A New Perspective On Bilateral Investment Treaties

Bilateral investment treaties (BIT), as a form of foreign investment, is a controversial economic agreement. For instance, it posts a question on whether bilateral investment treaties are effective in encouraging foreign investment and in increasing international investment flows. Studies show binary opinions regarding bilateral investment treaties: on the one hand, it is said to have an impact on the international investment flows; on the other, it still has limitations that are dependent on the political and social situation of a state in which the investment is to take place.

BITs, grounded on the neoliberal framework and on international economic trade policies, are still ineffective in alleviating foreign investments. Results and data on the increasing international investments are those produced largely by the US and China. BITs are ineffective to other countries. Although BITs have been a trend and almost a status quo in the international sphere, dominated by the United States and China, foreign investors should find more effective means in increasing the productivity of investments. At the same time, these international treaties should have strict regulations that comply with domestic laws governing businesses and profit-oriented institutions. Whereas the prime purpose of BITs is to protect foreign investments, the results can be very unpredictable and open-ended. BITs are very dependent on the political and social conditions of a specific country in which the investment would take place. If the political situation is unstable, it would be a great risk for foreign investors even if the country was a goose that laid golden eggs. Examples of countries that are a hot-spot for foreign investments but are politically unstable are those in the Middle East. Moreover, BITs do not promise equal treatments on parties involved, as they favor foreign over the local. This may cost one country its domestic income, especially with the consideration of the free flow of capital that removes a local government’s accountability over foreign corporate behavior within its authority and sovereignty.

Countries, institutions in civil society and stakeholders should come with better concepts on more effective means in increasing foreign investments that are favorable for both parties at hand and are beneficial not only for the foreign investor but also for domestic growth of the country in which the investment will take place. Bilateral investment treaties are policies created within the liberal and de-regularized framework of Neoliberalism, which has its backbone on speculation. Moreover, BITs have insignificant results in international investment flows, which are more or less predominated by the US and the China; thus, they are ineffective to other countries. It has more disadvantages than compensations. It is also risky because of the unpredictability of a specific country's political and social condition.

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