Foreign Investments and Trade in the Western Balkan–Focus on Economic and Legal System

Abstract

The high openness and high dependence of this region on foreign capital have made the Western Balkan countries vulnerable to capital volatility. The reduction of foreign capital imposed rapid adjustments in domestic demand that, together with a collapse in exports, resulted in substantial output declines. High competition between the Western Balkan countries favored investors and a race to the bottom in terms of regional investment conditions (taxes, subsidies) led to a situation that made regional development policies difficult. 

Foreign Direct Investment in the Function of Economic Development - Example of Selected Countries in the Western Balkans

“…For most countries of the Western Balkans, there were significantly higher inflows of foreign investments in the period of 2006-2010, mostly under the influence of a different development strategy that was more oriented towards the real development needs of the region [35], [36]. In the following years, it is expected that Central and Eastern European countries continue to stimulate the entry of FDI mostly through liberal trade policies, with the tendency of an increase in exports, which is highly important for multinationals [37].…”