Reframing international rules for foreign direct investment

Project description

In the course of current discussions regarding the contribution of foreign direct investment (FDI) to sustainable development processes the role of international investment agreements (IIAs) is being questioned. IIAs were traditionally negotiated as tools to protect western companies’ FDI in politically unstable developing countries. This one-sided focus for IIAs is no longer appropriate today: the global investment regime is in a period of change which calls the traditional North-South logic behind IIAs into question. In addition, due to the increased interconnectedness of various policy fields the coherence of IIAs has to play a greater role.

Against this background this research project deals with the following two questions:

1) To what extent do IIAs limit policy space and what measures can host countries adopt to create more room to regulate in the interest of development?

The question regarding the effects of IIAs on host countries’ policy space will be addressed in a case study of Indonesia’s international investment policy. In this respect DIE cooperates with Dr. Jan Knörich of the University of Oxford. Policy recommendations will be derived from the case study with regard to the challenges and opportunities other developing countries face to creating more policy space.

2) What are the possibilities to make international investment rules more development friendly?

This question is addressed on the example of the European Union which is not only the biggest FDI-exporter, but its 27 member states have furthermore negotiated more than 1100 IIAs. The Lisbon Treaty has resulted in a far-reaching institutional reform of the EU’s Common Commercial Policy. The competency to negotiate IIAs shifted from the member states to the EU level. Against this background this research project investigates the opportunities and risks of the reform of the Common Commercial Policy for developing countries.