India, Philippines go slow on BIT push

Negotiations Delayed by COVID-19 Pandemic

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.

Progress on Preferential Trade Agreement (PTA)

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.

Slow Progress in Talks

However, those talks did not make much progress and matters have progressed little since.

Indian Investments in the Philippines

Indian investments in the Philippines are valued at around $900 million. Bilateral trade stands at around $3 billion in 2022-23.

India’s Negotiations on Investment Treaties

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.

Impact on Foreign Direct Investments (FDI)

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 Investments in the Philippines

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.

Constraints to Indian Investments

A constraint to Indian investments, the persons cited above say, is the fact that the Philippines remains fairly isolated from many lucrative global supply chains.

Impact of BITs on FDI Inflows into India

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.”

Ease of Doing Business in India

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.

Importance of Investor Protection

The Icrier report added, “The collective presence of an overall investor protection is positively and significantly linked to foreign investment flows.”