FOREIGN direct investment (FDI) inflows into Central and Eastern Europe declined from a record $31 billion in 2002 to a low of $21 billion last year, the UN Conference on Trade and Development (UNCTAD) said in its World Investment Report 2004.
The plunge is the result of the end of privatisation in the Czech Republic and Slovakia, according to the report released on September 22. Despite the decline in 2003 however, the report predicts that the medium-term prospects for further FDI growth in Central and Eastern Europe are good.
In all, FDI inflows last year rose in 10 of the region's countries and fell in nine, with most countries receiving less than one billion dollars. In 2002 Bulgaria received $900 million in FDI, as against $1.4 billion in 2003.
As part of their efforts to enhance their attractiveness to investors (domestic and foreign), several new EU members have lowered their corporate taxes to levels comparable to those in such locations as Ireland.
The combination of low corporate tax rates, relatively low wages and access to EU subsidies - enhanced by a favourable investment climate, a highly skilled workforce and free access to the rest of the EU market - makes the accession countries attractive locations for FDI, both from other EU countries and from third countries, UNCTAD said.
Aside from the Czech Republic and Slovakia, the decline in FDI inflows was small, from $19 billion in 2002 to $18 billion in 2003. The ups and downs of FDI among the Central and East European countries in 2003 re-established Poland, the Czech Republic and Hungary as the three top locations for inward FDI in the region.
Far from diverting FDI flows from the old members of the EU, the group of eight Central and East European countries that joined the EU in May 2004 - the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia and Slovakia - saw their combined FDI inflows shrink from $23 billion in 2002 to $11 billion in 2003.
In the other 11 countries of the region, inflows climbed from $8.6 billion in 2002 to $9.5 billion in 2003, representing an increase in their share of total FDI inflows to Central and Eastern Europe from 28 per cent in 2002 to 45 per cent in 2003.
FDI went to 53 projects in Bulgaria in 2002 and 2003, of which 31 were Greenfield projects. Expectations are that both the new EU members and the other countries of Central and Eastern Europe will receive large increases in FDI inflows. In the long run, many EU applicant countries are in a good position to attract FDI and evolve to higher value-added activities.
Germany and the US are expected to be the main investors in the region. Experts forecast an increase in FDI in food and beverage production, motor vehicles and services, including construction and real estate, wholesale and retail trade.
- Business Staff
The plunge is the result of the end of privatisation in the Czech Republic and Slovakia, according to the report released on September 22. Despite the decline in 2003 however, the report predicts that the medium-term prospects for further FDI growth in Central and Eastern Europe are good.
In all, FDI inflows last year rose in 10 of the region's countries and fell in nine, with most countries receiving less than one billion dollars. In 2002 Bulgaria received $900 million in FDI, as against $1.4 billion in 2003.
As part of their efforts to enhance their attractiveness to investors (domestic and foreign), several new EU members have lowered their corporate taxes to levels comparable to those in such locations as Ireland.
The combination of low corporate tax rates, relatively low wages and access to EU subsidies - enhanced by a favourable investment climate, a highly skilled workforce and free access to the rest of the EU market - makes the accession countries attractive locations for FDI, both from other EU countries and from third countries, UNCTAD said.
Aside from the Czech Republic and Slovakia, the decline in FDI inflows was small, from $19 billion in 2002 to $18 billion in 2003. The ups and downs of FDI among the Central and East European countries in 2003 re-established Poland, the Czech Republic and Hungary as the three top locations for inward FDI in the region.
Far from diverting FDI flows from the old members of the EU, the group of eight Central and East European countries that joined the EU in May 2004 - the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia and Slovakia - saw their combined FDI inflows shrink from $23 billion in 2002 to $11 billion in 2003.
In the other 11 countries of the region, inflows climbed from $8.6 billion in 2002 to $9.5 billion in 2003, representing an increase in their share of total FDI inflows to Central and Eastern Europe from 28 per cent in 2002 to 45 per cent in 2003.
FDI went to 53 projects in Bulgaria in 2002 and 2003, of which 31 were Greenfield projects. Expectations are that both the new EU members and the other countries of Central and Eastern Europe will receive large increases in FDI inflows. In the long run, many EU applicant countries are in a good position to attract FDI and evolve to higher value-added activities.
Germany and the US are expected to be the main investors in the region. Experts forecast an increase in FDI in food and beverage production, motor vehicles and services, including construction and real estate, wholesale and retail trade.
- Business Staff
