foreign Direct Inves tment. In Karl P. Sauvant and Lisa E. Sachs, editors,The Effects of Treaties on Foreign Direct Inves tment. Bilateral Inves tment Treaties, Double Taxation Treaties, and Inves tment Flows. Oxford, UK: Oxford University Press. [DOI:10.1093/acprof:oso/9780195388534.003.0014]

Rights and permissions
Creative Commons License This work is licensed under a Creative Commons Attribution 4.0 International License.

© 2025 CC BY-NC 4.0 |

Designed & Developed by : Yektaweb