engleski

Foreign Portfolio Investments in the Republic of Croatia

In this paper capital movement as a necessary factor of economic development and especially foreign portfolio and direct investments in Croatia will be discussed. Even this has been of prior importance for involving Croatia in the world economic system, results are not on a satisfactory level and foreign investments didn't give the required impulse to the domestic economy. In the focus of our research will be primarily portfolio investments in Croatia and other transitional countries, for example Slovenia. A comparative analysis will be carried out by calculating volume, structure and share of foreign portfolio investments in total foreign investments in transitional countries mentioned above. Importance of foreign portfolio investments will also be pointed by calculating all data as percentages of GDP. The structure of portfolio investments is in favor of debt securities, especially government bonds. Equity capital (shares) and reinvested earnings are almost negligible. Foreign investments began to flow in a great volume since 1996¸ even they are still deficient in relation to Croatia's GDP as well as in the case of Slovenia. In comparison to other leading transitional countries the importance of foreign portfolio investments could be much higher. Therefore an analysis will be done on the main reasons for such a trend. One of the factors involved is insufficient development of Croatia's financial market and especially deficient breadth and depth of the secondary capital market. Also, the privatization process didn't meet all the expectations and it was delayed compared to other transitional countries. Country risk has been also been taken into consideration. The main result of our research will among others be that Croatia has to encourage development of domestic capital market by attracting foreign investments and make itself to a profitable destination for portfolio and direct investors from abroad.

economic development; foreign portfolio investment; capital market; Croatia

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