Changing reasons of foreign investment to Central and Eastern Europe

Abstract

The purpose of this study is to examine the inward FDI (foreign direct investment) potential index in the Eastern European region. The FDI index was elaborated by the UNCTAD and serves to determine the ability of countries to attract foreign capital. International and regional findings show that capital investment decisions are influenced by the following factors: market size, openness and competitiveness of the country's economy, development of infrastructure, quality of human capital, country risk, impact of privatisation, tax policy, tax rate, cost and productivity of labour. The actual values of these variables before and after EU accession need to be analyzed for the specific countries in the region. The resulting benchmark exercise will not only reflect the impact of these factors on the FDI potential of the countries but also point out the different effects which EU accession had on the economies concerned.