Abstract
The aim of this paper is to determine the factors that attract Foreign Direct Investments (FDIs) to Central and Eastern European Countries (CEECs) and Southern and Eastern Mediterranean Countries (SEMCs). To this end, this paper tested three variables representing public governance, physical infrastructure and macroeconomic quality, over a ten-year period stretching from 2008 to 2017. The results of the regressions estimated on CEE countries show that entrepreneurs are attracted to this region mainly for governance and infrastructure quality. Macroeconomic policy variables seem to attract less FDIs to these countries. Using aggregated  variables, the results of the regressions estimated on SEMCs show that the governance variable becomes statistically significant but retains a low value. The other variables of physical infrastructure and macroeconomic policies seem to be more robust and better explain FDI inflows to this region.
Highlights
Foreign direct investment (FDI) is a very complex phenomenon to be empirically measured
In addition to correlation between governance and infrastructure variables presented in Tables 1 and 2, there is a correlation between Ln GDP/capita and HK (r = 0.93) and between Ln GDP/capita and LIFEE (r = 0.84) for the Central and Eastern European Countries (CEECs) group and (r = 0.89) and (r = 0.85) for the SEMCs group, respectively
These correlations illustrate the potential difficulty of statistically identifying the influence of some infrastructure measures particular of FDI models that include traditional economic variables such as GDP per capita
Summary
Foreign direct investment (FDI) is a very complex phenomenon to be empirically measured. FDI inflows are international transfers of financial capital with the aim of expanding or acquiring foreign businesses. The idea of being able to uphold the long-term management of a foreign company is very challenging as suggested by the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD), and justifies the difficulties in measuring FDIs because of their qualitative dimension. FDIs are three types: 1) direct investment capital, 2) intra-group loans (between parent companies and their subsidiaries), and 3) retained earnings that are reinvested by subsidiaries abroad. Non-governmental organizations have recommended and proposed agendas for States, developing and transition countries, to attract this type of foreign capital
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