Foreign direct investments (FDI) in the transition progress - Motivations, forms and effects of FDI in selected central eastern European countries (CEECs)

Foreign Direct Investments have an enormous potential to create jobs, to improve international competitiveness of firms, to raise productivity, to enhance exports from CEE firms to western countries and to transfer modem technology. Foreign Direct Investment is a very important factor in the long-term economic development of the Central and Eastern European Countries. Although global FDI inflows declined during the last two years (2001/2002) the decline was uneven across regions and countries. The CEECs again bucked the world wide trend by reaching a new record of 29 billion US-Dollars in FDI inflows. There is a new trend to expand into higher value-added activities. The basic motivations for FDI in CEE are cutting product costs, market presence and high-qualified staff. Experience has shown that different forms of FDI result in different effects of FDI in CEECs. Policy makers in CEECs should bear this fact in mind before long-term measures for FDI stimulations are introduced. In reality the motivations of Transnational Companies (TNCs) have not always been compatible with national economic interests in CEECs. Most reservations against FDI result from the fact that in general the local firms are too weak to compete against the foreign affiliates.