Signalling Demand for Foreign Investment: Postsocialist Countries in the Global Bilateral Investment Treaties Network

Abstract

A unique dataset on bilateral investment treaties provides a novel source of evidence on the link between neoliberal globalisation and market transition. We argue that postsocialist countries of Europe and Eurasia, more than other developing regions in the world, signed such treaties to signal demand for foreign investment in the spirit of neoliberalism. We calculated the density of the whole BIT network since its inception in 1959 to 2009, and density and centrality of different regional blocks within it, and found strong support for our argument. Yet, even if bilateral investment treaties are designed to promote foreign direct investment, dynamic panel regression models show that signing them does not automatically translate into foreign direct investment inflows for postsocialist European and Eurasian countries in the 1990–2010 period.

Notes

We thank participants at the 2nd IEAS Conference on Contemporary European and American Societies at Academia Sinica for useful feedback. We are also grateful to Europe-Asia Studies’ reviewers for important suggestions. Please direct correspondence to Nina Bandelj, Department of Sociology, University of California, Irvine, [email protected].

¹ Degree and eigenvector network centrality each indicate the importance of the country in the network. Degree centrality for any given country is the sum of the number of its treaties. Eigenvector centrality weights connections with more central countries more heavily.

² Obviously, there have been differences across countries along this dimension. We acknowledge country variation but bracket it in the present analysis that attempts to portray regional trends in postsocialist European and Eurasian countries, compared to other world regions.

³ For a summary review see Sauvant and Sachs (2009).

⁴ We used the UN membership list as a criterion of national sovereignty and counted the 192 countries that the UN lists as the population of countries in the world. In addition, we added the National Palestine Authority since its establishment as an administrative unit in 1994, since the National Palestine Authority is the only non-officially recognised country that signs BITs.

⁵ CIS countries include the Russian Federation, Ukraine, Belarus, Kazakhstan, Kyrgystan, Turkmenistan, Uzbekistan, Moldova, Armenia, Azerbaijan, Georgia and Tajikistan.

⁶ See, CIA Factbook, 2015, available at: https://www.cia.gov/library/publications/the-world-factbook/, accessed 15 May 2015.

⁷ For another application of eigenvector centrality measure see the study of Mahutga et al. (2010) on global cities.

⁸ Interestingly, BITs continued to be signed even in the period of the worldwide economic crisis; between 2008 and 2009 more than 100 new treaties have been signed.