Business Recorder | February 13, 2014
Talks on BIT require new template, US tells Pakistan
The United States has conveyed to the Pakistan Muslim League (N) government that future negotiations on Bilateral Investment Treaty (BIT) will be held on the basis of a new template as the old template lapsed in 2012, sources said. As both countries failed to reach a conclusion in the past, the treaty will have to be renegotiated on the basis of a new template, sources said.
Sources further revealed that with the lapse of the old template a waiver from the US President is required, therefore talks will be held on the basis of a new template which is the same except inclusion of environment clauses. The United States has asked Pakistan to restart stalled talks on BIT and the Board of Investment (BoI) has been engaged in consultation with all domestic stakeholders before restarting negotiations with the US.
Recently, the Board received a message from US administration, informing the Board for inclusion of a clause relating to environment in the draft BIT agreement. It is not Pakistan specific and is applicable to all BIT agreements to be signed in future with the US, sources said.
In 2005 report, Salacuse and Sullivan concluded that a US BIT exhibits a very strong correlation with US FDI outflows to a developing country compared to US flows to developing countries with no US BIT. The results suggest that a US BIT is correlated with an extra 1 billion US dollars in increased FDI per year. The US and Pakistan began negotiating BIT in 2004 and BoI has not be able to address the concerns of line ministries and other government departments so far. The negotiations stopped in 2012 after the Strategic Plans Division (SPD) and the Pakistan Military objected over the insertion of security related clauses in the draft treaty and its implications on the country’s defence programme.
When contacted former Chairman BoI, Saleem Mandviwalla, said the USA has not changed any thing in BIT draft which was already agreed upon but the Non-Conforming Measures (NCMs) need to be finalised by the Pakistani side. "I was not able to sign the BIT as SPD raised some concerns on which they required clarification which are still pending," he maintained.
The BOI is yet to complete its internal consultation with the line ministries regarding the NCMs (illustrative lists of all policy and procedural parameters for investors eyeing Pakistan), a senior official of Board said. He said that the present government would seek greater access to US markets when it begins negotiations on the BIT however meetings are yet to be scheduled.
Despite years of negotiations both sides have yet to sort out key thorny issues. The US in particular has a long list of requirements including settlement of US investment disputes according to US laws, protection of US companies that have invested from a third country of origin and for Pakistan to notify to the US all draft laws and rules concerning any change in investment policies prior to their approval by the Pakistani Parliament.
According to the office of United States Trade Representative, the USA BIT program helps to protect private investment, develop market-oriented policies in partner countries, and to promote US exports. The BIT program’s basic aims are to protect investment abroad in countries where investor rights are not already protected through existing agreements (such as modern treaties of friendship, commerce, and navigation, or free trade agreements).