ZZ and BITs

1. ZZ and BITs Kampala, 10-14 November 2008

2. Filling in the questionnaire: “it depends” was the first thing which came to my mind ….

3. Justification: question 1 • The results of econometric studies are inconclusive, ranging from no impact through weak impact to a big impact of BITs on FDI. There are many doubts about the suitability of econometrics to investigate the BITs/FDI issue, given very poor data and the complexity of the host country determinants of FDI • There is, however, evidence from home countries surveys that investors, including large ones, press their governments to conclude a BIT in a country in which they want to invest • A considerable number of TNCs take BITs seriously into account in their locational decisions Conclusion: BITs are a factor in several FDI projects and therefore increase FDI into developing countries, but it is impossible to put a number on these increases and clearly identify situations in which these increases take place

4. Justification: question 2 • The Government should enter negotiations with the United States • US is the largest single home country in the world and potentially a source of significant FDI for our country • Only by entering negotiations we can learn if the US offer is motivated by serious interest of US TNCs to invest in our country or by the ideological urge to extend to one more country demanding US investment standards, which could limit our policy space • If the former it is worthwhile trying. If the latter, negotiations do not have to end successfully. Even if the BIT is signed, if we can not clearly demonstrate to our parliament potential benefits in terms of increased FDI from the US, it will, most likely, not be ratified. There are many signed but not ratified BITs in this world

5. Justification: question 3 • The government should reinvigorate the BITs programme but in combination with an investment promotion effort • There many new countries, sources of FDI, in the world, including developing countries, which are bypassing our country • The IPA should evaluate our potential attractiveness for TNCs from such countries and approach them with proposals to conclude BITs • Targeted promotional effort in these countries should be undertaken

6. Justification: question 4 • BITs improve the investment climate and increase the transparency, stability and predictability of the investment framework. These are things which are increasingly important for many investors, and are considered as a standard feature of such a framework • It would be a pity to be bypassed by investors only because a host developing country does not have a BIT with investors’ country while its competitors for FDI do have it • Countries, especially those which have BITs with elevated standards, should watch developments in international dispute arbitrations and consider renegotiating some clauses, concerning, for example, creeping expropriations. Some home countries are open to renegotiations, because, as host countries, they were challenged by frivolous claims • Countries should consider replacing BITs with FTAs, which, including BITs FDI provisions, give trade access to home country’s market and thus may help stimulate FDI

7. On econometric exercises To capture the impact of BITs on FDI in the situation, in which tens of no less important policy determinants can impact FDI “… is like trying to analyze if eating green leaves of salad for breakfast promotes health in visible and statistically capturable ways” (Thomas Waelde).