Patterns of inward FDI in economies in transition

Abstract

This article analyses the contribution of foreign direct investment to structural change in various groups of economies in transition: new European Union member countries (including Bulgaria and Romania), South-East Europe (excluding Bulgaria and Romania), and the Commonwealth of Independent States. It comes to the conclusion that foreign direct investment has had the deepest impact on structural change in new EU members, and the smallest (in fact negative) impact in the Russian Federation. This is related to differences in timing of investment flows (they started earlier in new EU members; other subregions caught up later on), as well as the sectoral composition of FDI. It also has to be noted that the FDI of new EU member countries, especially in automotive production and electronics proved to be more vulnerable to the crisis of 2008–2009 than FDI in other transition economies. It remains to be seen if these countries in turn will be able to benefit fast from the post-crisis recovery.

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