Foreign direct investment in the post-communist member states of the European Union: who are the leaders?

Grażyna Kozuń-Cieślak,Ewa Markowska-Bzducha

doi:10.24136/ceref.2021.005

Abstract

Joining the European Union has been treated as a chance for Poland and other post-communist countries to improve their economic growth and development. It was clear from the beginning that it was going to be a long and demanding process in which success is only possible if appropriate economic policies are pursued. That policy should provide stable frameworks to support business development, attract foreign direct investments (FDI), keep the discipline in public finances and assure the right institutional ability and managerial skills to absorb the EU funds. According to forecasts by The McKinsey Quarterly from 2004, 5% Poland's economic growth rate was to require around USD 10 billion of annual FDI inflow! The aim of this study was identifying the leaders in attracting FDI among post-communist European Union member states in the period of 2004-2020. The research showed a huge variation in attracting foreign capital among eleven post-communist EU members. Estonia, the Czech Republic, Hungary, Slovakia seem to be winners in this race, leaving Poland far behind.

Highlights

Foreign direct investment (FDI) is a key element in international economic integration
The aim of this study is to identify the leaders in attracting FDI among postcommunist European Union member states
Poland has been a leader in attracting foreign investment in the period 2004 - 2020 taking about 30% of the total FDI located in the EU-11 postcommunist countries

Summary

Introduction

Foreign direct investment (FDI) is a key element in international economic integration. The inward FDI stock is the value of foreign investors' equity in and net loans to enterprises resident in the reporting economy. In the years 2004-2020 we were witnessing an intensive growth in the global FDI Within this period the world FDI inward stock almost tripled in real terms (281%), it increased from 14.1 trillion 2018 USD in 2004 up to 39.6 trillion 2018 USD in 2020. It should be noted, that “old” EU-15 member states host in average 31% of the global FDI inward stock, while new post-communist EU-11 members attracted just 3% of it. Many times a similar situation took place in the case of declines (see Figure 2)

Foreign direct investment in the EU-11 post-communist states in 2004 - 2020

Findings

Conclusions