This study examines the effects of home country measures (HCMs) on FDI in international agreements, in particular the scope and effectiveness of commitments made by the European Union in the Lomé IV (rev) Convention regarding promoting and protecting FDI in ACP states. Listed measures were assessed in terms of their relevance and effectiveness in promoting investment. Based on the identified strengths and weaknesses of these measures, the study also briefly discussed changes introduced in the Cotonou Agreement and their potential effects on investment. Examples of HCMs include provision of information on investment opportunities in host countries; provision of investment guarantees and insurance; provision of risk and venture capital; support to linkage promotion programmes; aid to improve the economic fundamentals of host countries, etc. The study briefly described the provisions in Chapter III, sections 1, 3 and 4 of Lomé IV (rev) and then examined if and how they have been translated into practice and how effective these measures have been; briefly assessed how the scope of provisions in the area of investment in the Cotonou Agreement differed from the Lomé IV (rev); examined the potential effects of new provisions and measures (e.g. investment guarantees) in the Cotonou Agreement on the basis of the experience of the use of similar measures in selected countries (e.g. the UK, Sweden and Switzerland), by assessing their effectiveness, as perceived by providers and users of such measures; and offered conclusions and implications for the use of HCMs in international investment agreements.
Director, International Economic Development group, Principal Research Fellow