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Did financial incentives affect Foreign Direct Investment (FDI) inflows in Bulgaria?

Author

Listed:
  • Aristidis Bitzenis

    (City Liberal Studies, Affiliated Institution of University of Sheffield, Greece)

Abstract

Firms may need tax incentives to increase their viability and their profits and governments need those incentives to attract significant FDI inflows in order to decrease the unemployment rate, finance their deficits, increase their production, their GDP and thus to fine-tune their economic development. Although tax incentives in Bulgaria seem to be of less importance for the majority of foreign investors, those incentives do seem to be significant for enterprises, which belong to the textiles sector. MNEs established FDI projects in specific areas with high unemployment rates, creating an export base and exploiting mainly geographical proximity, tax incentives and low labor cost. This paper concludes that the non-fiscal incentives such as political and macroeconomic stability, functioning market economy, lack of corruption, bureaucracy and bribery or the prospects of a country to participate to the EU, together with its prospects for market growth, seem to be significantly considered by foreign MNEs.

Suggested Citation

  • Aristidis Bitzenis, 2003. "Did financial incentives affect Foreign Direct Investment (FDI) inflows in Bulgaria?," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 1(1), pages 65-84.
    • Handle: RePEc:seb:journl:v:1:y:2003:i:1:p:65-84
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    File URL: http://www.asecu.gr/Seeje/issue01/bitzenis.pdf
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    References listed on IDEAS

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    1. Terry F. Buss, 2001. "The Effect of State Tax Incentives on Economic Growth and Firm Location Decisions: An Overview of the Literature," Economic Development Quarterly, , vol. 15(1), pages 90-105, February.
    2. Aristidis Bitzenis, 2004. "Why foreign banks are entering transition economies: the case of Bulgaria," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 6(1), pages 107-133.
    3. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(1), pages 1-31, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Eleftheria Koniari, 2016. "Determinants Of Greek Fdi Outflows In The Balkan Region The Case Of Greek Entrepreneurs In Bulgaria," Economics and Management, Faculty of Economics, SOUTH-WEST UNIVERSITY "NEOFIT RILSKI", BLAGOEVGRAD, vol. 12(1), pages 33-44.

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    More about this item

    Keywords

    Bulgaria; Transition economies; Planned economy; Incentives; Legal framework; Foreign direct investment;
    All these keywords.

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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