REGIONAL COOPERATION AND ECONOMIC INTEGRATION

FDI FLOWS IN SOUTH EASTERN EUROPE
1. On foreign direct investments
The experiences of the large number of the transitional countries showed that FDI represent
more favorable form of the necessary accumulation inflow compared to the classical loan
arrangements that could be obtained from the international financial institutions. FDI also
contributes to the improvement of economic situation, development of economic activities,
growth of employment and productivity, growth of export and establishment of economic
prosperity in developing countries. Former socialistic, nowadays transitional economies
have undergone various phases regarding their attitude towards the role of FDI within the
framework of the transformational processes of their economies. These processes usually
start from the phase of doubt, then go through euphoric phase and again return to the phase
of doubt regarding the role and importance of the FDI in the development of the national
economy. (Vidas-Bubanja, 2008)
Foreign direct investments can appear in several different forms depending on the investors’
goals and the nature of his business activity, as well as the current situation in the country
where he wants to invest. The country’s competitive ability and attractiveness are also
important. Some of the previous and the future forms of foreign capital investments in West
Balkan countries are Greenfield and Brownfield investments, Mergers and Acquisitions.
Foreign direct investments favorably influence the general environment by creating
necessary preconditions for sustainable long-term economic development of some
country. (Savić, 2007) However, sometimes the situation might not be so ideal. We are
familiar with numerous unpleasant experiences of certain transitional countries. Foreign
direct investments often condition the uncontrolled exploitation of the natural resources,
especially those that are non-renewable, they influence the growth of unemployment rate
and create technological dependence on foreign companies, they form consumption pattern
that is often inadequate considering the level of the host country development and can
sometimes seriously endanger its national sovereignty.
We can certainly say that the basic model of the international company that invests its
funds into some transitional country is the company that aims at achieving higher profits
and strengthening its power. In compliance with the aforementioned facts and depending
on the motive of the investor, i.e. strategic investment goal, foreign direct investments can
be divided into four groups: market, productive, resource and strategic. (Reiljan, Reiljan,
Anderson, 2001). Besides obtaining satisfactory profits, expanding their business activities
and conquering new markets, the investors most frequently want to exploit the existing rare
resources, to use favorable legislative regulatives of the country they are investing in, hire
cheap but skilled labor force and in this way reduce the costs of their operations and achieve
desirable profits. It is interesting to mention the category of the strategic investments the
purpose of which is to obtain the resources, the means and capabilities which the company
believes will improve or support its core competence and core advantages in the regional
and world market. (Dunning, 1994)
2. Foreign direct investments in West Balkan countries
West Balkan countries underwent number of changes in recent years regarding
transformation of centrally - planned to market economy. Until recently, huge interventions
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