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The Effect of Treaties on Foreign Direct InvestmentBilateral Investment Treaties, Double Taxation Treaties, and Investment Flows$
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Karl P. Sauvant and Lisa E. Sachs

Print publication date: 2009

Print ISBN-13: 9780195388534

Published to Oxford Scholarship Online: May 2009

DOI: 10.1093/acprof:oso/9780195388534.001.0001

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Do Bilateral Investment Treaties Attract FDI? Only a Bit … and They Could Bite *

Do Bilateral Investment Treaties Attract FDI? Only a Bit … and They Could Bite *

Chapter:
(p.349) 13. DO BILATERAL INVESTMENT TREATIES ATTRACT FDI? ONLY A BIT … AND THEY COULD BITE *
Source:
The Effect of Treaties on Foreign Direct Investment
Author(s):

Mary Hallward-Driemeier

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195388534.003.0013

This chapter addresses the question of whether bilateral investment treaties (BITs) attract foreign direct investment (FDI). Analysis of twenty years of bilateral FDI flows from the Organization for Economic Cooperation and Development (OECD) to developing countries finds little evidence that BITs have stimulated additional investment. Those countries with weak domestic institutions, including protection of property, have not received significant additional benefits: a BIT has not acted as a substitute for broader domestic reform. Rather, those countries that are reforming and already have reasonably strong domestic institutions are most likely to gain from ratifying a treaty. That BITs act as more of a complement to than a substitute for domestic institutions means that those that are benefiting from them are arguably the least in need of a BIT to signal the quality of their property rights.

Keywords:   BIT, foreign direct investment, developing countries, arbitration, property rights

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