The Impact of Heterogeneous Bilateral Investment Treaties (BIT) on Foreign Direct Investment (FDI) Inflows to Vietnam

Abstract

The impact of heterogeneous Bilateral Investment Treaties on FDI inflows to a country has been taken into consideration in the world. However, in our perception, only until Bellak and Chaisse (2011), the solution for a BIT index construction could be successfully dealt with. Furthermore, for such a developing country as Vietnam, we couldn't find any previous research regarding this topic. To narrow the gap, we do build up our BIT index for Vietnam basing on the methodology raised by Bellak and Chaisse (2011) for 57 BITs with collected contents. Furthermore, applying Random-effect technique for panel data from 1995 to 2012, we strongly support the positive effect of heterogeneous BITs on FDI inflows to Vietnam. It means signing BIT does help Vietnam to attract more FDI and more favorable BITs lead to further FDI inflows into the country. These results are not only supported by the whole sample but also all, new and old members sample.The commitment and signaling effect of BITs could attribute to the above positive results. Besides the above general effect, as considering the separate impact of each in our 11 main articles, we find out that broadening Definition of Investment, broadening by moving from Admission to Establishment and including National Treatment in BITs give more impetus for investors to carry out FDI flows in Vietnam. Besides, our results also stress on the role of Political Stability and Absence of Violence, Regulatory Quality and Control of Corruption as essential factors of attracting FDI.