Journal Press India^®

Author Details ( * ) denotes Corresponding author

The past three decades have witnessed a rapid increase in FDI inflows into developing countries which has been accompanied by a proliferation of bilateral investment treaties (BITs) concluded by these economies to signal their commitment to favourable treatment of foreign investors. However, whether BITs are major contributors towards increasing FDI in developing countries is still debatable because of the diverse results reported by different studies. The main objective of this paper is to critically review the existing studies available in this field so as to understand the role of BITs in attracting FDI into developing countries. This can provide useful insights to policymakers regarding the efficacy of BITs and to researchers for understanding existing research gaps. We find that the evidence on the impact of BITs on developing economies is inconclusive. While some of the early studies have shown weak impact of BITs, more recent studies indicate BITs having a strong impact on FDI inflows into developing countries.

Keywords

Bilateral investment treaties; Developing economies; Foreign direct investment.

1. Aisbett, E. (2007). Bilateral investment treaties and foreign direct investment: Correlation versus causation (CUDARE Working Paper 1032). Berkeley: University of California.
2. Allee, T., & Peinhardt, C. (2010). Delegating differences: Bilateral investment treaties and bargaining over dispute resolution provisions. International Studies Quarterly, 54(1), 1-26.
3. Armstrong, S. P., & Nottage, L. R. (2016). The impact of investment treaties and ISDS provisions on foreign direct investment: A baseline econometric analysis. Sydney Law School Research Paper, (16/74).
4. Bae, C., & Keum, H. (2013). The impact of FTAs on FDI in Korea. KIEP Research Paper. World Economy Update, 13-19.
5. Banga, R. (2003). Impact of government policies and investment agreements on FDI inflows (Working Paper No. 116). New Delhi: Indian Council for Research on International Economic Relations.
6. Barthel, F., Busse, M., & Neumayer, E. (2010). The impact of double taxation treaties on foreign direct investment: Evidence from large dyadic panel data. Contemporary Economic Policy, 28(3), 366-377.
7. Berger, A., Busse, M., Nunnenkamp, P., & Roy, M. (2010). More stringent BITs, less ambiguous effects on FDI? Not a bit!. Economics Letters, 112(3), 270-272.
8. Bhasin, N. (2012). Foreign direct investment in India: Policies, conditions and procedures. New Delhi: New Century Publications.
9. Bhasin, N., & Manocha, R. (2016). Do bilateral investment treaties promote FDI inflows? Evidence from India. Vikalpa,The Journal for Decision Makers, 41(4), 275–287.
10. Blonigen, B. A., & Davies, R. B. (2004). The effects of bilateral tax treaties on US FDI activity. International Tax and Public Finance, 11(5), 601-622.
11. Busse, M., Koniger, J., & Nunnemkamp, P. (2008). FDI promotion through bilateral investment treaties: More than a bit? (Kiel Working Paper No. 1403). Kiel, Germany: Kiel Institute for the World Economy.
12. Büthe, T., & Milner, H. V. (2004). Bilateral investment treaties and foreign direct investment: A political analysis. Paper presented at the Annual Meeting of the American Political Science Association, Chicago, IL.
13. Cardamone, P., & Scoppola, M. (2012, June 4–5). Trade costs and the pattern of foreign direct investment: Evidence from five EU countries. Paper prepared for presentation at the 1st AIEAA Conference on Towards a Sustainable Bio-economy: Economic Issues and Policy Challenges, Trento, Italy.
14. Desbordes, R., & Vicard, V. (2009). Foreign direct investment and bilateral investment treaties: An international political perspective. Journal of Comparative Economics, 37(3), 372-386.
15. Egger, P., & Merlo, V. (2007). The impact of bilateral investment treaties on FDI dynamics. World Economy, 30(10), 1536–1549.
16. Egger, P., & Pfaffermayr, M. (2004). The impact of bilateral investment treaties on foreign direct investment. Journal of Comparative Economics, 32(4), 788–804.
17. Falvey, R., & Foster-McGregor, N. (2017). Heterogeneous effects of bilateral investment treaties. Review of World Economics, 153(4), 631-656.
18. Gallagher, K. P., & Birch, M. B. (2006). Do investment agreements attract investment? Evidence from Latin America. The Journal of World Investment & Trade, 7(6), 961-974.
