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Attractiveness Of Public Policies For Fdi In Central And Eastern European Countries







The paper builds on the burning issue of the attractiveness of the location for foreign direct investments (FDI), assuming its positive and substantial economic impact on the development of the host country. The location decision for FDI in Central and Eastern European (CEE) countries is investigated based on the attractiveness framework designed by policy makers: infrastructure endowment, institutionsâ€(tm) quality, labour market conditions and level of taxation. The analysis assesses the FDI inflows in a country in three years: 2004, 2007 and 2010. Thus the FDI evolution relative to public policies attractiveness is seized starting with the European Union (EU) integration and after the crisis started. The paper follows the literature on the determinants of the FDI related to the L (location) factor described in the eclectic paradigm of Dunning (the OLI model), but focuses on the role of public policies in attracting FDI and captures two of the recent major turning points faced by the CEE countries, scarcely tackled in the literature: the EU integration and the recent economic crisis. We compute a public policy index, constructed as a composite measure, based on the four pillars mentioned above, in order to test the public policies attractiveness in the CEE countries. Moreover, we develop an attractiveness matrix starting from the public policy index, and we rank the most attractive countries for FDI in the three years. We analyze the matrix based on the FDI inflows per capita. We found a positive relation between the increase in the public policies attractiveness and the inward FDI. The increase of the FDI per capita since the EU accession year is, at least partially, due to the increasing attractiveness of the public policies. The crises worsened the CEE countriesâ€(tm) attractiveness. Still, the winners in the race for FDI remained those countries that improved the infrastructure, the institutionsâ€(tm) quality and the labor market conditions. Therefore, short and medium term policy directions can be emphasized. Infrastructure and institutionsâ€(tm) quality can be improved for further attracting FDI during rough budgetary constraints. The literature is enriched with the empirical analysis of the FDI determinants in the recent years. Our paper takes into account the major events faced by the CEE countries in the last years and checks for potential methods of attracting FDI even during difficult economic conditions.

Suggested Citation

  • Popovici Oana Cristina & Calin Adrian Cantemir, 2012. "Attractiveness Of Public Policies For Fdi In Central And Eastern European Countries," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 61-67, July.
  • Handle: RePEc:ora:journl:v:1:y:2012:i:1:p:61-67

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    References listed on IDEAS

    1. Christian BELLAK & Markus LEIBRECHT & Mario LIEBENSTEINER, 2010. "Attracting foreign direct investment: the public policy scope for South East European countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 1, pages 37-53, December.
    2. Christian Bellak & Markus Leibrecht & Jože P. Damijan, 2009. "Infrastructure Endowment and Corporate Income Taxes as Determinants of Foreign Direct Investment in Central and Eastern European Countries," The World Economy, Wiley Blackwell, vol. 32(2), pages 267-290, February.
    3. Mintz, Jack M. & Weichenrieder, Alfons J., 2010. "The Indirect Side of Direct Investment: Multinational Company Finance and Taxation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262014491, May.
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    Cited by:

    1. repec:rej:journl:v:19:y:2016:i:61:p:95-122 is not listed on IDEAS
    2. Popovici Oana Cristina, 2017. "International Competitiveness Versus Location Attractiveness For Fdi. A Theoretical Approach," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 199-205, February.
    3. Popovici Oana Cristina, 2015. "Assessing Fdi Determinants In Cee Countries During And After Transition," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 113-122, July.
    4. POPOVICI Oana Cristina & CĂLIN Adrian Cantemir, 2015. "The Effects of Enhancing Competitiveness on FDI Inflows in CEE Countries," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 01, March.
    5. Oana Cristina POPOVICI, 2016. "Determinants Of Fdi In The New Eu Member States," Romanian Economic Business Review, Romanian-American University, vol. 11(2), pages 173-182, June.
    6. repec:rjr:romjef:v::y:2018:i:1:p:108-123 is not listed on IDEAS

    More about this item


    foreign direct investments; public policy; Central and Eastern Europe countries; attractiveness matrix;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe


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