Abstract
Since the onset of economic transition there have been widespread expectations that foreign direct investment (FDI) would contribute significantly to this process. Transition involves institutional change and a learning process and, at its best, FDI can support these by transferring technologies, managerial and labour skills, marketing channels and a market-based business culture. In addition, it was often felt that substantial amounts of FDI were needed to supplement domestic savings in a quest to “catch up” with living standards in the West.’ Given the region’s closeness to major centres of economic gravity, cost advantages in production, market size and potential growth, the conditions appeared to be there for investment supply to respond to this challenge.
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Notes
For an overview of such calculations of investment “needs”, see EBRD Annual Economic Outlook 1993, section 4.3.
See Table 3 in the Annex for FDI data; for comparison, note that the total FDI flow into the non-OECD area is estimated at US$90 billion in 1995, a third of which was accounted for by China (World Debt Tables, World Bank, 1996).
The EBRD’s Transition Report 1994 provides an overview of these in chapter 9.
“Distribution investment”: investment in a sales base to promote exports from outside the region; “market investment”: manufacturing investment with sales directed primarily at the local and regional (CEE or FSU) market; “export investment”: manufacturing investment with sales directed primarily at the Western European or world market.
Only for investments that are operational or at an advanced stage of planning; the data refer to averages of project-by-project information.
These opportunities included low cost acquisitions in privatisation programmes, acquisition of brands, sites and other assets, and first-mover advantage over competitors.
This may establish a systematic difference between FDI in transition economies and that in, say, developing countries.
“Transition indicators”, on a scale of I to 4, are taken from the EBRD’s Transition Report 1995 and represent average’s of nine indicators of a country’s progress in market-oriented reform.
These are results from the estimation of a multinomial logit model, i.e. these results control for the influence of all other motivating/deterring factors (19 in total).
ibid
These results refer to the average perception of risk by country on a scale of 1–4 (based on comparator country groups outside the region) among all respondents who felt confident in making that assessment.
The survey distinguished among the following types of country risk: transfer risk, expropriation risk, regulatory risk, risk of labour unrest, macroeconomic risk.
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Lankes, HP., Venables, A.J. (1997). Foreign direct investment in Eastern Europe and the former Soviet Union: results from a survey of investors. In: Zecchini, S. (eds) Lessons from the Economic Transition. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-5368-3_32
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DOI: https://doi.org/10.1007/978-94-011-5368-3_32
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