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Bilateral Investment Treaties, Political Risk and Foreign Direct Investment

  • Kim, Sokchea

The study constructs a linear model to evaluate the significant impacts of bilateral investment treaties (BITs) on foreign direct investment (FDI) and the possible consequences of BITs. The results show that BITs have significantly promoted FDI, and their effects are substitute for the level of political risk in a country. Another interesting finding is that BITs signed with non-OECD countries should not be overlooked. By estimating the growth of FDI resulting from an additional BIT ratified, the finding further indicates that BITs are more potential for most Asian countries to promote FDI. On average, a BIT ratified by a country in South, East, and South-East Asia can raise FDI by around 2.3 percent.

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File URL: http://mpra.ub.uni-muenchen.de/21324/1/MPRA_paper_21324.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21324.

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Date of creation: May 2006
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Publication status: Published in Asia Pacific Journal of Economics & Business 1.11(2007): pp. 6-24
Handle: RePEc:pra:mprapa:21324
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  1. Andrzej Baniak & Jacek Cukrowski & And Jan Herczy´┐ŻSki, 2003. "On the Determinants of Foreign Direct Investment in Transition Economies," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 48(2), pages 6-28, January.
  2. Sebastian Edwards, 1992. "Capital Flows, Foreign Direct Investment, and Debt-Equity Swaps in Developing Countries," NBER Working Papers 3497, National Bureau of Economic Research, Inc.
  3. Mary Hallward-Driemeier, 2003. "Do bilateral investment treaties attract foreign direct investment? Only a bit - and they could bite," Policy Research Working Paper Series 3121, The World Bank.
  4. Egger, Peter & Pfaffermayr, Michael, 2004. "The impact of bilateral investment treaties on foreign direct investment," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 788-804, December.
  5. Singh, Harinder & Kwang W. Jun, 1995. "Some new evidence on determinants of foreign direct investment in developing countries," Policy Research Working Paper Series 1531, The World Bank.
  6. Jennifer Tobin & Susan Rose-Ackerman, 2003. "Foreign Direct Investment and the Business Environment in Developing Countries: the Impact of Bilateral Investment Treaties," William Davidson Institute Working Papers Series 587, William Davidson Institute at the University of Michigan.
  7. Hubert Janicki & Phanindra Wunnava, 2004. "Determinants of foreign direct investment: empirical evidence from EU accession candidates," Applied Economics, Taylor & Francis Journals, vol. 36(5), pages 505-509.
  8. Dollar, David & Hallward-Driemeier, Mary & Mengistae, Taye, 2004. "Investment climate and international integration," Policy Research Working Paper Series 3323, The World Bank.
  9. Bruce A. Blonigen & Ronald B. Davies, 2002. "Do Bilateral Tax Treaties Promote Foreign Direct Investment?," NBER Working Papers 8834, National Bureau of Economic Research, Inc.
  10. Rashmi Banga, 2003. "Impact of government policies and investment agreements on FDI inflows," Indian Council for Research on International Economic Relations, New Delhi Working Papers 116, Indian Council for Research on International Economic Relations, New Delhi, India.
  11. Peter Nunnenkamp, Julius Spatz, 2003. "Foreign Direct Investment and Economic Growth in Developing Countries: How Relevant Are Host-country and Industry Characteristics?," Kiel Working Papers 1176, Kiel Institute for the World Economy.
  12. Suleyman Tulug Ok, 2004. "What Drives Foreign Direct Investment into Emerging Markets? : Evidence from Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(4), pages 101-114, July.
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