South-South Cooperation in International Investment Arrangements

During the past decade, the number of international investment agreements among developing countries increased substantially, both in number and geographical coverage, pointing to growing South-South cooperation in investment. The recent proliferation of bilateral investment treaties, double taxation treaties and various types of preferential trade agreements with investment components establishes this trend. After a slow growth rate in their early years, both bilateral investment treaties and double taxation treaties registered fast growth rates during 1995-2001 (which, however, slowed down since then). The number of bilateral investment treaties between developing countries leaped from 47 in 1990 to 603 by the end of 2004, involving 107 developing countries. Double taxation treaties between developing countries also rose, from 96 in 1990 to 345 in 2004, involving 90 developing countries. Preferential trade and investment agreements also intensified among developing countries in the 1990s, rising to more than 73 in 2004, involving some 122 developing countries. Despite rapid growth, and a large number of South-South investment agreements, a significant share of outward foreign direct investment stock by developing countries in other developing countries is not covered by South-South agreements. This indicates a potential for further South-South cooperation. Developing countries are actively signing international investment agreements among each other as “tools” to encourage and facilitate investment flows among themselves. Although they vary in the extend to which they contain provisions aimed at strengthening the development impact of these agreements, they are one aspect of South-South cooperation that – more broadly – aims to achieve developmental goals.