Abstract
The paper aims to trace how important state policies, cultural differences and neighborhood of developed countries are as driving forces attracting foreign capital inflows. Authors overview the inward and outward foreign direct investment (FDI) tendencies in Lithuania and Estonia, reveal similarities and differences of the neighbor countries. Authors distinguish and discuss a role of privatization policy in attracting foreign direct investments. The assumption about different inward FDI sources caused by different privatization strategies adopted by considered countries is to be elaborated. Another focus of presented paper is outward FDI structure in terms of capital origin, and differences of its in scale in two Baltic countries ‐ Lithuania and Estonia. Phenomenon of Scandinavian FDI channeling through Estonia is to be traced and interpreted.
Highlights
Post - socialist economies have in general low levels of domestic savings due to their low levels of incomes
In previous chapters we presented statistical data on Lithuanian and Estonian foreign direct investment (FDI)
Lithuania and Estonia are perceived as similar transition countries belonging to the same economic area and having same path of economic development, FDI inflows and outflows in those countries differ significantly
Summary
Post - socialist economies have in general low levels of domestic savings due to their low levels of incomes. The foreign direct investment (FDI) is seen as an important potential contribution to the process of restructuring, economic growth and development of technology in these countries. Baltic States have adopted rather favorable laws for foreign investors. They have emphasized the importance of attracting foreign capital and have tried to create favorable investment environment through appropriate tax concessions. Lower production costs and higher profit rates have been the main motivators in investing into transition countries. Privatization programs of some of these countries have facilitated foreign direct investments. The object of this paper work is to overview the inward and outward foreign direct investment tendencies in Lithuania and Estonia by exploring the main determinants, influencing development of FDI in those two Baltic countries
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