Effects of Investor Treatment on FDI Inflow: Developed v Developing States

Abstract

It has been widely accepted that investor treatments afforded by states alone do not have a significant impact on FDI inflow. Rather, FDI inflow has been shown to be dependant on numerous other factors. This has however been traditionally examined against the backdrop of an ever-more globalised world, whereas more recent years have seen an uncharacteristic slowdown in globalisation, and indeed has ushered in a post-pandemic anti-globalisation trend. During this period, FDI in developed and developing states has faired very differently. Specifically, FDI into developing states has proven significantly more resilient compared to their developed counterparts, and indeed has overtaken developed states in net FDI inflow for the first time. Can this resilience be attributed to divergent approaches in investor treatments? This enquiry was undertaken by examining representative proxy states from the pool of developed and developing nations. After carefully electing said proxy states from both ends of the FDI inflow spectrum, I analysed whether, and to what extent they provided the most considered investor treatments; MST/FET, NT, MFN, pre-establishment protection and protection against expropriation. Notably, although the USA generally provides for these protections and is at the top of the FDI spectrum, Angola remained at the bottom of the spectrum whilst providing similar, and indeed broader protection in the case of NT and MFN. Furthermore, the Netherlands is the only state lower than Anglo during the examined period, yet it, save for pre-establishment protection, offered similar treatment. The study in casu was unable to establish that differences in investor treatments had any bearing on FDI inflows, and could not account for the converse performance of developed and developing states during the anti-globalisation period.