International Investment Law and Development
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International Investment Law and Development

Bridging the Gap

  • Frankfurt Investment and Economic Law series

Edited by Stephan W. Schill, Christian J. Tams and Rainer Hofmann

Foreign investment is meant to contribute to the host country’s development, and yet international investment law has often been seen as an obstacle to (sustainable) development. So are investment and development friends or foes? Combining critical reflection and detailed analysis, this timely volume explores the relationship between the two concepts and explores options of harnessing investment for development.
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Chapter 13: The law of investment protection and poverty reduction

Krista Nadakavukaren Schefer

Extract

The contribution of foreign direct investment to a nation’s economic growth and development has long been hypothesized, investigated, and backed up by data showing it to be true. Skeptics seemingly never tire of pointing out the ambiguity of the numbers and the questionable causation between investment flows and development indicators, but there does seem to be agreement that sustained economic development requires at least some measure of economic growth and that economic growth, in turn, will require the inflow of resources (money, goods, services, technologies, or knowledge) to an economy. Thus, while it would be rash (and certainly wrong) to assert that investment alone will lead to development, it is safe to assume that foreign investment contributes to economic growth, which itself is a requirement for development. The contributions in this volume examine the ways in which the law of protecting foreign investors from host state actions impact on development and developing countries. This question is important because development is an explicit goal of many international investment agreements (IIAs), and both host and home state governments rely on investment to ‘work’ to stimulate development and improve standards of living as well as the economic capacity of the host. But development is a broad term – maybe even more appropriately called a concept – and exactly which aspects are furthered by investment and investment protection (themselves arguably two different questions) may be unclear if treating it as a whole.

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