Outward FDI from Central and Eastern European Countries

Abstract

In Central and Eastern Europe, outward foreign direct investment (FDI) has not yet become as a prominent factor in the region’s reintegration into the world economy as trade liberalisation used to be in the early 1990s or inward foreign direct investment is currently. In the terminology of the investment–development path, with the notable exception of the Russian Federation, the region is in stage 2, whereby inward flows are still growing faster than outward flows. This article argues that a combination of the latecomer status of the region’s transnational corporations and the transition shock can explain most of that laggard situation. It hypothesises that the enlargement of the European Union (EU) would give a major push to the outward foreign direct investment flows of Central and Eastern Europe (CEE), on condition that adequate government policies to promote those investments are put in place. The impact on the investment–development path, however, is uncertain, because accession to the EU is often accompanied by a surge in foreign direct investment inflows, too. Finally, the article also looks at the options available to deal with the specific problems of the Russian Federation in relation to capital flight, including ways of regularisation and potential return to the home economy.