'Rogue' countries with abusive regimes are not attractive to foreign investors, says a new study

06 Feb 2018 11:55:29.113

PA 21/18

Countries shamed by the United Nations Human Rights Council for committing violations against their citizens, are missing out on foreign investment according to a new study.

The research, by the University of Nottingham in collaboration with the University College Dublin and the Norwegian University of Science and Technology, also proposes that longer term this lack of investment could encourage these regimes to improve the treatment of their people.

The study – ‘Human Rights Shaming and FDI, published in the journal World Development, finds that foreign investors avoid countries which have been shamed by the Human Rights Commission, which was later reformed into the Human Rights Council, for committing human rights violations.

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The Human Rights Council is an internationally recognised organisation where member states shame repressive regimes for human rights violations. In this study, experts argue that these resolutions can influence foreign investors in two main ways;

  • They signal that a state is an outcast, unable to secure alliances with the human rights bodies that protect it from being publically shamed, with negative consequences for investment attractiveness.
  • They  signal that a state is one of the most rogue, severe human rights  violators because voting members of the Human Rights Council may be aware of many human rights violations, but they pass resolutions only in the harshest cases. And any investor associated with such a country risks severe reputational damage.

Results from the panel data analysis of 165 countries confirm that the condemnations deter foreign direct investment (FDI). This effect is amplified by media reporting of human rights abuse, and stronger and more robust than a bad human rights record of a state itself.

One of the authors on the study, Dr Nicole Janz from the School of Politics and International Relations at the University of Nottingham, said: “Our findings have presented some interesting policy implications. We’ve found that foreign investors do avoid countries shamed by the UN. Secondly, we shed more light on the power and workings of intergovernmental organisations such as the Human Rights Council.

“We show that these resolutions can deter foreign investors from operating in targeted countries. Their unique and political decision-making process can influence investors by showing that the host country has become an outcast, with weak political and economic ties to other states.

“There is still much to be done in this area. For example, does the type of human rights violation that is shamed play a role in deterring FDI? Since some rights violations may weight heavier in damaging a firm’s reputation than others. 

“Overall, the policy indication of our work is clear; by strengthening intergovernmental organisations that monitor and condemn countries for human rights violations, we might be able to discourage foreign investment into repressive regimes, which might even encourage such regimes to improve their human rights record. The results really have far-reaching implications.”

A full copy of the report can be found here.

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Story credits

More information is available from Dr Nicole Janz from
the School of Politics and International Relations at nicole.janz@nottingham.ac.uk

Charlotte Anscombe – Media Relations Manager (Arts and Social Sciences)

Email: charlotte.anscombe@nottingham.ac.uk  Phone:+44 (0)115 74 84 417 Location: University Park

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