Is globalization consistent with the accumulation of FDI inflows in the Balkan countries?

Abstract

Most large enterprises have "a global view" in the expansion of their activities and, thus, in the creation of their investment projects. They invest in specific countries when they conclude that the countries in question fulfill their goals. It is not enough that an economy of a country has as a target to become a market economy, to open its borders and to attract foreign direct investment (FDI) flows for the economy to become globalized, but it is necessary for this result to be shown by significant foreign participation and huge FDI and trade inflows into the host country. If this never happens, then the country will not benefit from globalization. From one point of view, multinational enterprises (MNEs) "decide" which countries benefit from economic integration and which countries successfully participate in the huge worldwide globalized economic chain. On the other hand, due to the large investment opportunities that a few countries offer to MNEs and due to the large number of host countries, at the end, MNEs invest only in specific countries. Thus, there are a lot of countries that are isolated from the whole system. Moreover, smaller MNEs in economic magnitude often extend their activities mainly to neighboring countries, in order to maximize their profits and minimize their costs. The share of FDI is not the same in all countries and the FDI inflows in less-developing or poor countries show little growth or no growth at all. Today's FDI orientation is not as global as expected and there is a regional trend in those flows, when at the same time a few countries, especially from specific regions (such as the Balkan region) still live cut off from the world of FDI flows.

Vol. 2, No. 3, in July 2009

“…A fixed effects model based on a panel data of FDI flows within the EU-15 showed specifically that the Maastricht criteria on interest rate, government fiscal policy, and debt do play a significant role in attracting multinational investment. Rojec and Potocnik (1997) and Bitzenis (2004) provided additional support to the finding by Janicki et al (2005) that EU integration represents a strong incentive for FDI to flow into member and non-member countries in the region. An even stronger incentive for increased FDI in a country is its acceptance as a new member in the EU.…”

“…In yet another study, Bitzenis (2004) noted that FDI orientation is not as global as expected and that there is a regional trend in those flows. The regional factor is responsible for channeling FDI into less-developed and poor countries when otherwise they would not be getting any share of it at all.…”

“…According to Bitzenis (2004), it is regionalization rather than globalization that is responsible for the inflow of FDI into the Balkan region. Had it not been for regionalization, the individual Balkan countries may not even receive any FDI.…”

“…Had it not been for regionalization, the individual Balkan countries may not even receive any FDI. Bitzenis (2004) made this conclusion after observing an inconsistent disparity between a higher FDI accumulation and the dismal state of globalization related reforms and transition programs happening in that region (note 4).…”

“…An even stronger incentive for increased FDI in a country is its acceptance as a new member in the EU. There is no doubt that Slovenia's membership in the EU (Rojec and Potocnik, 1997) as well as the Balkan regional economic integration (Bitzenis, 2004) would strongly increase FDI inflow into that country. This increase, however, will not be felt immediately but in the longer term when Slovenia harmonizes her legal and institutional frameworks with EU standards (Rojec and Potocnik, 1997).…”