Emerging markets need to upgrade their legal infrastructure, particularly those related to arbitration rules and regulation, experts said at the second day of the Annual Investment Meeting 2014 in Dubai.
Louis Wells, Professor of international management at the Harvard Business School, said that despite the remarkable growth emerging markets could achieve in attracting foreign investments, these countries should work harder to improve their arbitration system.
Arbitration is a very important instrument for improving the overall investment environment in the emerging markets and governments should do better in this to facilitate and protect these investments, Wells said.
This will enhance these markets’ performance and increase their competitiveness, he added.
Going back to 2008, the beginning of world economic crisis, Wells said that the emerging market usage for arbitration to solve disputes between investors, since that date until today, is improving but still very expensive.
“International arbitration emerged and became a common tool to solve disputes between investors at the time when world economic crisis burst. But it was really costly,” he said.
Philip McCrum, editorial director of EMEA, economist corporate network, said while it is very true that arbitration system in the emerging markets is not efficient, these are the only markets which achieved double digits growth last year and will continue to have the same result this year.
“This is a contradiction but it is real business,” he added.
In this case he advised investors to watch over the volatility in the emerging markets and try to manage the risk.
McCrum also called investors who want to succeed in the emerging market to pay attention to localisation policy.
“Foreign investors should localise their businesses in these countries,” he added.
“Investor should be more involved in the market as well as community by creating joint ventures with local sectors, train the local human resources and keep investing and spending locally rather than to squeeze the lat profit of pennies,” he added.