engleski

Regional vs. national approach in shaping an optimal FDI policy - case of Croatia

During the 90s transition countries of Central and East Europe have invested a lot of effort in creating open market economies capable of coping with competitive pressure from the world market and the single EU-market as well. These efforts included macroeconomic stabilization, economic restructuring and institutional reform. However, all these endeavours would be futile without an influx of capital in form of foreign investment which gave access to new technology and know-how. Furthermore, reform countries with their unexhausted market capacities and privatization projects on the way have proved to be the right destination for foreign investments in the 90s. Some of them have made considerable success and have transformed their economies into world class business environments. Nowadays, when the greatest part of M&A and other privatization-related projects has been realized these countries are becoming more determined in creating a genuine investment friendly environment. Transition process in Croatia did not follow the same dynamics as advanced reform countries did. Therefore, and taking into consideration the expected changing pattern of FDI-inflow in countries of Central and East Europe the main objective of the paper is to investigate the most critical elements constituting effective FDI-policy and to apply it in the case of Croatia. In doing so, a specific feature of this paper is regional approach to the issues that are normally considered on national scale and widely known as – investment climate ; the analysis includes three Croatian Regions (North, Central and South) with quite different experiences regarding foreign investment. The overall purpose is to ensure Croatian participation in international capital flows and by becoming an attractive investment site to make possible long-term economic growth and smooth development. Croatian legislation which regulates FDI is generally speaking similar to that of the advanced transition countries, however with some weaknesses. Unlike countries with large inflow of foreign investment and significant positive spill-over effects Croatian legislation does not apply either regional or sector criterion which would help to channel FDI into less developed regions or underdeveloped economic sectors. Therefore, by hosting the greatest part of FDI in the services sector (financial intermediation and trade) Croatia has failed to realize significant positive spill-over effects on the whole. Furthermore, the analysis has shown that success in attracting FDI depends not only upon the quality of the legal framework on national scale but also on the quality of the specific (regional) business environment. Regarding the latter much can be done on regional level, particularly in terms of local administrative support to foreign investors.

FDI; investment climate; institutional reform; transition countries; EU; regional approach

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