Owing to the increasing importance of foreign real and financial (FRF) flows1 to the developing countries which are characterised by fiscal and balance of payments deficits, it is imperative for these countries to embark on various initiatives at all levels2 to attract more FRF flows. It is against this background that the developing countries entered into different international agreements (IAs) and pursue unilateral policy and institutional reforms. However, of particular interest to international business stakeholders is the impact of these IAs on foreign investment flows to these countries, particularly whether their impacts are significant, complementary, spill-over, competitive and stable. Therefore, a case of interest in this paper is the impact of bilateral investment treaties (BITs) signed between the European Union (EU) and West African countries.
There are many related reasons why this type of study is important. First, West African countries were among their developing country cohorts that have largely cultivated, and competed for, foreign direct investment (FDI)3 inflows to bridge their domestic saving-investment gap and therefore augment the available funds to finance own development process through bilateral investment agreements. Since May 1961 and December of the same year when Togo and Liberia signed the first and second BITs, respectively, all West African countries have signed BITs with different interests particularly since the early 1990s. Despite this development, few studies exist on West Africa that examined the impact of BITs, while many studies have been done for the developed world and Asia.
Currently, West African countries are engaged in trade and investment negotiations with the EU to make their economic cooperation of over three decades reciprocal within the context of an economic partnership agreements (EPA). During the Lome conventions which previously characterised Africa, Caribbean and Pacific (ACP)-EU relations, BITs constituted one of the instruments of economic relations that West African countries individually signed with their EU counterparts. The purpose of signing these BITs was to access cutting-edge technologies alongside unilaterally liberalising their investment regimes as well as participating in the preferential trade and investment agreements (PTIAs) component of the Lome conventions.
A second and related point is that despite various BITs signed by West African countries and other policy initiatives, the magnitude and rate4 of FDI are low ( The World Bank, 2007 ; Adewuyi and Akpokodje, 2009 ; Oyejide
The third point has to do with the impact of BITs on FDI flow, evidence on which remains controversial in the literature. Recent studies buttressed this inconclusive evidence. While a class of studies has suggested that BITs impact positively on FDI flows ( Blomstrom and Kokko, 1998 ; Gastanaga
Notwithstanding the controversial impact of BITs and PTIAs on FDI flows in the literature, it is expected that BITs signed with EU countries attracted investment more than from other non-EU countries, while PTIAs should similarly increase FDI to West African countries. This becomes really very necessary as West African countries need to understand the various components of the EPA-related investment agreement and negotiate development-oriented outcomes accordingly.
It should also be pointed out that studies on FDI in Africa (regional, sub-regional or country specific) have focused exclusively on the traditional determinants without any reference to the role of BITs and PTIAs. Besides, there are just few studies that have looked at the determinants of FDI in Africa incorporating internal factors such as the role of institutions, governance and political environments, and openness of the economy (studies include Asiedu, 2002, 2005, 2006, 2011 ; Asiedu and Lien, 2004 ; Ezeoha and Cataneo, 2012 ). Review of literature reveals that recent studies are mostly on the USA (and not EU) and developing countries including Asia; but not specifically on Africa or West Africa. The extent to which the findings of the previous studies can be generalised to cover West Africa is an issue. Apart from this, factors as plurality of IAs, existence of high exchange rate volatility, poor governance as well as inefficient/undeveloped financial sector which characterised West African countries represent additional costs to foreign investors thereby further distorting the impact of BITs and PTIAs on FDI flows.
Thus, the effectiveness of BITs in the presence of all these factors is the issue examined in this paper. Also investigated is whether and the extent to which both BITs and PTIAs triggered investment flows between West African countries and the EU countries with a view to motivating the investment component of the EPA5.
In Section II, the paper describes the international investment agreements and FDI flows between West Africa and EU countries. This description covers the three-track approach namely, the BITs, PTIAs and the unilateral investment policies
Globally, the 1990s constituted a period when BITs gained popularity among developing countries culminating in a phenomenal rise of the total number of BITs to 2,573 at the end of 2006 and 2,844 as of may 2012, with an average annual increase of approximately 75 BITs during 2004-2006 ( UNCTAD, 1997, 2007 ) and 45 BITs during 2007-2011/2012( OECD, WTO and UNCTAD, 2012 ). Developing countries' increased participation in BITs manifests in their share, approximately 82 per cent, of the 73 new agreements in 2006 while renegotiation of existing treaties with developed countries continued unabated. Recent trend in BIT ratification similarly shows increasing relations between developing countries, with Asian countries continuing their conspicuous lead. In the first half of 2007, UNCTAD estimated that out of the 15 new BITs in 2007, 12 Asian countries were involved, featuring India signing up to 4 with African and Latin American countries. As at May 2012, Germany leads in the number of BITs signed with a total of 136, followed by China with 127 BITs, while South Africa signed a total of 46 BITs ( OECD, WTO and UNCTAD, 2012 ).
West African countries, like their counterparts in other regions, have followed a three-track approach to cultivating FDI. Thus, apart from using BITs, they have, as the second track engaged in preferential trade agreements (PTAs) that embodied investment protocols. This commenced from the Lome conventions through to the Cotonou partnership agreement (CPA) which constitutes the transitional agreement to the reciprocal EPA. Unilateral liberalization undertaken at individual country levels which produced investment law reforms in these countries constituted the third track. The trend in global PTIA has also indicated an increase and a rapid proliferation to 241 in 2006 with Asian countries showing similar inclination to ratify PTIAs as in BITs.
Moving from an investment-bias environment of the 1960s, the domestic investment framework of West African countries witnessed substantial policy reforms from the mid-1980s. These reforms were aimed at allowing foreign participation in many sectors of their economies through investment promotion, and later, investment protection. Many of the investment codes and related legislations in the liberalised regime offer investment protection and national treatment of foreign investment as well as arbitration in case of a dispute between host country and investors. Along with the various incentives to foreign investors to invest in host countries6 are requirements in the domestic investment regulations that spell out measures to ensure foreign investment effectiveness such as operational permits and performance requirements. Most early BITs were signed between African and Western European countries ( Tobin and Rose-Ackerman, 2003 ) as a response to the weakness of customary international law under which foreign investment is subject exclusively to the territorial sovereignty of the host country ( UNCTAD, 1998 ).
BITs are the historical product of Treaties of Friendship...