The host state

There is no certain, necessary relationship between foreign direct investment (FDI) and human development in the receiving country. And whether FDI contributes to human development depends, to a large extent, on the quality of governance in the host State. Where negotiations with investors are conducted in full transparency, with the involvement of the communities directly affected, and with appropriate procedural safeguards to ensure that the public interest will be served and that the benefits will accrue to the population, FDI can be a powerful tool for human development. Conversely, however, where investment treaties or host government agreements ¹ are negotiated without parliamentary scrutiny and without participation of the local communities concerned, in weakly governed States, the consequences may be highly detrimental: some local elites may benefit, in particular through side-payments or by capturing the benefits from the investment, but the linkages to the local economy and the increase in fiscal revenues can remain minimal, and the situation of the local communities worsen, not improve, in particular as a result of the increased competition for the natural resources on which these communities depend.