New Age (Bangladesh)
Bilateral investment treaties dangerous traps: experts
Thursday December 08 2005
ASJADUL KIBRIA, back from Negombo, Sri Lanka
Experts have cautioned that bilateral investment treaties with the rich countries will ultimately lead the developing and least developed countries towards dangerous traps at the cost of their national interests.
They also felt that such treaties have so far proved not helpful, to increase the flow of foreign investments to the poor and mid-income countries.
Against the backdrop, the experts at the December 3-4 seminar at the Sri Lankan beach town urged the South Asian countries to explore development-friendly models both at multilateral and bilateral levels.
The seminar, organised by the Institute of Policy Studies in association with United Nations Development Programme and South Asian Centre for Economic Journalists, was aimed at further educating regional economic journalists on bilateral trade agreements.
‘Bilateral trade agreements can have serious and dangerous consequences for developing states,’ said Mahnaz Malik, legal adviser to the International Institute for Sustainable Development.
‘The most dangerous part of such treaty is provision for dispute resolution under which the investor company can sue the country before international tribunal,’ she said in a paper presented on the concluding day of the programme chaired by former New York Times correspondent for international trade Elizabeth Becker.
She was of the view that such dispute resolution become very expensive and burdensome for poor and mid-income countries.
‘Out of total 94 cases settled by the International Centre for Settlement of Investment Disputes, 30 were against African states and out of 103 pending cases, 17 are filed against Africans,’ Mahnaz said.
In this connection, Mahnaz referred to recent Indian case of settled a dispute for $145 million with GE-Bechtel against a claim worth of $1 billion.
Focusing on Pakistan-US bilateral investment treaty she said, Pakistan needs to be realistic in analysing the costs and benefits of the treaty. ‘The treaty only concerns foreign investment, not export but doesn’t guarantee increased investment flow and not certainly ensure that free trade agreement will follow the investment treaty,’ she cautioned.
Mahnaz was of the view that US interest in Pakistan is primarily political and not economic.
She said all the countries in the South Asia have such agreements with different countries. Of these, Bangladesh has 24, Nepal 4, Sri Lanka 25, India 58 and Pakistan 50.
The international lawyer said bilateral investment treaty persuaded by the United States mandated inclusion of liberalisation provisions and restrictions on performance requirements like transfer of technology and local labour employment.
She also said provision of expropriation is another costly thing for the developing countries under which ‘host country must provide adequate, effective and prompt compensation if investment is expropriated.’
In her presentation, Mahnaz said International Institute for Sustainable Development has already proposed to balance investor protection with sustainable development.
‘A holistic, contemporary approach that strikes a balance between investor protection and sustainable development can be a welcome alternative,’ she said.
The international lawyer said before singing any investment treaties, developing countries and least developed countries should be very careful. In reply to a question, Malik said any bilateral treaty could be unilaterally terminated by host country within a specific period of time but exiting foreign investments are subject to 20 years of protection.
Saman Kelegama, executive director of the of the IPS, Bhagirath Lal Das, former director of UNCTAD, Ratnakar Adhikari and Swarnim Wagel of UNDP, Jiraporn Limpananont of Bangkok-based Chulalongkorn University, Dushni Weerakoon of IPS, Sanya Reid Smith of Third World Network and Shafqat Munir of SACEJ also spoke in the different sessions.