Most investment treaties overlook home-country measures (HCMs), such as commitments regarding the protection of foreign investors, according to the Vale Columbia Centre on Sustainable International Investment. Those that have been referenced in investment treaties are weak, and lack the stability and predictability to make them the effective tools for sustainable development that they could be, the report says.
In Vale Columbia's report, which was published as part of the centre's FDI Perspectives series, it was found that the vast majority of investment treaties focus singularly on setting out the host country obligations of the treatment of foreign investors. Although some treaties contain provisions on HCMs, those provisions have generally been limited to FDI rather than specific obligations with mechanisms to ensure their implementation.
Some home countries, ie. the source countries, take HCMs to promote outward investment, including providing information, technical assistance, insurance and financial and fiscal support. However, it is the enhancement of coordination among investment promoting agencies which is necessary for attracting investment. While there is nothing inherent in investment treaties that is inconsistent with including more obligations on HCMs, Vale Columbia points out that future treaties could include commitments of HCMs to take into account the countries’ special obligations.
In their current state, investment treaties are mere regulators of the relationship between home and host countries. However, if HCMs are implemented successfully, they can help home investors overcome the numerous barriers that make it difficult for them to invest and succeed abroad and can help encourage FDI and economic co-operation, which can lead to sustainable development.
Ideally, treaties should include measures that will help channel investment into technologies and business models aimed at solving global issues such as poverty and climate change, while enhancing the competitiveness of home-country firms. Countries and regions that have struggled to attract such flows can benefit greatly from a new approach to creating capital flows and it would thus be a welcome departure from the traditional practice if new treaties were to contain these commitments.
HCMs should be on the agenda of issue policy makers and treaty negotiators as home-country efforts to assist with investment promotion activities can be win-win measures for home and host countries.