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Attractiveness of Western Balkan Countries for FDI

In: Serbia and the European Union: Economic Lessons from the New Member States

Author

Listed:
  • Matija Rejec

    (University of Ljubljana, Faculty of Social Sciences)

  • Slavica Penev

    (Institute of Economic Sciences)

Abstract

Based on standard classification of competitive advantages of a country as investment location and complex international assessments of countries' competitiveness, the paper identifies competitive advantages and disadvantages of five Western Balkan countries (WB5), as FDI location. WB5 as a region lags behind EU27 and EU10 average in almost all relevant indicators of locational competitiveness. The identified competitive advantages of WB5 as a location for FDI are the following: stable macroeconomic environment, fast economic growth, geographical proximity to major EU markets, stable and relatively well developed financial system, relatively low cost and qualified labor, and EU Stabilization and Association Agreement with EU, CEFTA and other bilateral trade agreements. The most prominent weaknesses inhibiting more FDI inflows in WB5 are: small domestic market with low per capita income, relatively high country risk, slow progress in structural and institutional reforms, underdeveloped infrastructure, inefficient government bureaucracy and high administrative barriers. The papaer concludes that the main policy message arising from theoretical findings and empirical evidence suggest that the best way for WB5 to attract more FDI in the future is to strengthen the structural reforms and to speed up their EU approximation processes. Any specific FDI policies are only of a secondary importance.

Suggested Citation

  • Matija Rejec & Slavica Penev, 2011. "Attractiveness of Western Balkan Countries for FDI," Book Chapters, in: Mirjana Radovic Markovic & Srdjan Redzepagic & João Sousa Andrade & Paulino Teixeira (ed.), Serbia and the European Union: Economic Lessons from the New Member States, edition 1, volume 1, chapter 2, pages 27-46, Institute of Economic Sciences.
    • Handle: RePEc:ibg:chaptr:srbeu-2
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    References listed on IDEAS

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    Cited by:

    1. Amir Fejzić, 2017. "Sectorial Composition Of Foreign Direct Investment And Growth: The Case Of The See-5," Ekonomske ideje i praksa, Faculty of Economics and Business, University of Belgrade, issue 24, pages 87-116, March.
    2. Uros Delevic & Irina Heim, 2017. "Institutions In Transition: Is The Eu Integration Process Relevant For Inward Fdi In Transition European Economies?," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 5(1), pages 16-32.

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