19. Grosse, R., & Trevino, L. J. (2005). New institutional economics and FDI location in Central and Eastern Europe. MIR: Management International Review, 45(2), 123-145.
20. Guerin, S. (2010). Do the European Union's bilateral investment treaties matter? The way forward after Lisbon. CEPS working document No. 333, July 2010.
21. Hallward-Driemeier, M. (2003). Do bilateral investment treaties attract FDI? Only a bit and they could bite. World Bank Policy Research Paper No. WPS 3121. Washington, D.C: World Bank.
22. Jang, Y. J. (2011). The impact of free trade agreements on foreign direct investment among developed countries. The World Economy, 34(9), 1628–1651.
23. Kerner, A. (2009). Why should I believe you? The costs and consequences of bilateral investment treaties. International Studies Quarterly, 53(1), 73-102.
24. Kim, S. (2006). Bilateral investment treaties, political risk and foreign direct investment. (MPRA Working Paper No. 21324). International University of Japan.
25. Lejour, A., & Salfi, M. (2015). The regional impact of bilateral investment treaties on foreign direct investment. Netherlands Bureau for Economic Policy Analysis, Discussion Paper, 298.
26. Mina, W. (2010). Do bilateral investment treaties encourage FDI in the GCC countries? African Review of Economics and Finance, 2(1), 1–29.
27. Murthy, K. V. B., & Bhasin, N. (2015). The impact of bilateral tax treaties: A multi-country analysis of FDI inflows into India. Journal of International Trade and Economic Development: An International and Comparative Review, 24(6), 751–766.
28. Narula, R., & Dunning, J. H. (2000). Industrial development, globalization and multinational enterprises: new realities for developing countries. Oxford development studies, 28(2), 141-167.
29. Neumayer, E. (2007). Do double taxation treaties increase foreign direct investment to developing countries?. The Journal of Development Studies, 43(8), 1501-1519.
30. Neumayer, E., & Spess, L. (2005). Do bilateral investment treaties increase foreign direct investment to developing countries? World Development, 33(10), 1567–1585.
31. Pastrana, Q. V. (2011). The role of international investment agreements in foreign direct investment, political risk mitigation and country competitiveness: A comparative analysis of Mexico, Brazil, and Argentina (Doctoral dissertation, University of Cambridge).
32. Pradhan, J. P. (2011). Emerging multinationals: A comparison of Chinese and Indian outward foreign direct investment. International Journal of Institutions and Economies, 3(1), 113–148.
33. Salacuse, J. W. & Sullivan, Nicholas P. (2005). Do BITs really work?: An evaluation of bilateral investment treaties and their grand bargain. Harvard International Law Journal, 46(1), 67-130.
34. Siegmann, T. (2007). The impact of BITs and DTTs on FDI (master’s thesis). University of St. Gallen Law School, St. Gallen. Working Paper No. 2008-22, Retrieved from https://ssrn.com/abstract=1268185 or http://dx.doi.org/10.2139/ssrn.1268185
35. Tobin, J., & Rose-Ackerman, S. (2003). Foreign direct investment and the business environment in developing countries: The impact of bilateral investment treaties (William Davidson Institute Working Paper No. 587). Michigan: The University of Michigan Business School.
36. Tobin, J., & S. Rose-Ackerman (2006), “Bilateral Investment Treaties: Do They Stimulate Foreign Direct Investment?”, Yale University, mimeo, June.
37. Tortian, A. (2007). International investment agreements and their impact on foreign direct investment: Evidence from four emerging Central European countries (Doctoral dissertation, Université Panthéon-Sorbonne-Paris I). Retrieved from https://tel.archivesouvertes.fr/file/index/docid/165194/filename/Tortian_Annie_these.pdf
38. UNCTAD. (1998). Bilateral investment treaties in the Mid-1990s. New York and Geneva: United Nations.
39. UNCTAD. (2017). World investment report, 2017: Investment and the digital economy. Retrieved from http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1782
40. Williams, C., Lukoianova, T., & Martinez, C. A. (2017). The moderating effect of bilateral investment treaty stringency on the relationship between political instability and subsidiary ownership choice. International Business Review, 26(1), 1-11.
41. Yackee, J. W. (2007). Sacrificing sovereignty: Bilateral investment treaties, international arbitration, and the quest for capital. University of North Carolina. Retrieved from https://cdr.lib.unc.edu/record/uuid:ae712737-245c-462d-a5ba-85b706fa9ee2