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Investment Policy Blog

It is now widely recognized that women play a critical role in advancing “economic development, active civil society, and good governance.” Increases in women’s rights are linked positively to an array of economic and political outcomes, such as better health conditions, higher levels of education and literacy, vibrant community organizations and democracy, lower levels of political violence, and higher-skilled labor.

Yet many global economic actors and institutions overlook the significance of female empowerment or have priorities that are at odds with improved women’s rights. We focus our attention on one of these areas of concern, foreign direct investment (FDI). The prospective relationship between women’s rights and FDI is contentious. On one hand, respect for women's rights translates into a higher-skilled labor pool and stable investment climate that investors might find attractive. Yet, investors may see advantage in a “ low road to growth” that leverages economic inequalities across genders, particularly as it applies to wages, to compete more effectively in the global economy. To provide some empirical clarification of this relationship, we assessed in our article “Is Foreign Direct Investment ‘Gender Blind’? Women’s Rights as a Determinant of US FDI” the extent to which countries with greater (or lower) respect for three different dimensions of women’s rights (political rights, economic rights, and educational attainment) attract US FDI.

We uncover a complex relationship between different facets of women’s rights and different types of FDI. On the positive side, we find that US investors are attracted to countries where women have greater political voice. Moreover, US firms -- even in efficiency-seeking sectors such as manufacturing – are more likely to invest in countries with a more educated female workforce. Yet the picture is less positive regarding women’s economic rights, such as pay equity and freedom from discrimination. Most notably, we find that investment in service industries – a sector that relies heavily on female labor – is drawn to hosts where women have significantly lower levels of economic rights. Taken as a whole, these findings may reflect an intentional and myopic strategy by host countries and corporations to exploit a gap between female capabilities and their relative lack of economic empowerment. This would be consistent with the economic perspective that views female labor solely as a cash-generating commodity separate from the true empowerment of women. Viewed somewhat differently, this could indicate a more transitory gap in the improvement of different types of women’s rights, with economic empowerment lagging behind other types of rights. This basic pattern is suggested in some of the data in this area.

Within the broader policy milieu related to investment and women’s rights, our research provides some insights into how the markets, particularly investment patterns of US-based firms, respond to different aspects of women’s rights across different potential host countries. More broadly, it connotes which aspects of women’s rights are “naturally” encouraged by the investment decisions of market actors, and which rights could benefit from active support and prioritization on behalf of states and international institutions. Along those lines, of particular interest is the role of women’s economic rights, which is at odds with foreign investment in a sector that is very dependent upon female labor.

While it is ultimately up to states and their constituent societies to support women’s empowerment, international financial institutions can play a key supporting role, particularly in the developing world. Unfortunately, the historical record of the Bretton Woods institutions in this regard does not inspire confidence. World Bank and IMF programs (particularly structural adjustment programs) have been subject to criticism, and empirical studies have shown that their programs exacerbate violations of women’s rights in recipient countries. Yet, there is evidence that both institutions are beginning to pay increased attention to women’s rights – the IMF is acknowledging its critics and incorporating women’s rights concerns into current programs. For its part, the World Bank recently launched the We-Fi (Women’s Entrepreneur Finance Initiative), a “start-up” whose charge is to provide loans and support to female-led businesses within the developing world. Thus far it has raised over $340 million toward that end and hopes to acquire over five times that much in its first round of raising capital.

Within this context, International Investment Agreements (IIAs) would ostensibly be well-positioned to prioritize these issues and at the least put women’s rights on the agenda of potential investors. Unfortunately, there is no analysis on where IIAs stand on women. Given this deficiency, we examined the IIA Database for insights into the prominence of women’s rights – or any gender-related concern -- across all IIAs, including both BITs (Bilateral Investment Treaties) and TIPs (Treaties with Investment Provisions). The results are striking: women’s rights and gender equality are mentioned in only 42 of the 3332 total IIAs. In terms of patterns, all but five of the 42 IIAs include the EU. Women or gender concerns are mentioned in Articles that focus on either labor or social cooperation, and these issues receive prominent placement (i.e., a separate Article or chapter dealing specifically with women or gender) in fewer than a quarter of the 42 agreements. There is a great deal of room for improvement on this front, particularly as none of the other leading sources of FDI outside of the EU (such as the US, China, Japan or Canada) include even the barest mention of women’s rights in any of their agreements.

What does this suggest in terms of moving forward? As gender equality is one of the Sustainable Development Goals (SDGs), current efforts to encourage SDG-related projects and investment are certainly a start. Additionally, given the considerable economic and political benefits of gender equity, it is important that women’s rights receive prominent attention in efforts to reform and update IIAs and investment policy.

Ultimately, meaningful improvement in women’s rights “ is about more than economics;” it requires substantial cultural and political shifts within countries and societies. Yet progress in women’s economic rights -- an area in which IIAs can be especially influential – is critical as it lags behind other elements of gender equality, most notably political rights. While investment policies will not single-handedly transform gender equity, actively incorporating women’s rights, particularly in the workplace, as an investment priority can at least move a very important “needle” in a positive direction.

About the authors

Shannon Lindsey Blanton is the Dean of the Honors College, as well as Professor in the Department of Political Science and Public Administration, at the University of Alabama at Birmingham. She is author (with Charles Kegley), of World Politics: Trend and Transformation (Cengage Publishing, 2017). Her research areas include human rights, international political economy, and the global arms trade, and previous work has appeared in a wide variety of scholarly journals, including American Journal of Political Science, Journal of Politics, International Studies Quarterly, Political Research Quarterly, and World Development.

Robert G. Blanton is a professor in the Department of Political Science and Public Administration at the University of Alabama at Birmingham. His research and teaching areas focus primarily on human rights and international political economy, particularly the ways in which the two relate. Specific areas of focus include human trafficking, labor rights, industrial accidents, and foreign direct investment. His previous work has appeared in such journals as World Development, Journal of Politics, International Studies Quarterly, Political Research Quarterly, and Harvard Business Review.

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