REGIONAL COOPERATION AND ECONOMIC INTEGRATION

Laura Giurca Vasilescu, ph.D.
Assoc. Prof.
Faculty of Economy and Business Administration
University of Craiova,
Romania
FDI FLOWS IN SOUTH EASTERN EUROPE
FDI in romania - ASSESING THE POSSIBLE EFFECTS OF
THE INTERNATIONAL FINANCIAL CRISIS
Abstract
Over the last years, Romania has benefited from record FDI inflows which were stimulated
by the macroeconomic stabilization, rapid GDP growth and large-scale privatizations.
Also, foreign investors were attracted by Romania’s relatively low unit labor cost, the
improvements in the business environment, the flexible labor market, the low corporate
tax level in the region, the proximity to the euro area and its increasing domestic market
potential. An important moment was the integration of Romania to the European Union at
1 st January 2007.
Romania’s patterns of FDI and foreign trade indicate the transition from exploiting low-cost
advantages towards services and higher value-added production, following the example of
many countries from Central and Eastern Europe.
One of the major factors with influence on the FDI is the international financial crisis.
Especially, the indirect effects of the crisis in Romania will concern the availability and cost
constraints of external financing, decline in the volume of FDI inflows, negative impact on
foreign demand, increased exchange-rate volatility and significant decrease in investors’
attitude for risk on emerging markets.
Key words: foreign direct investment, financial crisis, economic growth
Introduction
For all countries, a component of the development strategies and an essential instrument in
the development of a strong and dynamic private sector is to attract foreign direct investment
(FDI). The FDI facilitates the indirect access to foreign markets through the complementary
effect of the related technology and know-how implementation (Blomström et. al 2004).
On its way to a better integration within the international economy, the restructuring and
reform process of the Romanian economy requires significant foreign investment flows
driven by the increasingly global character of production process. This aspect, together
with the already global character of trade, requires a new approach to the identification and
distribution of resources. Also, should be taken into consideration that the financial flows,
and particularly FDI, show a different regional and country pattern because of various
internal and external factors (Daianu and Voinea, 2002).
The Center and Eastern European countries (where Romania is located) registered a positive
FDI flows in the last years and the premises of interest for foreign investors were: political
331