Foreign direct investment in Central and East European countries: State of affairs, prospects and policy implications

Abstract

Foreign direct investment (FDI) is rightly considered as an engine in transforming Central and East European Countries (CEECs). Without massive inflows of capital, technology and management know-how a sustainable growth is unlikely to happen. Although governments in CEECs make more than air effort to create a favourable climate for FDI, the international investors' community has responded hesitatingly. Only the number of projects have skyrocketed, the amount of capital invested has increased only at a slow pace. Foreign investors are testing the water, but they are not rushing to jump. The paper attempts to provide an overview of the current state and prospects of FDI in CEECs. First, it briefly reviews the theoretical framework for understanding FDI. Then it focuses on the trends and patterns of FDI-flows. Finally, it draws attention to the policy towards FDI.