REGIONAL COOPERATION AND ECONOMIC INTEGRATION

Part V
FDI FLOWS IN SOUTH EASTERN EUROPE
Prof. Vesna Bucevska, Ph.D.
Ss. Cyril and Methodius University
Faculty of Economics-Skopje
Macedonia
KEY DETERMINANTS OF FOREIGN DIRECT INVESTMENTS:
EMPIRICAL EVIDENCE FROM THE EU CANDIDATE
COUNTRIES
INTRODUCTION
Foreign direct investment (FDI) has been a centrepiece of economic literature and empirical
studies over the past two decades as a result of its rapid growth, on one hand and its multi-fold
contribution to economy of a host country, on the other hand.
The importance of FDI for the growth and economic development of the South-Eastern
European countries to which the present European Union (EU) candidate countries
(Croatia, Macedonia and Turkey) belong has been highlighted in numerous papers.
First of all, FDI provides capital for closing the gap between the low domestic savings in
these countries and the huge need for investment. So, FDI inflows are of vital importance
for improving and accelerating the long-term economic growth and development of EU
candidate countries.
FDI does not only provide the recipient country with fresh capital, but also with transfer
of technology and managerial and other skills (Estrin et.al, 1997 and Lankes and Venables,
1996. This in turn increases the international competitiveness of its goods and services,
leading to higher volumes of sales and profits of it companies.
FDI can contribute to job creation on a long run. However, effects of FDI on job creation
in the EU candidate countries are not straightforward due to the fact that the majority of
FDI in those countries represent acquisitions of existing companies, rather than greenfield
investment.
Another potential benefit of FDI is speeding up the EU accession process. Those
countries that experienced higher FDI inflows in the early years of transition have been
more advanced in fulfilling two economic criteria for joining the EU and have started
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