Live Mint - 27 September 2023
India, Philippines go slow on BIT push
By Shashank Mattoo
A push by India and the Philippines to renegotiate their investment agreement is moving slowly, according to persons aware of the matter. The agreement, which was signed in 2000 and came into force in 2001, expired in 2011. New Delhi has called for the agreement to be terminated and replaced by a new Bilateral Investment Treaty (BIT).
The negotiations were delayed by the covid-19 pandemic. According to persons cited above, both sides also discussed kicking off the talks in June during a meeting between foreign ministers S. Jaishankar and Enrique Manalo.
Those talks also saw progress on signing a preferential trade agreement (PTA). After the meeting, the two sides are understood to have had a round of talks virtually where they exchanged their templates for an investment agreement.
However, those talks did not make much progress and matters have progressed little since.
Queries mailed to the ministries of external affairs and commerce were not answered by press time.
Indian investments in the Philippines are valued at around $900 million. Bilateral trade stands at around $3 billion in 2022-23.
India is negotiating investment treaties alongside free trade agreements with several of its trading partners, including the UK and EU, that are looking for stronger investment protection than afforded by the 2016 model BIT.
The government annulled BITs based on texts framed back in 1993 after receiving adverse judgments in multi-billion dollar investor-state disputes in international courts.
To prevent this, the model BIT included “exhaustion of local remedies" as a clause which in effect emphasized state rights over investor rights.
However, the number of BITs India signed after 2016 declined. Economists said that it also has impacted the pace of foreign direct investments.
Indian investment in the Philippines is mainly in the areas of textiles, garments, IT&ITes, steel, Airports, chemicals, Automobiles and pharmaceuticals.
Major investors include firms like GMR, which won a bid in 2014 to upgrade and run the Cebu-Mactan airport project. Tata Motors and Mahindra are present in the automobile sector while Wipro, TCS and L&T Infotech, along with others, are present in the BPO sector. Indian pharma firms like Dabur Pharma, Lupin and Torrent among others maintain a presence in the Philippines.
A constraint to Indians investments, the persons cited above say, is the fact that the Philippines remains fairly isolated from many lucrative global supply chains.
An Icrier working paper on the impact of BITs on FDI Inflows into India observed that the government has on many occasions voiced complete antipathy to any multilateral governance of international investment.
“Instead the faith seems to reside in soliciting foreign investment, supported by indices such as an escalation in the ease of business ranking. However, mere improvement in this kind of ranking may not be sufficient to encourage substantive foreign direct investment."
According to a World Bank ‘Ease of Doing Business 2020’ report, India ranked 163 out of 190 countries in ease of enforcing contracts, and takes 1,445 days and 31% of the claim value for dispute resolution. Experts said that the delay hurts investor confidence and impacts FDI inflows.
The Icrier report added, “The collective presence of an overall investor protection is positively and significantly linked to foreign investment flows."