impact of government policies and investment agreements on fdi ...

<strong>investment</strong>s <strong>and</strong> lay down specific st<strong>and</strong>ards <strong>of</strong> <strong>investment</strong> protection <strong>and</strong> transfer <strong>of</strong>
funds. They contain provisions for the settlement <strong>of</strong> disputes both between the treaty
partners <strong>and</strong> between investors <strong>and</strong> the host state. BITs also cover a number <strong>of</strong> other
areas, in particular, non-discrimination in the treatment, <strong>and</strong> in some cases the entry <strong>of</strong>
foreign-controlled enterprises, <strong>and</strong> other related fields. An important characteristic <strong>of</strong>
BITs is a considerable uniformity in the broad principles underlying the <strong>agreements</strong>
(UNCTAD 1999), coupled with numerous variations in the specific formulations
employed. BITs generally recognise the effect <strong>of</strong> national law on FDI <strong>and</strong> accept the right
<strong>of</strong> <strong>government</strong>s to regulate entry <strong>of</strong> FDI. By providing protection, BITs are expected to
promote FDI.
BITs were initially addressed exclusively between developed <strong>and</strong> developing
countries. A major reason for this being that developed countries were the major source
<strong>of</strong> <strong>investment</strong>s. However, the decade <strong>of</strong> 1990 has witnessed an increasing number <strong>of</strong>
BITs between developing countries themselves. The study examines empirically the
<strong>impact</strong> <strong>of</strong> total number <strong>of</strong> BITs signed by a country in a particular year on FDI flows. The
<strong>impact</strong> <strong>of</strong> number <strong>of</strong> BITs with developed countries <strong>and</strong> with developing countries on
inward FDI is examined separately. Further, the <strong>impact</strong> <strong>of</strong> BITs on FDI from developed
countries <strong>and</strong> from developing countries is examined. Table 5 shows the total number <strong>of</strong>
BITs concluded in selected developing countries in different years ranging from 1980 to
January 2000. We find that not only has the total number <strong>of</strong> BITs increased exponentially
in the 1990s, but countries like China, Indonesia, Malaysia, Philippines <strong>and</strong> Vietnam
have signed a large number <strong>of</strong> bilateral <strong>investment</strong> treaties in the period between 1995 to
2000. The number <strong>of</strong> BITs with developing countries has also increased overtime (Table
6) <strong>and</strong> has almost doubled in the period between 1995 to 2000. However, the number <strong>of</strong>
BITs with developed countries has not increased at the same rate.
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